Reaction in Progress as Expected

Friday, December 30, 2016
WE WISH EVERYONE A SAFE AND HAPPY NEW YEAR, AND A VERY PROFITABLE 2017!!!
What To Do?
Short Term
Short-term bears should hold short positions and use stops at last Wednesday’s highs.
Short-term bulls stand aside.
Intermediate & Long Term:
Intermediate and long term positions to the upside should be maintained.
There are no intermediate or long term opportunities to the downside.
Market Trends:
Intra-day: Down
Short Term: Down
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave, opened lower and continued lower the rest of the trading session until a minor bounce into the year-end close.  Volume was slightly higher today than yesterday, but still at holiday levels.
The Wyckoff Wave closed lower on the day and has now changed the short-term trend to down.  The price spread and volume showed supply present once again.
The Technometer is registering a neutral reading.
The Nasdaq was down almost 1% today and the S&P 500 was down a .5%.  These two indices are much weaker than the Wyckoff Wave in the last few weeks.

A review of the intra-day waves confirms the above.  After opening lower supply was present all day, with a minor rally into the close. Volume was low but as expected for this holiday shortened week.  We are anxious to see how price and volume trade after we get the holidays out of the way.
The Intra-day Optimism-Pessimism Index is trending lower as well with the Wave.
The Optimism-Pessimism Index closed lower.
The Force Index closed lower today as well.
On Monday, the Technometer will open in an neutral condition.

Today, the Wyckoff Wave traded lower once again on a slight increase in volume.  The reaction we have been expecting over the last few weeks has finally begun.  It seems everyone was expecting a continued Santa Claus rally, but stocks have slowly fell on their own weight the last four days.  We would like to see the Wave continue lower from these levels and volume to expand on the downside.  We should not see Wednesday’s highs again for this short-term correction to continue.  The Technometer has returned to neutral levels and we should see a little more downside action before it would register oversold.
The alternative scenario is that we are backing up to the previous highs for a Last Point of Support.  For all the reasons we have mentioned over the last few weeks, we see this as a very low probability.  But we are always aware of alternative scenarios.
The rally to “Z” did not have a dramatic increase in spread or volume, and does not appear we had a Jump Across The Creek, but more so a test of the upper end of the trading range. This weeks action has not changed that prognosis.  This suggests the Wyckoff Wave will react back into the trading range.
The reduced probability of a successful Sign of Strength also indicates the Wyckoff Wave will not experience a Last Point of Support on this reaction.  This suggests the Wave is expected to react back into the trading range and test the previous support at point “W”, “U”, and the more important lows at point “S” in a normal correction.

Good Trading,
Todd Butterfield