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Market Swinging Wildly.....No Change....Sentiment Still Unwinding....Transports Improving...

It's a fact we've all gotten used to. At least I hope you have by now. Today yet another day that makes no sense thus it does. We had there days of poor action and then after hours last night the futures were falling hard, mostly due to a very poor earnings report from Dow leader DIS. An unexpected miss with a bad outlook for the rest of this year in to 2016. The stock crushed and I mean crushed after hours. Futures falling hard. It looked like another huge down day was dead ahead. We wake up this morning to a large gap up even though DIS actually worsened. Go figure! As we've surely gotten used to, we saw the highs of the day erode over time but with the Sp 500 and Nasdaq holding on to some gains. Another surprise wake up with regards to the futures and another day where the market was all over the place. I think we've all reached the point of where we no longer question this whipsaw not only day to day but intra day to intra day. The SP 500 chart below is showing tight compressed triangle forming which once it breaks it typically turns directional:

S&P500 Daily Chart

There is no rhyme or reason for the behavior except to recognize that many stocks are behaving beautifully and many stocks are behaving terrible. It's not all or nothing across the board. Many are trying to understand the market but it's really more about understanding individual stocks. As the tide shifts from day to day we see many stocks coming out of their bear markets while others are going in to them and this allows the rotation to continue ever onward. So for today we can chalk it up to the same old behavior even though it feels so bizarre. Whipsaw is the new game in town. Maybe we can all accept it and allow the emotional aspect to calm down. That would be best for all of us as it would allow for clearer minded trading. One thing for sure the Dow is acting much weaker than the SP 500 and Nasdaq and is approaching a test of our key 17,400 base top area. Earnings have been weak in the Dow stocks for the most part this past month. See the Dow Daily chart below:

Dow Daily Chart

Sentiment fell a drop again from last weeks number. The bull bear spread down to 24.7% which is the lowest reading since last October. Yes, that's last October. Froth has been having a very fun time for way too long. The bears aren't rocking in yet but they are three points off their lows. The good news is that the bulls, once at 60%, are down to 42.2%. They are getting frustrated by all the back and forth action and trust me folks, that's how the market often does its dirty work. If the market isn't in the mood to crush sentiment through a bear market or a nasty correction, it can get the job done by moving laterally long enough to frustrate the most patient of traders. For now that's how it's getting the job done. That doesn't mean we still won't enter a period of heavy downside action and if that did occur we would see the bull bear well below 10% but for now it is a relief to see the spread at 24.7% and especially nice to see the bulls down to 42.2%. Froth isn't that much of a problem at this moment in time.

The transports have been the biggest problem for the bulls and the best friend of the bears for quite some time now. That said, we saw a recent powerful gap up candle that closed strongly and has done well ever since, If it can pull back a bit and form a right shoulder it could form an inverse bullish pattern. That would be bullish and if the transports are strong it'll be tough to hold the market down. No guarantee the pattern will take shape but that gap up candle off the bottom has set a more bullish pattern in to motion. The same is true in some other areas. The market is going to drive the masses a bit crazy but thus far we have a stalemate that the transports can help turn things more bullish over the coming weeks. Day to day as usual for now.

Bottom line we've been doing well focusing on individual stocks in good bases and avoiding some of the noise in the broad markets. We had two nice breakout moves today in RAD and UNH out of mature basing patterns. Have to pick your spots carefully no doubt!!!

Transports Daily Chart

 

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