If the stock market is going to fall sharply, as some are looking for in the month of May, this isn’t the week it’s likely to happen. While we may (or may not) be in the midst of an Elliott second wave down, from a sentiment perspective, we are hovering at a strong support line that thus far has refused to give way. While it’s hypothetically plausible that a large market selloff could happen first, and then people would get really down in the dumps about it, mood almost always precedes market. Right now the mood says, “No, not going down there yet.”
(click to enlarge)
The chart above shows the MarketMood Indicator daily signal vs. S&P close year to date. Back in March through early April, the Mood Signal, after some struggle, broke above the 2100 resistance line (see chart). In late April, the market finally reached this level, but couldn’t maintain a solid break above it. The Mood Signal in the year to date chart here goes through this weekend (Monday open). Once again, it’s back to this line, except from above, hovering right at support.
While markets may indeed drop tomorrow, the stock market won’t likely be able to stay dropped for long. What the market really “wants” is to try to solidly break
above that 2100 line and stay there, at least for a bit, if it can. In order for it to “give up” on that, the Mood Signal will need to solidly break below that same line. The message for the moment is that the Mood has not done that, and won’t do so through Monday open.
MarketMood Indicator for Friday: close down.
Want to know more about what the markets might be up to next? Go
HERE.
