Reaction in progress…

Wednesday, December 14, 2016
What To Do?
Short Term
Short-term bears should stay short and lower stops to todays high.
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, traded both sides of unchanged until the Fed announcement.  The Fed announcement gave us a quick spike which was the high of the day.  Then volume came in to the downside, and the Wyckoff Wave closed near the lows of the day, on an increase in volume.
The Wyckoff Wave closed lower on the day, in a neutral condition relative to the Technometer.  The price spread and volume suggested supply was present day.
The Nasdaq was down 1/2% today, and the S&P 500 was down over 3/4% today.

A review of the intra-day waves confirms the above.  After a slight correction in the first two hours the market slowly rallied into the Fed announcement. After the Fed announcement we had one more new high spike, then volume expanded on the selloff to the days lows. Volume expanded with today’s selloff showing supply present.
The Intra-day Optimism-Pessimism Index divergence of the last five days finally helped to get todays selloff rolling.  The Optimism-Pessimism showed weakness into the close.
The Optimism-Pessimism Index closed lower.
The Force Index closed lower as well today.
On Thursday, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave traded lower on an increase in volume.  The reaction we have been expecting over the last week appears to have finally begun.  We would want to see this reaction to continue lower levels.  The recent rally has not had a dramatic increase in spread or volume, and todays selloff had an increase in volume to the downside.  It does not appear we had a Jump Across The Creek, but more so a test of the upper end of the trading range.  We look for the reaction to continue…
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 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.
Todays action suggest that it will still be difficult for the Wyckoff Wave to move significantly past the resistance at the top of the trading range.

Good Trading,
Todd Butterfield