Rally Off Support, Maybe

Thursday, September 15, 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 Up
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 higher on decreased volume. It closed in the upper half of a wider price spread, in a clearly oversold condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves indicates today was a lack of demand day. After a small gap opening to the downside, demand came into the market and the Wyckoff Wave rallied to point E. The reaction to point F was on a lack of supply.

Then, the Wyckoff Wave rallied to point G. Because point G was higher than point E, the intra-day trend was changed to up. The new trend channel is drawn in blue.

Then, the wave rallied to point E. This intra-day rally lasted about 2 1/2 hours. That was longer than the move from points D to E. That rally lasted just under 2 hours. More importantly, the thrust from points F to G was noticeably less than that from points D to E. In addition, on the rally to point G, the Wyckoff Wave was unable to reach the supply line of the new intra-day up trend channel. This suggests a withdrawal of demand.

The Wyckoff Wave is in harmony with its intra-day O-P Index.

The Wyckoff Wave has also rallied and, at least, weakened the intra-day trend channel. This makes it vulnerable to react and retest the lows at point D.

The Optimism – Pessimism Index rallied, but still remains in a positive inharmonious action, with the Wyckoff Wave, when compared with point D.

Tomorrow, the Technometer will open in an oversold condition.

Today, once again, the Wyckoff Wave rallied off the support line drawn from point D. While the price spread and increased, the reduced volume suggests demand was not particularly dominant and the Wyckoff Wave may need to react again, and test the support at point D.

This observation is in contrast with the oversold Technometer. That suggests there is still an opportunity for demand to come into the market and allow the Wyckoff Wave to rally and test the high at point J.

While short-term bulls should maintain any short-term positions to the upside, the brief reaction scenario has the highest probability of success.

On the reaction from point J volume has been relatively high. This suggests supply has not completely dried up. The Wyckoff Wave may need to react to test the support on reduced price spread and noticeably lower volume, before it is in a position to rally.

The Spring scenario discussed yesterday still can’t come into play. However, in most cases an index or a stock Springs support relatively quickly and does not put in a small sideways movement first.

While the Wyckoff Wave certainly can continue to rally off the support, it may well react and test the support before putting in a more substantial move to the upside.