Just one more ‘what’s going on with the US stock market?’ post from the blog-Ohhh-sphere…

I have covered most shorts, have a few paper losses on longs and been bailed out big time by one stock, NFTRH+ highlight AFFX, bought for a bottoming pattern and dumb lucked into a buyout at a 50% premium. Yay me!

Well, in 2015 I had a day where the exact opposite happened; I chose to sell a biotech stock (GILD) that then issued good news and went up and hold a biotech stock that then issued bad news and got cut in half! So let’s keep it real here. The stock market is hard. Entirely due to AFFX and the Semiconductor shorts (LRCX, AMAT and the still-held MKSI) I am up for the year. Ha ha ha, “the year”… it’s only Jan. 11th!

None of this bear activity should be surprising. SPX has worn the blue Dome* over its head for months now, after making a cyclical high. This is my chart illustrating Peter Eliades’ cycle work.

Furthermore, broader indexes have been overtly bearish for some time now. Here’s the motley crew. The US stock market has been sick since early summer.

Still, substance abusers will look at the fairly over sold nature of things and the fairly over bearish sentiment backdrop and cheer for a bounce. SPX’ daily RSI is not deeply over sold and sentiment is not extreme, when using  August as a measuring stick. I hope a bounce comes shortly because it would be a great shorting opportunity after upside objectives are reached. We have been watching 1875 as the low limit.

So RSI is not what August was and neither is sentiment. From Sentimentrader…

So here is the thing; if the market bounces from current levels said bounce will not be expected to be nearly the thing that the post-September rally was. I felt at the time that that thing would be either powerful or enduring (we projected the market to chop and grind into year-end, which it ended up doing) simply because of the extremes in flash bearishness that whipped up out of nowhere. We do not have that this time. So a bounce now would be a good short per bounce targets we will manage as applicable.

Alternatively, the market could just slide from here and bring on over sold and sentiment extremes from last summer. Technical damage was done last week to the point where it is an intermediate bear trend. A failure to bounce at or above the SPX 1875 area would bring on a whole different animal; a bear.

* The “Dome” is my not so technical term for a rounded and orderly topping pattern. Of late we have started using an even less technical term, the “Dunce Cap”.