Expecting the Reaction to Continue

Friday, January 20, 2017
What To Do?
Short Term
Short-term bears should hold short positions and keep stops on original short positions at the higher level as marked on the intra-day chart.  On any new short positions added last week use the lower stop level as marked on the chart.
Short-term bulls should stand aside.
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 slightly higher today, and then reversed lower, till a later afternoon rally brought the Wave off of the low of the day.  Volume was increased today, as investors were positioning during the inauguration.
The Wyckoff Wave closed lower today, and the price spread and volumes showed some supply present.
The Technometer came off of the overbought reading which we used as a sell signal in the middle of last week and is moving towards neutral again.
The Nasdaq and S&P 500 were both slightly higher today.

A review of the intra-day waves shows the Wave opened higher and then supply came in once again to drive us down to the midday lows, before a late rally cut the losses for the day.   The O-P broke the short term uptrend Thursday, and was weak early again today, before some upside volume came into the Wave in the last few minutes of the day.   We still expect further downside in the days ahead for the Wyckoff Wave.
The Optimism-Pessimism Index closed higher today.
The Force Index closed higher today as well.
On Monday, the Technometer will open neutral/overbought.

Today, the Wyckoff Wave closed lower again on higher volume.   The last few days it has held below the recent top of the trading range and starting to fall further back into the trading range as we have been expecting.  We would like to see more downside volume come in here and take the O-P to a new low as the Wave has done.  The Technometer has just came off an overbought “Sell” reading and we should have more downside before it would become near oversold.
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 with an increase in volume, then that would be a bullish scenario and we would discuss in more detail.  With last weeks O-P/Wave divergence and overbought Technometer, this alternative is losing favor.
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 further back into the trading range here as expected.
 

Good Trading,
Todd Butterfield