A Little Demand: Reaction Still Expected

Tuesday, September 6, 2016

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What To Do?

Short Term:
There are no short-term opportunities to the upside.

Short-term bears positions to the downside should be maintained. In addition, new positions can be considered.

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: Up but weakened
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 upper quarter of a narrower price spread, in a high neutral condition relative to the Technometer. The price spread and volume suggest the presence of supply.

A review of the intra-day waves indicates today was more of a demand driven day. After a wide gap opening to the upside to point N, supply came into the market and the Wyckoff Wave reacted to point O.

Then, the Wyckoff Wave rallied for the next two hours on good price spread but relatively low volume. The rally ended at point P. After a long reaction on a lack of supply, demand returned and the Wyckoff Wave rallied for the last 15 min. of the trading day.

Since the beginning of the rally at point E, the Wyckoff Wave has been in relative intra-day harmony with its O – P Index.

Once again, the Wyckoff Wave weakened its intra-day up trend channel. The rallies to points N and P barely returned the Wave to the channel. The day’s final rally left the Wyckoff Wave in a weakened position relative to the channel. This general weakening on the rally and the inability of the Wyckoff Wave to reach the trend channels supply line continues to suggest the Wyckoff Wave will react.

The Optimism – Pessimism Index rallied. It is in a negative divergence with the Wyckoff Wave when compared with point E. It is also in a very slightly overbought position relative to its upward trend.

Tomorrow, the Technometer will open in a neutral condition.

Today, some demand returned and the Wyckoff Wave put in a modest move to the upside. While demand was present it was not particularly strong. While the Wave did rally, the quality of demand continues to suggest the Wyckoff Wave will react and, at least, test the low at point D.

This scenario is supported by the Wave’s significant negative divergence with its O-P Index. Since the reaction to point H, the O-P Index has put in a substantial effort to the upside, yet the Wyckoff Wave has basically moved sideways.

While the Wyckoff Wave may continue to rally, it will have a difficult time moving past the top of the sideways movement that began at point G.

The reaction back into the trading range scenario continues to have the highest probability of success