Good supply needs to come in at this level

Click Here For Wyckoff Wave Chart 06-02-2016

Short Term:

Their are no short-term opportunities to the upside.

Today, the market did not perform as expected. Therefore, unless good supply comes into the market tomorrow morning, short-term positions to the downside should be closed.

Intermediate & Long Term:

Intermediate and long-term bulls should maintain existing positions. However, this is a good place to close trades that have reached objectives and eliminate any underperforming positions. Cash should be held in preparation for ending action and a move to the upside.

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

Market Trends:

Intra-day: Neutral..

Short Term: Down and in an overbought position relative to the trend

Intermediate Term: Neutral

Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed at the top of a wider price spread, in an extremely overbought condition relative to the Technometer. The price spread and volume suggest a lack of supply.

A review of the intra-day waves confirms the above. After a small gap opening to the downside, the Wyckoff Wave reacted to point O. Then, it rallied for the rest of the trading day.

The Wyckoff Wave rallied past the earlier highs at points L, J and H. This creates two possible scenarios. The first is the test has failed and the Wyckoff Wave will continue to rally. The second is that this is a poor quality test of earlier highs. If that is the case, the highs will need to be retested, before reacting.

A clue to which scenario will prevail may be found in the intra-day up waves are marked 1, 2 and 3. At first glance, the good price spread and volume suggest good moves to the upside. However, when reviewing the length of each wave, a different picture is presented.

The wave marked #1 lasted for 2 hours. The wave marked #2 lasted 55 min. The last wave of the trading day, marked #3 lasted 50 min. The high volume that is always found in the last 15 min. of the trading day is included in wave #3.

This suggests the rally was not particularly strong. However, the relatively wide price spreads suggest little supply was coming in to stop the advance. Until more supply comes into the market, the Wyckoff Wave has an opportunity to continue its advance. This would suggest the failed test of the earlier highs scenario, has the highest probability of success

The Optimism – Pessimism Index rallied and remains in an overbought position relative to its upward trend channel. It is back in harmony with the Wyckoff Wave, when compared with point X. The negative divergence with the Wyckoff Wave, when compared with point V, remains in place.

The Force Index rallied and is producing low positive readings. There continues to be a mitigating impact on the extremely overbought Technometer.

Tomorrow, the Technometer will open in an overbought condition.

Today, the Wyckoff Wave surprised and put in a nice move to the upside. Instead of continuing to react, the lack of supply allowed the Wyckoff Wave to advance and take out an earlier high at point X.

This gives the Wyckoff Wave an opportunity to continue to rally and test the high at point V.

The extremely overbought Technometer continues to suggest it will be difficult for the Wyckoff Wave to exceed the high at point V and that any test would be successful.

It appears the extremely overbought Technometer is being supported by a strong Force Index. However, regardless of that index’s strength, it is difficult for an index or stock to advance in the face of an extremely overbought Technometer.

Today’s market action makes it difficult to continue to support the reaction back to test the lows at points U and S scenario.

It also suggests the reaction to point Z may have formed the support for the next phase of the trading range.

Tomorrow is a critical day. The Wyckoff Wave did not perform as expected. Unless good supply comes into the market tomorrow, look for the Wyckoff Wave to rally and test the high at point V.

If supply does come into the market tomorrow and the Wyckoff Wave reacts, it will still have a difficult time moving past point Z. There is a good probability it will successfully test the supply line of its short-term down trend channel. This would change the short-term trend to neutral. If the Wyckoff Wave continues to advance past point X, this will also change the short-term trend to neutral.