More Withdrawal Of Demand

Monday, November 14, 2016

What To Do?

Short Term:

Short-term bulls should continue to maintain their positions. The expected minor reaction would create a difficult risk/reward ratio for any new positions to the downside. Short-term short positions are not recommended.

There are no short-term positions to the downside.

Intermediate & Long Term:

Intermediate and 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 Neutral.
Short Term: Neutral.
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, experienced an intra-day failure to the downside. It closed, on decreased volume, in the upper quarter of a narrower price spread, in a neutral condition relative to the Technometer. The intra-day failure suggests a lack of supply.

A review of the intra-day waves confirms the above. After a gap opening to the downside, supply remained and the Wyckoff Wave reacted to point H. The intra-day reaction lasted for two hours and forty-five minutes. Supply was withdrawn and the Wyckoff Wave spent the rest of the trading day in a poor quality rally. The rally was on relatively narrow price spread and volume and suggested a lack of demand. It lasted four hours and fifteen minutes. During that time the Wyckoff Wave gained 409 points. This indicates the Wyckoff Wave made little progress to the upside during an extended period.
The Wyckoff Wave has weakened its intra-day up trend channel. This changes the trend to neutral. The Wave is also in intra-day harmony with its O-P Index.

Today’s poor quality rally continues to suggest the Wyckoff Wave is putting in a successful test of points B and G, on the intra-day chart. The Wyckoff Wave failed to rally past point B at point G. This is a second attempt and unless strong demand comes into the market it will also successfully test point B. This continues to make the Wyckoff Wave vulnerable to react and reduces the probability of any type of intra-day rally.

Look for the Wyckoff Wave to react and test the lows at points W, which is also the top of the intra-day trading range.

A quick note: Occasionally, the above statements concerning the presence, or lack of, demand and supply differ. Every day I analyze the intra-day waves and conclude whether demand, supply, lack of demand or lack of supply dominated the day’s market action. Most of the time the intra-day analysis is in concert with the general Wyckoff principle. Sometimes, like both yesterday and today they are not the same. I feel the intra-day analysis carries more weight than the general Wyckoff principle. When they differ, I go with the intra-day analysis.
Back to the daily report.

The Optimism – Pessimism Index rallied slightly. It continues in a negative divergence with the Wyckoff Wave when compared with points NJ and H.

The Force Index rallied, but is still producing moderate negative readings.

Tomorrow, the Technometer will open in a neutral condition.

Today’s intra-day failure to the downside continues to suggest demand is weakening and the Wyckoff Wave is vulnerable to react. Notice the wider price spread and volume, that appears on the vertical line chart, over the last four days. This type of formation usually indicates distribution.

Today’s lack of demand makes the Wyckoff Wave extremely vulnerable to supply coming into the market. That would begin the reaction.

As mentioned previously this reaction could lead to a Last Point of Support and a trading opportunity to the upside.

When the reaction begins, watch the price spread and volume. A reduction in both suggests a lack of supply. It will also be helpful if the reaction holds at or above the halfway point of the rally from point S. Again, this is in the area of points P and R.

The Wyckoff Wave encountered some resistance at points P and R. Now that the rally has moved past those points, they will change to support areas on any reaction.