Is Supply Drying Up?

Thursday, August 11, 2016

Click here to open the attached charts

What To Do?

Short Term:
There are no short-term opportunities to the upside.
Aggressive short-term bears should maintain their positions. However, they should be closed if strong demand returns.

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: Down, but in a slightly oversold position
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 lower half of a slightly narrower price spread, in a low neutral 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 continued in a long slow reaction until it reached the low for the day at point C. The reaction lasted for four hours and 30 min. Then, the Wyckoff Wave moved sideways for the rest of the trading day.

The Wyckoff Wave is in harmony with the intra-day O – P Index when compared with points C and A.

The Wyckoff Wave is in a slightly oversold position relative to its intra-day down trend channel. Today’s lack of supply does give the Wave an opportunity to rally back into the channel.

The Wyckoff Wave has moved sideways since Monday’s low at point X. Today’s lack of supply opens the door for demand to come into the market. However, previously, whenever the door was opened, demand did not make an appearance.

The Optimism – Pessimism Index reacted. It remains near the supply line of its upward trend channel. It is in harmony with the Wyckoff Wave when compared with point D.

The Force Index produced positive readings.

On Monday the Technometer will open in a neutral condition.

Today the Wyckoff Wave reacted and is again testing the August 5th lows. It is found support there for six consecutive trading days.

Today’s lack of supply, finding support over the last six trading days, plus the Technometer’s nearly oversold condition all suggest there is an opportunity for the Wyckoff Wave to rally. However, as mentioned throughout the week, until good demand returns, it will be difficult to put in a noticeable move to the upside.

If the Wyckoff Wave rallies, it will quickly run into resistance at the line drawn from point C. A rally of this nature would fill last Friday’s wide gap opening and create a supply point for a new trend channel to the downside.

While that scenario continues to have a good probability of success, the Wyckoff Wave could also continue drifting to the downside. The solid support the Wyckoff Wave has received over the past six days give this scenario a relatively low probability of success.