A Minor Last Point of Supply

Friday, September 2, 2016

Click here to open the attached charts

What To Do?

Short Term:
There are no short-term opportunities to the upside.

Short-term bears a position to the downside should be maintained. In addition, new positions can be considered.

Intermediate & Long Term:
Their are no intermediate or long term opportunities to the upside.
Long-term positions to the upside should be maintained.
There are no intermediate or long term opportunities to the downside

Market Trends:

Intra-day: Up but weakened
Short Term: Neutral. However, a reaction on Tuesday would change the trend to Down
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed in the middle of a slightly wider price spread, in a neutral condition relative to the Technometer. The price spread and volume suggest a lack of supply.

A review of the intra-day waves indicates today was a lack of demand day. After a gap opening to the upside and a brief, 20 min., follow-through to point H the Wyckoff Wave reacted to point I. Then, it put in a poor quality rally to point J and a reaction to point K. This was followed by another poor quality rally to point L and a quick reaction to point M.

Then the Wyckoff Wave spent the last two hours and 20 min. of the trading day and a long slow rally. The rally was also on relatively narrow price spread and low volume. This also indicated a lack of demand.

On the reaction to point K the Wyckoff Wave weakened its intra-day up trend channel. It was unable to return to that channel on the rally to point A and also at Friday’s close.

This weakend the new up trend channel. In addition, the Wyckoff Wave failed to rally through the support, now resistance line drawn from point U.

There is an intra-day negative divergence with the O-P Index when compared with points H and D..

All this suggests it will be difficult for the Wyckoff Wave to continue any rally and move through that resistance and test earlier highs at points B and T.

Today’s market action suggests the Wyckoff Wave will react and attempt to return to the intra-day down trend channel drawn in red.

The Optimism – Pessimism Index rallied and is at the supply line of its upward trend channel. It is in a negative divergence with the Wyckoff Wave when compared with point E.

On Tuesday, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave attempted to rally through the resistance formed by the low at point H. In fact, the Wave made four attempts to do so and each attempt failed.

The poor quality of Friday’s market action suggests the Wyckoff Wave will continue to react and test the lows at point D.

If, on Tuesday, the Wyckoff Wave reacts through Thursday’s low, the short-term trend of the market will change from neutral to down.

Several Wyckoff indicators support this scenario. Most importantly, there is now a significant negative O – P Index divergence with the Wyckoff Wave, when compared with point E.

In addition the Technometer is moving into a nearly overbought condition. Any rally would, most probably, create an overbought condition.

This would suggest the minor Last Point of Supply scenario now has the highest probability of success.

Look for the Wyckoff Wave to react during the coming week.