Needing a Retest

Click Here For Wyckoff Wave Chart 02-11-2016

Short Term:
There are no opportunities to the downside

While aggressive short-term bulls should continue to identify new opportunities to the upside, they should wait for a successful test of the trading range support for a Spring..

Intermediate & Long Term:
Intermediate and long-term bulls should maintain existing positions.

There are no intermediate or long term opportunities to the downside.

Market Trends:

Intra-day: Down, but in a severely oversold condition
Short Term: Neutral
Intermediate Term: Down, but in an oversold condition
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded lower on increased volume. It closed in the middle of a wider price spread, in a neutral condition relative to the Technometer. The price spread and volume suggest the presence of supply.

A review of the intra-day waves confirms the above. After a wide gap opening to the downside, the Wyckoff Wave continued to react on good supply to point E.

There was a brief rally to point F and, more importantly, a reaction to point G (intra-day chart), on reduced price spread and volume. Point G held above point E.

Demand returned and the Wyckoff Wave rallied for the rest of the trading day. However, the second strong intra-day wave to the upside had a narrower price spread and lower volume then the intra-day wave that followed point G.

While the Wyckoff Wave could continue to rally and attempt to reenter the intra-day down trend channel, today’s strong supply and moderate demand response suggest the low at point E probably needs to be retested.

The Optimism – Pessimism Index reacted and returned to its upward trend channel. To the downside, it is in a positive inharmonious action with the Wyckoff Wave when compared with points I and G.

The Force Index reacted and is producing moderately negative readings.

Tomorrow, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave reacted back into the mini trading range and tested the low at point G, on the daily chart. It encountered moderate demand and the rallied back towards the middle of the mini trading range.

This indicates that the rally to point L was not a Sign of Strength. Point L now becomes an additional resistance point in the mini trading range. The daily chart has been adjusted to reflect that change.

As mentioned above, the moderate demand that came into the market, as the Wyckoff Wave tested point G, suggests today’s low may need to be retested before the Wyckoff Wave can advance.

The Wyckoff Wave is also in a situation where it can react and test the trading range’s major support line at point G. It may also Spring that support.

The third scenario is that the reaction of the past two days is a Sign of Weakness. If this scenario plays out, the Wyckoff Wave will react strongly through the support line drawn from point G.

The relatively strong O – P Index suggest this scenario has a low probability of success. During the past two days, the O – P Index has barely reacted, while the Wyckoff Wave moved to the bottom of the trading range. In most cases, when an index or stock breaks through an important support point, to the downside, the O – P Index is noticeably weaker.

This suggests that:
The Wyckoff Wave will either retest the low at point G or the low at point Q and a rally within its trading range or,
The Wyckoff Wave will Spring that support and a rally.

Charts of the Wyckoff Wave are attached.