Reaction In Progress

Tuesday, January 10, 2017
What To Do?
Short Term
Short-term bears should hold short positions and lower stops to last Wednesdays highs as marked on the intra-day chart.
Short-term bulls should be looking for long candidates and be prepared to act.
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: Down
Short Term: Down
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave opened higher and had another rally back into the middle of the recent sideways range, then had a slight pullback into the close.  Volume was slightly higher today.
The Wyckoff Wave closed slightly higher today, and the price spread and volume gave no helpful indications.
The Technometer has come off of neutral where it has been for a considerable time.  It is moving to oversold but will take a few more days of selling to get it there.
The Nasdaq was slightly higher today while the S&P 500 was unchanged.

A review of the intra-day waves shows the Wave opening higher, continued its rally into the middle of the recent sideways range, and then pulled back in the afternoon.  It held Monday right at the important intra-day level we have had marked on the chart.   The lack of follow through selling keeps the bulls hopes alive, but then the rally’s are of poor nature.  We are locked in this trading range, but it is getting tighter and tighter.
The Optimism-Pessimism Index closed higher today.  The O-P went to a new low today versus a week ago, and the Wave held above the corresponding level.  We then got today’s early rally off of that divergence.
The Force Index closed lower again today and continuing to exert downside pressure.  A reading of -231 will have a mitigating effect on the soon to be oversold Technometer.
On Wednesday, the Technometer will open in a slight below neutral condition.

Today, the Wyckoff Wave closed slightly higher on a slight increase in volume.  We still feel there is more downside coming in the immediate days ahead.
We do not want to see a rally above point “B”, and we would like to see the Wave fall back into the trading range from here.  We have tried to stay short, but it has been a tiring process.
As we mentioned a week ago, the alternative scenario is that we are backing up to the previous highs for a Last Point of Support.  For all the reasons we have mentioned over the last few weeks, we see this as a very low probability.  If the Wyckoff Wave can continue higher then that would be a bullish scenario, and we would discuss in more detail.
As we have been continuing to acknowledge, the rally from “S” to “Z” did not have the volume and price spread we was expecting from a Jump Across The Creek, but appeared more as a test of the upper limits of the trading range.  Lets see if we can fall back into the trading range here as expected.
 

Good Trading,
Todd Butterfield