Continued Sideways Action

Thursday, January 5, 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 slightly higher then had a quick correction to the lows of the day, before experiencing a half way rally back to end the day.  Volume has been relatively low last three days.
The Wyckoff Wave closed lower on the day, after closing slightly higher yesterday.  The price spread and volume showed some supply present.
The Technometer is registering a neutral reading.
The Nasdaq and S&P 500 was both basically unchanged today.


A review of the intra-day waves shows no real progress in either direction after the divergences on Tuesday.  Wednesdays rally lost steam today right in the area where we should have seen acceleration to the upside if we was ready to rally, instead we saw weakness once again. We are leaning to a continued correction at this point.
The Optimism-Pessimism Index closed slightly lower.
The Force Index closed lower and is starting to apply downside pressure.
On Friday, the Technometer will open in a 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 a little discouraging for the bulls, but lets see how Friday 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 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 Friday, 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