Resistance At Top Of Trading Range

Thursday, December 8, 2016
What To Do?
Short Term
Short-term bears should stay short.  Identify possible shorts and be prepared to enter shorts again if we find resistance at top of trading range as expected.  Today’s action still supports this scenario.
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: Up
Short Term: Up
Intermediate Term: Neutral
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave, opened slightly higher in the opening minutes, had brief pullback for 30 minutes to define the low of the day, then rallied to the high of the day, which was another new high for the move.  Then spent the last half of the day retracing back to unchanged for the day, with some down volume coming in on the last few waves of the day.
The Wyckoff Wave closed unchanged on the day, in an overbought condition relative to the Technometer.  The price spread and volume suggest a lack of demand day.
The Nasdaq and S&P 500 was higher once again today.

A review of the intra-day waves confirms the above.  After the slightly higher opening, the Wave spent the rest of the day on both sides of unchanged.  Volume was slightly lower today, and showed lack of demand on the rally.
The Intra-day Optimism-Pessimism Index showed a slight divergence at the high of the Wyckoff Wave today.
The Optimism-Pessimism Index closed unchanged as well today.
The Force Index closed lower today and still showing moderate negative readings.
On Friday, the Technometer will open in an overbought condition.

Today, the Wyckoff Wave basically traded both sides of unchanged today after making a mid-day high.  The reaction we have been expecting over the last week has failed to materialize.  Todays rally showed a lack of follow through demand and volume was not strong enough to support the Sign of Strength.  We feel that the top of the trading range will prove resistance for this rally.  We continue to feel the Wyckoff Wave is vulnerable to a more important correction.
This suggests the Wyckoff Wave will react back towards the middle/bottom of the minor 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 to the bottom of the trading range and test the previous support at point “U”, and the more important lows at point “S” in a normal correction.
This weeks action suggest that it will still be difficult for the Wyckoff Wave to move past the resistance at the top of the trading range.   The overbought Technometer still supports this scenario.

Good Trading,
Todd Butterfield