Bulls Still Wear the Dunce Cap

I assume everyone sees the topping pattern on the S&P 500.  It is the Dome (AKA Dunce Cap) we have been following since mid-2015.  The most bullish thing about this chart is that it is and has been so obviously bearish.  Add in the fact that this bounce has been every bit as strong as the post-September bounce (which I for one, did not think likely when originally planning the bounce scenario in February) putting the price above the would-be supportive moving averages, turning weekly RSI green and putting a ‘W’ pattern into the MACD and there you go, a lot of people have gone bullish.

Yet still the Dunce Cap rests atop SPX’s bulbous cranium.

spx

The market trend is down, and so the story remains the same.  It is the bulls that need to change the trend, not the bears.  From a sentiment standpoint, the story appears to be that people are back to over bullish on the short-term, but that there are things in play indicating that on a longer-term horizon the market is going to find a sustainable bottom.  My question continues to be whether that bottom will be somewhere within the chop and grind of the last 1.5 years (and probable lower low) or at the all too obvious major support in the 1500’s.

No need to make titillating forecasts.  In my opinion it’s best to take it in chunks.  The next chunk is either a new downturn at the logical bounce parameter (favored) or a removal of the Dunce Cap and greed-fueled, euphoric “phase transition” here and now, which is not favored, but these are the markets and they don’t care what you, I or anyone else (including Marty’s computer, which seems to be observing and adjusting just like the rest of us) favors.

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