Sentiment Timing – Morning Notes 5/17/2022

From yesterday: I am still leaning on buying weakness here, but one does have to be careful. 

We saw the spx test my support 1 (3986), where buyers stepped in and closed the spx back above the 4000 handles.

I honestly prefer bear market moves rather than melt-ups.

When volatility is in play like it is like we see in 2022, everything makes sense and is followed.

If sentiment is at extreme bearish readings and we have buy signals, buying that weakness works more times than it doesn’t.

When we have melt-ups, we can see a plethora of extreme bullish sentiment readings, and sell signals on all time frames, but yet the tape continues to grind higher until there is nobody looking lower, then they pull the rug out.

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So our preferred pattern was to use weakness to buy the dips since last Wednesday.

Using history as my guide, the expectation was for another face ripping short squeeze to hit at any time.

Today we are seeing a gap higher open and again, this is just a gut feeling using history, but I think they will NOT give the bears a chance to get out and we will see the 4100/4200 upside targets hit in the coming days/weeks.

Just place stops at entry and if we see 4120 come into play soon, start layering out of the long side trade.

Enjoy this easy trading while it lasts!

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For today, watch the 4082/4096 will be the battleground for the bulls.

If they can get the price above the 4096, we should see a reaction trade up to the 4150 (not today-right?)

The bears need to get prices below 4030 to get any downside momentum going. Below 3980 would get them out of immediate harm’s way.

My target 1 remains at 4120, target 2 is at 4250-ish. Most likely we will see some bearish divergences forming, so don’t chase!

SPX Hourly Technicals

Stochastics: Overbought

Divergences: Bullish Divergences (playing out)

Resistance Pivots: R1-4082 R2-4096 R3-4120

Support Pivots: S1-4030 S2-4000 S3-3975

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