On Friday the Wyckoff Wave put in a significant day to the upside. It appears to be in the process of finally leaving the 10 month trading range and perhaps beginning a new markup period.
In Wyckoff terms, this is called “Jumping the Creek”. In a perfect world, the Wyckoff Wave would continue to rally and then react back towards the resistance line on reduced price spread and volume. The “Backup to the Creek”, if successful, would constitute an important Last Point of Support. This would set the stage for a new strong rally.
Last Wednesday and again on Thursday, Pulse of the Market subscribers received a buy signal. This was applicable to both short traders and intermediate to long-term investors.
The buy signal was based on the following:
1. While, after reaching and slightly penetrating the resistance line drawn from point X, no real supply came into the market to drive the Wyckoff Wave back into the trading range.
2. We did not see an upthrust. In fact, relative volume was reduced.
3. As the Wyckoff Wave moved sideways, the Technometer began to move towards an oversold condition. This was an important signal that any reaction would not be deep or long in nature.
4. Even though the Technometer was moving towards an oversold condition, the Force Index remained strong and continued to produce positive numbers. This was a very positive development and also suggested any reaction would be extremely mild.
5. The Optimism – Pessimism Index was moving strongly into new high ground and was leading the Wyckoff Wave. This strongly indicated that good demand was present and any supply being dumped on the market was easily taken in.
These significant Wyckoff indications gave the market an extraordinarily good chance to rally. Wyckoff Pulse of the Market subscribers who had taken positions earlier in the week, then enjoyed Friday’s positive market performance.
Over the weekend, subscribers also receive an analysis of the Wyckoff Wave 100 Point & Figure Chart, which identified the four phases, their accounts and the short, intermediate and long-term objectives. The most aggressive of which had the Wyckoff Wave increasing in value by 50%.
Friday’s market action also changed some of the market trends. The short-term trend, which was up, continues. However, the intermediate-term trend is changed from neutral to up. Finally, on the weekly chart, the Wyckoff Wave has returned to its long term trend channel. This would change the long-term trend to up.
While all of this is extremely good news for the bulls, the Wyckoff Wave still has a few things to confirm before the new rally becomes official. Once the Wyckoff Wave “Jumps the Creek”, three things can happen.
1. As mentioned above, the Wyckoff Wave can backup towards the resistance to test the “jump” and put in an important Last Point of Support. This is the best scenario. It is also important to note that while the backup can be easy to see and take a few days, it can also be very brief and missed by many traders. As an old trader once said, “once the train pulls out of the station, it doesn’t slow down to wait for stragglers”.
2. The Wyckoff Wave can backup (react) towards the resistance and put in an unsuccessful test. This would cause it to fall back into the trading range. This would negate the positives of the “jump” and the Wyckoff Wave would move within the trading range until there was new ending action. This is exactly what happened on the reaction to point E on the daily chart.
3. The Wyckoff Wave had a successful backup and test, but then moved sideways in a new phase of the trading range. This is exactly what happened when the Wyckoff Wave penetrated the trading range on its rally to point X. There was a “Jump Across the Creek” to point X and a backup to point A. The Wyckoff Wave then moved sideways to point D, where it fell back into the original trading range.
While any of these three scenarios can most certainly happen, at this point, scenario #1 seems the most probable.
The Wyckoff Wave has put in a long sideways trading range with plenty of rallies and reactions. It appears our patience is about to be rewarded.