Reaction In Progress

Monday, January 9, 2017
What To Do?
Short Term
Short-term bears should hold short positions and use stops at recent highs.
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: Down
Short Term: Down
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave opened lower, and drifted lower the rest of the day.  Volume was the same as Fridays and at relative low levels.
The Wyckoff Wave closed lower again today, after closing slightly lower Thursday and Friday.  The price spread and volume today gave indications of slight supply coming in to the downside.
The Technometer is finally coming off of neutral where it has been for a considerable time.  It is moving to oversold but will take a few more days of selling to get it there.
The Nasdaq was slightly higher today while the S&P 500 was slightly lower.

A review of the intra-day waves shows the Wave opening lower, a brief rally to plus on the day, then selloff the rest of the day into the close.  The lack of follow through rally the last few days finally brought in some light selling today.  We still think there is more downside to go from here.  The level marked on the above chart as important for bulls, could be broken tomorrow.
The Optimism-Pessimism Index closed lower today.  You can see on the above chart the O-P Index rallied to a new high Friday, price had failed to follow.  As we mentioned yesterday, this was a slight short term divergence, which was bearish and helped today’s selloff.
The Force Index closed lower as well and is applying downside pressure. A reading of -212 will have a mitigating effect on the soon to be oversold Technometer.
On Tuesday, the Technometer will open in a slight below neutral condition.

Today, the Wyckoff Wave closed lower on lower than average volume.  We still feel there is more downside coming in the immediate days ahead. Today’s action was helpful for the shorts we have been holding on to.
We do not want to see a rally above point “B”, and we would like to see the Wave fall back into the trading range from here.  We have tried to stay short, but it has been a tiring process.
As we mentioned a 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.  If the Wyckoff Wave can continue higher then that would be a bullish scenario, and we would discuss in more detail.
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.  Lets see if we can fall back into the trading range here as expected.
 

Good Trading,
Todd Butterfield