More Selling to Come?

Tuesday, January 17, 2017
What To Do?
Short Term
Short-term bears should hold short positions and keep stops at last Tuesdays high as marked on the intra-day chart.  This would be a good area to add to short positions.
Short-term bulls should 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: Down
Short Term: Down
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave opened lower and traded lower for the first half of the day.  Volume did not come into the downside, and the Wave then spent the rest of the day trading sideways.  Volume was slightly higher again today.
The Wyckoff Wave closed lower again today, and the price spread and volume showed some supply on the market once again.
The Technometer is registering an overbought reading now of 49.85.
The Nasdaq and S&P 500 were both lower today as well.

A review of the intra-day waves shows the Wave opened lower and continued lower for the first three hours.  Then the Wave recovered some of the days losses going into the close.  The O-P traded sideways early in the day, and then went to another recovery high for the move.   This is a divergence on the intra-day charts as the O-P has been much stronger in the last 4-5 days versus the Wave.  This buying volume has not been able to get the Wave to advance, and has now proceeded to return the Technometer to an overbought reading.  These indications should allow for futher downside in the days ahead for the Wyckoff Wave.
The Optimism-Pessimism Index closed higher today.
The Force Index closed higher again today and is registering a reading of -135.
On Wednesday, the Technometer will open in an overbought condition.

Today, the Wyckoff Wave closed lower again on slightly higher volume and declining further back into the recent trading range.  With the Technometer now returning to an overbought condition, and the aforementioned divergence between the O-P and Wave, we feel there is more downside coming in the immediate days ahead.  We do not want to see a rally above last Tuesdays highs, and we would like to see the Wave fall further back into the trading range from here.  Being short has been a tiring process and very little reward, but this could change in the very near future.
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 with an increase in volume, then that would be a bullish scenario and we would discuss in more detail.  With the now divergence and overbought Technometer, this alternative is losing favor.
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 further back into the trading range here as expected.
 

Good Trading,
Todd Butterfield