Reaction Started?

Wednesday, December 28, 2016
What To Do?
Short Term
Short-term bears should stay short and use stops at today’s highs.  Additional short positions could be taken on any intra-day rally.
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: Down
Short Term: Neutral
Intermediate Term: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave, opened lower and continued lower the rest of the trading session.  Volume was slightly higher today than yesterday, but still at holiday levels.
The Wyckoff Wave closed lower on the day and changed the intra-day trend to down.  The price spread and volume showed some supply present.
The Technometer is registering a neutral reading.
The Nasdaq and S&P 500 were both down almost 1% today.


A review of the intra-day waves confirms the above.  After opening lower supply was present all day, with no intra-day rallies, and closing on the lows of the day.  Volume was low but as expected for this holiday shortened week.
The Intra-day Optimism-Pessimism Index touched a new high today for the move, that was unconfirmed by the Wyckoff Wave.  This is shown by the blue arrows above.  Then the Wave started its stair-step decline for the rest of the day.
The Optimism-Pessimism Index closed lower.
The Force Index closed lower today as well.
On Thursday, the Technometer will open in an neutral condition.

Today, the Wyckoff Wave traded lower today on a slight increase in volume.  The reaction we have been expecting over the last few weeks showed signed of finally beginning today.  We would like to see the Wave continue lower from these levels and volume to expand on the downside.  We should not see today’s highs again for this short-term correction.  The Technometer has returned to neutral levels and we should see more downside action before it would register oversold.
The recent rally to “Z” 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 weeks action has not changed that prognosis.  This suggests the Wyckoff Wave will react back into the trading range.
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