A Lack of Supply Reaction

Friday, September 16, 2016

Click here to open the attached charts

What To Do?

Short Term:
Short term bulls, who entered the market, should maintain their positions.
There are no short-term positions 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: Changed to Down and then changed again to Neutral
Short Term: Down, but weakened and in an overbought condition.
Intermediate Term: Neutral
Long Term: Neutral

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

A review of the intra-day waves indicates that the first 4 hours and 15 min. of the trading day was on a lack of supply. Demand returned during the final 2 hours and 15 min.

After a small gap opening to the downside, supply continued as the Wyckoff Wave reacted sharply to point H. After a brief rally to point I, the Wyckoff Wave reacted again to point J. Then it put in a poor quality rally to point K. Supply continued and the Wyckoff Wave reacted to point L.

The reaction to point H changed the intra-day trend to down. A new intra-day down trend channel was drawn in red. The Wyckoff Wave quickly weakened the trend at points H and I.

Even though the rally to point K was on a lack of demand, the intra-day down trend channel was weakened. The Wyckoff Wave was unable to return to the trend channel on the reaction to point L.

At point L, demand came into the market and the Wyckoff Wave rallied for the rest of the trading day. The strength of the rally changed the intra-day trend from down to neutral.

The Wyckoff Wave is in a positive intra-day divergence with its O-P Index when compared with points L, J and H.

The reaction from point G to point L was on a lack of supply. It also held above the earlier low at point D. This suggests a successful secondary test of the low at point D.

The afternoon demand appears to be the beginning of the intra-day rally that should, at least, test yesterdays high at point G.

The Optimism – Pessimism Index reacted and continues in a positive inharmonious action with the Wyckoff Wave when compared with point D.

On Monday, the Technometer will open in an oversold condition.

Today, it appears the Wyckoff Wave has successfully tested the support area created by the line drawn from point D. The late demand, that followed the lack of supply reaction, suggest the Wyckoff Wave is prepared to rally off the support and continue this phase of the long trading range.

The Technometer continues in an oversold condition. This, plus the Wave’s positive inharmonious action with its O-P Index support the rally scenario.

This gives the Wyckoff Wave an opportunity to rally and test the highs at point E.

It is difficult for a stock or index to react in the face of an oversold Technometer.

As mentioned yesterday, the Wyckoff Wave has been unable to reach the support line of its short-term down trend channel, since it rallied off that line to point H.

While everything appears to be ready for a good move to the upside, it will be important that Monday’s market action be to the upside and also be on wider price spread and good volume.

It is time for demand to take charge of the market. If it doesn’t, the rally scenario is in jeopardy.

There was an error in yesterday’s report. In the first paragraph I wrote “The price spread and volume suggest a lack of supply.” I should have written a lack of demand.

Fortunately, the first sentence of the second paragraph was “A review of the intra-day waves indicates today was a lack of demand day.” Hopefully I corrected my inadvertent error.

Regardless, that is a mistake and I apologize for my error.

My thanks to the attentive reader who brought that to my attention.