Groundhog Day

Thursday, July 14, 2016

What To Do?

Click here to open the attached charts

Short Term:
There are no short-term opportunities to the upside.
There are no short-term opportunities to the downside.
Intermediate & Long Term:
Their are no intermediate or long term opportunities to the upside.
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: Neutral
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on increased volume. It closed in the middle of a narrower price spread, in a neutral condition relative to the Technometer. The price spread and volume suggest the presence of demand.

A review of the intra-day waves confirms the above. After a wide gap opening to the upside, the Wyckoff Wave continued to rally for the next 30 min.

At point D, supply came into the market and the Wyckoff Wave reacted to point E, on the intra-day line chart. It then put in a poor quality rally to point F. Supply returned again and the Wyckoff Wave reacted.

Today’s close was below the price of the days gap opening. This indicates the Wyckoff Wave was unable to put in much of the gain, on its own. While some demand was certainly present during the rally to point D, it was being withdrawn as the Wyckoff Wave rallied to point F.

In addition, the Wyckoff Wave was unable to rally above point D. It is also moved noticeably away from the old intra-day up trend channel, that is still shown in blue. All this continues to suggest the Wyckoff Wave will react.

The Optimism – Pessimism Index reacted, but is still in harmony with the Wyckoff Wave. It remains in its upward trend channel.

We are still struggling with the Force Index readings. As the Technometer is in a neutral condition, today’s Force Index reading would not tell us much about the Wyckoff Wave’s future direction.

Tomorrow, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave continued its rally off point D. Once again, the rally featured a lack of demand and late supply coming into the market. The relatively low volume continues to suggest it will be difficult for the Wyckoff Wave to continue the rally. That is because little demand is present and what is, is being taken in.

This scenario is supported by the gap opening. Although the Wyckoff Wave rallied, the gap opening was higher than today’s close.

I know I sound like a broken record, but this market action is surprising and difficult to analyze. The temporary solution is to maintain long-term positions to the upside, which are enjoying some reasonable gains and staying away from the market on a short-term basis.

However, once the long-awaited reaction begins, it will be important to watch the price spread and volume as the Wyckoff Wave reacts back towards the resistance line that formed the top of the trading range. If the reaction is on reduced price spread and volume, which suggests a lack of supply, and holds at or above the resistance line, we could be in a bullish situation.

If the Wyckoff Wave reacts through the resistance line and tests the low at point D, this would indicate the Wyckoff Wave has simply put in another top in the developing trading range.

While these two scenarios have certainly not come into play, they should be filed away for review once the reaction begins.