Reaction in progress…

Thursday, December 15, 2016
What To Do?
Short Term
Short-term bears should stay short and use stops at recent highs.
Short-term bulls stand aside.
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: Neutral
Short Term: Up
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave, opened  higher on good volume and rallied back to the recent highs.  At that level, volume decreased, and we had a low volume pullback for the last half of the trading session, to retrace one half of the days move.
The Wyckoff Wave closed up on the day on decreased volume, in a neutral condition relative to the Technometer.  The price spread and volume suggested a lack of demand day.
The Nasdaq and S&P 500 was both up approximately .40% today.

A review of the intra-day waves confirms the above.  After opening plus the Wave continued the rally quickly to the high.  Volume was present for the first few waves, then fell off the rest of the day.  Volume contracted with today’s rally showing lack of demand.
The Intra-day Optimism-Pessimism Index once again did not confirm the rally and closed up only slightly.
The Optimism-Pessimism Index closed slightly higher.
The Force Index closed higher as well today.
On Friday, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave traded higher on a decrease in volume.  The reaction we have been expecting over the last few week has trouble getting started.  We would expect to see this reaction continue to lower levels.  The recent rally has not had a dramatic increase in spread or volume, and does not appear we had a Jump Across The Creek, but more so a test of the upper end of the trading range.
This suggests the Wyckoff Wave will react back towards the middle/bottom of the minor trading range.  For this to happen we would expect this reaction to continue a few more days, and then a minor rally to test the recent highs, before a more meaningful correction takes place.  The Technometer is back to a neutral reading, so we have to be prepared for the reaction to possibly be short and shallow, and give us another test of the recent high.
The reduced probability of a successful Sign of Strength also indicates the Wyckoff Wave will not experience a Last Point of Support on the reaction.  This suggests the Wave is expected to react back into the trading range and test the previous support at point “W”, “U”, and the more important lows at point “S” in a normal correction.

Good Trading,
Todd Butterfield