Important Developing Scenarios

Friday, July 15, 2016

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What To Do?

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 lower on decreased volume. It closed in the middle of a wider price spread, in an oversold condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves indicates that supply was present during the morning hours. Then, it was withdrawn and the afternoon featured a lack of demand.

After a gap opening to the upside and a brief follow-through to point F, the Wyckoff Wave reacted to point G. The reaction was on good price spread and volume as supply controlled the market action.

After meeting support at point G the Wyckoff Wave put in a poor quality rally to point H. Then supply returned for the last 30 min. of the trading day.

The Wyckoff Wave continues to show relative weakness. Note the lower tops at points F and H and the lower bottom at point G. In addition, because supply was drying up as the Wyckoff Wave approach point G, there was an opportunity for demand to come into the market. That didn’t happen and the result was that poor quality rally to point H.

This suggests the Wyckoff Wave has reached the end of its rally and is prepared to put in a more definitive reaction. The depth of that reaction will be discussed later in this daily report.

The Optimism – Pessimism Index reacted and remains in its upward trend channel. The O – P Index continues to be in harmony with the Wyckoff Wave.

The Force Index is producing positive readings. The issue with the Force Index readings is the placing of the decimal point. The index should read +110.

On Monday, the Technometer will open in a neutral condition. For him

Today, the Wyckoff Wave appears to have put in a top and is prepared to react back towards the resistance line drawn through the top of the trading range. Once again, after the early supply was withdrawn, good demand did not come into the market.

The Wyckoff Wave has made excellent progress to the upside from point D. However, it is not been on strong demand. Demand was relatively weak and not much supply came into the market. This is not consistent with a strong rally through the top of a trading range, or a Sign of Strength.

However, with the Technometer moving into an oversold condition and the Force Index producing positive readings, the reaction for a Last Point of Support scenario must become part of the analytical process.

As mentioned yesterday, it will be important to watch the quality of any reaction that takes place next week. If stronger supply comes into the market on Monday or Tuesday, the Wyckoff Wave will have a good chance of reacting through the resistance line drawn through points V, A and C.

If supply remains weak, as shown in narrower price spread and lower volume, the probability of success for the Last Point of Support scenario increases. This would also be an opportunity for intermediate and long-term investors to take new positions to the upside, or add to existing positions.

While normally, this would be an opportunity for new short-term opportunities to the downside, it is difficult to recommend that in the face of an oversold Technometer.