A Possible Testing Rally

Monday, August 15, 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. Short-term traders need to decide if they want to ride out any rally, or close their positions and reenter the market if the test of point F it is successful.

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
Short Term: Neutral
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed in the lower half of a slightly wider price spread, in a slightly oversold 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 nice gap opening to the upside, the Wyckoff Wave continued to rally to point D. A good portion of the move to point D was on the gap opening. The rally was on relatively low price spread and volume, suggesting a lack of demand. Then, the Wyckoff Wave spent the last three hours and 20 min. of the trading day in a long slow reaction which ended at the day’s close.

Although volume increased during the last 15 min. of the trading day, the overall quality of the reaction suggested a lack of supply.

The late increase in volume to the downside created an intra-day positive divergence between the O – P Index and the Wyckoff Wave. This is shown when today’s close is compared to point C.

The Wyckoff Wave also returned to its intra-day down trend channel.

Today’s market action gives the Wyckoff Wave an opportunity to test both the intra-day down trend channel supply line and the resistance at point M.

The Optimism – Pessimism Index reacted. It remains in intermediate and long-term harmony with the Wyckoff Wave. It continues to test the supply line of its upward trend channel.

The Force Index rallied slightly and continues to produce positive readings.

Tomorrow, the Technometer will open in a low neutral condition.

Today, the Wyckoff Wave continued moving sideways. Today’s overall lack of supply suggests the Wyckoff Wave will have an opportunity to rally this week and test both the resistance line drawn from point C and the support, now resistance, at point F. If a count is taken over to point G on the 100 Point & Figure chart, the objective is in the general area of these resistance lines and points.

Today’s oversold Technometer and the intra-day O – P Index’s positive divergence, also suggests the Wyckoff Wave is ready to leave the sideways movement to the upside.

The absence of both supply and demand suggests a poor quality rally that will and with a successful test of point F. The Wyckoff Wave can then react back into the trading range. This scenario has the highest probability of success.