Back to a watch and wait situation.

There are no opportunities to the downside

While aggressive short-term bulls should continue to identify new opportunities to the upside, they should wait for a successful test of the trading range support or a Spring..

Intermediate and long-term bulls should maintain existing positions.

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

Intra-day: Changed to Up

Short Term: Neutral

Intermediate Term: Down, but in an oversold condition

Long Term:  Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed at the top of a narrower price spread, in a slightly overbought condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves confirms the above. After a gap opening to the upside, the Wyckoff Wave continued its rally to point H. The rally lasted for three hours and 10 min., but the Wave did not make a sizable gain.

Then, the Wyckoff Wave reacted briefly to point I, where demand returned. Once again, it was not particularly strong. The intra-day up wave that followed the reaction to point I, lasted for 1 hour and 20 min., but only gained 156 points. This is minimal for an index at the 35,800 level.

Despite the poor quality rally, the intra-day trend is changed to up and the trend channel is drawn in blue.

The Wyckoff Wave is testing the supply line of the old intra-day down trend channel. It is also just below a significant resistance area, shown by the line drawn from point S.

It appears it will be difficult for the Wyckoff Wave to move through the resistance. It is expected to react and test the low at point E. If the reaction is on reduced price spread and volume, it would put the Wyckoff Wave and position to put in a more substantial rally.

The Optimism – Pessimism Index rallied. It moved into an overbought position relative to its upward trend channel. It is all also  in a short-term negative divergence with the Wyckoff Wave, when compared with points L, J and H.

The Technometer rallied slightly and is producing moderate negative readings. There is no mitigating impact on the slightly overbought Technometer.

The markets are closed on Monday for Presidents’ Day. On Tuesday, the Technometer will open in a slightly overbought condition.

Today, the Wyckoff Wave continued its rally off yesterday’s low at point M. As mentioned above, the rally was not particularly impressive.

In addition, the Technometer returned to a slightly overbought condition. The short-term negative divergences, with the resistance points of the mini trading range, indicate the noticeable effort of the O – P Index is not being matched by the results, as shown by the Wyckoff Wave.

All this suggests the Wyckoff Wave will be unable to sustain the rally and will react to test the low at point M.

The wide price spreads and relatively high volumes that appear in the mini trading range, that began at point G, suggest a fair amount of supply is still present in the market.

This supply will have to dry up before the Wyckoff Wave can advance. One indication of this is happening would be a reduction of price spread and volume as the Wyckoff Wave reacts to test point M.

It will also be helpful, for the bulls, if the Technometer moves into an oversold condition.

While supply is certainly present, the Wyckoff Wave has been supported well at point G, I, K and M. In addition, as mentioned yesterday, there is little effort to the downside as shown by the strengthening O – P Index.

Regardless, we remain in a watch and wait situation.

Have a relaxing and enjoyable Presidents’ Day weekend.