An Intra-Day Spring, What Does It Mean?
Click Here For Wyckoff Wave Chart 11-06-2015
One of the great Wyckoff words is Spring. A Spring can signify the beginning of a nice move to the upside. Everyone loves a Spring and everyone wants to buy on a Spring.
On Friday, the Wyckoff Wave had an intra-day Spring. On the intra-day chart, intra-day Preliminary Support was at point W. The intra-day Selling Climax was at point Y.
The Wyckoff Wave then established a trading range with resistance at point J and supply at the Selling Climax.
On Friday, the Wyckoff Wave reacted, broke through the support and rallied on fairly good demand. There was a Secondary Test at point P and the Wyckoff Wave is now rallying within the intra-day trading range.
The rally could turn into an intra-day Sign of Strength or the Wyckoff Wave could simply rally to the top of the trading range and experience an Upthrust. Finally, it could simply run into resistance at the top of the range and react.
If that reaction is on reduced price spread and volume, it could be a Last Point of Support. This would give the Wyckoff Wave one last intra-day opportunity to rally through the top of the trading range.
If the reaction is on increased price spread and volume, signifying the presence of supply, the Spring scenario would be negated and the Wyckoff Wave could either continue in the trading range or react back through the intra-day support.
It is important to remember that intra-day trends are measured from hours to weeks. An intra-day Spring is much less significant than the spring on the daily vertical line chart.
What do the other Wyckoff tools tell us about this intra-day spring? On the attached 100 Point & Figure chart, the Wyckoff Wave has a count of 800 points from the point P Secondary Test over to the Selling Climax at point Y.
There is an additional 400 point count over to the point W Preliminary Support, but that shouldn’t come into consideration until the first phase objective is reached.
The Phase 1 count takes the Wyckoff Wave back to the top of the trading range. While it can advance further, it will be important to monitor the price spread and volume, especially as it approaches the top of the intra-day trading range.
Now, let’s go to the daily chart. The intra-day trading range is identified by points 1 and 2.
An examination of the daily chart shows that the Wyckoff Wave, is not only moving sideways, but is successfully testing two important resistance point. They were the supply lines of both the intermediate and short-term up trend channels. This suggests the Wyckoff Wave is vulnerable to a reaction.
Further investigation identifies some significant weakness when the Wyckoff Wave is compared to the O – P Index. As of Friday’s close, the O – P Index was in a negative divergence with the Wyckoff Wave when compared with points N, L and J. It is in a negative in harmonious action when compared with point F. This indicates a tremendous amount of effort has gone into pushing the market higher, as shown in the O – P Index.
Unfortunately that effort has not produced the results as shown in the Wyckoff Wave. This suggests there is still a great deal of overhanging supply lurking in the market.
The Force Index is also producing negative readings. While the Wyckoff Wave has basically moved sideways from point W, the Force Index has reacted. While it did rally on Friday, it is still relatively weaker than the Wyckoff Wave. This suggests investor sentiment is becoming more bearish.
Throughout the move from point 1, the Technometer has been in a low neutral or oversold condition. This was in direct contrast to all the other negative indications coming from our Wyckoff analysis.
On Friday, the Technometer moved into a high neutral condition and on Monday, will open in an overbought condition. This brings all the Wyckoff tools into harmony.
This, along with the successful testing of the two supply, suggests it will be difficult for the Wyckoff Wave to put in a significant move to the upside.
If the Wave only reaches the top of the trading range, or puts in an intra-day upthrust, it will have met its objectives on the 100 Point & Figure chart.
While it may rally and test the highs at point K (top of the intra-day trading range) it appears that after this long sideways move, the Wyckoff Wave could be ready to react and establish an important support point in the trading range that began last August.
Springs are great, but they must be kept in perspective and be part of an overall market analysis. Friday’s market action was an intra-day spring. Any projected results must be Within the intra-day parameters.