Beware of strong demand returning

Their are no short-term opportunities to the upside.

There are no new short-term opportunities to the downside. Short-term bears who have taken positions should be prepared to close them if strong demand comes into the market on Tuesday.

Intermediate and long-term bulls should maintain existing positions.

There are no intermediate or long term opportunities to the downside.

Intra-day: Neutral

Short Term: Neutral.

Intermediate Term: Neutral

Long Term:  Neutral

The stock market, as measured by the Wyckoff Wave, experienced and intra-day failure to the upside. It closed, on decreased volume, near the bottom of a narrower price spread, in a neutral condition relative to the Technometer. The intra-day failure suggests a lack of demand.

A review of the intra-day waves indicates that demand dried up during the morning and moderate supply was present during the afternoon.

After a small gap opening to the downside and a quick five-minute follow-through to point S, the Wyckoff Wave rallied to point R. Notice the shortening of price spread and lower volume on each of the two intra-day up waves.

The Wyckoff Wave reacted on moderate supply to point U then rallied to point V. Volume on the rally was noticeably reduced. This suggests demand was drying up.

Then, supply came into the market and the Wyckoff Wave reacted for the rest of the trading day.

The rally to point V ended slightly above the high at point T. This suggests a poor quality secondary test. The Wyckoff Wave may need to rally and retest point V.

More importantly, today’s rally fell short of the earlier highs at points P and J.

There is a reasonable probability that the Wyckoff Wave will rally tomorrow and test the highs mentioned above. However, this afternoon’s presence of supply is an early indication these tests will be successful.

The Optimism – Pessimism Index rallied and remains in an overbought position relative to its upward trend channel. The short-term negative divergence with the Wyckoff Wave, when compared with point R continues. The longer-term negative divergences with the Wave D, B, Z and X also remains in place.

The Force Index rallied and is producing low negative readings.

Tomorrow, the Technometer will open in a slightly oversold condition.

Today, the Wyckoff Wave followed through on Fridays move to the upside. However, the rally was short-lived and supply came into the market.

Despite the afternoon supply, today’s relatively low volume suggest the Wyckoff Wave may make one additional attempt to test the highs at points R and T.

The Technometer’s rapid moved towards an oversold condition is a troublesome indication for the short term bears. That concern is somewhat offset by the negative relationship of the O-P Index with the Wyckoff Wave.

However, short-term bears who have taken positions to the downside should be prepared to close them if strong demand comes into the market tomorrow.