Backing up to the Creek?

There are no short-term opportunities to the downside.

The poor quality rally off the support at the top of the mini trading range continues to question the successful back up to the Creek, for a minor Last Point of Support. However, if strong demand comes into the market on Monday morning, aggressive bulls can take new short-term positions can be taken to the upside.

Intermediate and long-term bulls should maintain existing positions.

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

Market Trends:

Intra-day: Neutral.

Short Term: Neutral

Intermediate Term: Down

Long Term:  Neutral

The stock market, as measured by the Wyckoff Wave, experienced an intra-day failure to the downside. It closed, on decreased volume, near the top of a wider price spread, in a clearly 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 After a small gap opening to the downside, supply remained and the Wyckoff Wave reacted to point P. There supply was withdrawn and the Wyckoff Wave began to rally.

The rally was of poor quality, indicating a lack of demand, and ran into some resistance as it tested yesterday’s highs at points O and M.

While, so far, the test has been successful, supply did not come into the market and the Wyckoff Wave moved sideways for the rest of the trading day. This gives the wave an opportunity to test those guys on Monday.

The last intra-day wave is worthy of comment. Like yesterday, it was on increased price spread and noticeably higher volume. Unlike yesterday, the intra-day wave lasted for 40 min. This made the volume level more normal than yesterday. It also suggested that, while the intra-day wave move the Wyckoff Wave to the upside, the relatively narrow price spread and higher volume indicated some supply was coming into the market.

If the Wyckoff Wave was going to advance, it probably should’ve done so on the rally to point O. This failure suggests the Wyckoff Wave will have a difficult time rallying past point M and should begin to react.

The Optimism – Pessimism Index rallied. It remains in an overbought position relative to its upward trend channel. The O – P Index continues in a negative divergence with the Wyckoff Wave when compared with points D, B, Z, X and V.

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

On Monday, the Technometer will open in a high neutral condition.

Today, the Wyckoff Wave put in a very interesting performance. In textbook manner, it backed up to the resistance at the top of the mini trading range. After holding at the resistance, it began to rally and put in a strong close.

While it would be easy to call this a successful back up to the Creek, there are some concerns.

Usually, after a successful back up, strong demand returns and there is a strong rally off the top of the trading range. That didn’t happen. As discussed above, the rally off the low was of poor quality and suggested a lack of demand.

The Wyckoff Wave’s Technometer is in an overbought condition. The overbought condition is not mitigated by a strong Force Index. This suggests it will be difficult for the Wyckoff Wave to advance strongly in the face of an overbought Technometer.

The Optimism – Pessimism Index has been extremely strong and is now higher than it was at the top of the major trading range. This indicates a tremendous amount of effort to the upside, that has not been matched by the performance of the Wyckoff Wave.

While the market is relatively strong, at this time, it is difficult to see a strong move continuing to the upside.

The scenario with the highest probability of success continues to be a reaction back into the trading range to test the low at point M.

However, Mondays market action should be closely watched. If strong demand comes into the market, this would suggest, that despite the negative environment, the Wyckoff Wave is prepared to continue its move to the upside.

That being said, while it needs to be considered, that scenario has a much lower probability of success.