Continued Sideways Action

Friday, January 6, 2017
What To Do?
Short Term
Short-term bears should hold short positions and use stops at Tuesday/Wednesday (December 27/28th’s high), as marked on the intra-day chart.
Short-term bulls should be looking for long candidates and be prepared to act.
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: Neutral
Short Term: Down
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave opened lower, rallied back to slightly positive for the day, and then drifted the rest of the afternoon to close slightly lower.  Volume was slightly lower on today’s decline, and has been relatively low last four days.
The Wyckoff Wave closed lower again today, after closing slightly lower Thursday.  The price spread and volume today gave no real clues.
The Technometer is registering a neutral reading.
The Nasdaq and S&P 500 was both higher today.



A review of the intra-day waves shows no real progress in either direction after the divergences on Tuesday.  Wednesdays rally lost steam right in the area where we should have seen acceleration to the upside if we was ready to rally.  Instead we saw weakness, and today’s rally failed again to attract a following or volume.  We are still leaning to a continued correction at this point.
The Optimism-Pessimism Index closed slightly higher.  You can see on the above chart the OP Index rallied to a new high versus the last three days, but price has failed to follow.  This is a slight short term divergence, which would be bearish.
The Force Index closed slightly higher and is still applying some downside pressure.
On Monday, the Technometer will open in a neutral condition once again.

Today, the Wyckoff Wave was slightly lower on lower than average volume.  We still feel there is more downside coming in the immediate days ahead. Today’s action was once again discouraging for the bulls, so lets see how early this week plays out.
We should not see a week ago Tuesday/Wednesday’s highs again for this short-term correction to continue.  If the Wyckoff Wave can continue higher here then that would be a bullish scenario.  The Technometer has returned to neutral levels and registered an oversold reading during the midday correction last Wednesday.  We think those lows are important for both bulls and bears.  If they are breached it would be a signal that there is more correction to come for the bears.  For the bulls this area should be used as a stop level if long positions get entered.  We have the level marked on the intra-day chart.
As we mentioned as week ago, 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.
As we have been continuing to acknowledge, the rally from “S” to “Z” did not have the volume and price spread we was expecting from a Jump Across The Creek, but appeared more as a test of the upper limits of the trading range.
 

Good Trading,
Todd Butterfield