Santa Claus Rally

Todd Butterfield Market Opinion-Free 0 Comments

Friday, December 23, 2016


What To Do?

Short Term

Short-term bears should stay short and use stops at recent highs.  New short positions could be taken at these levels if volume expands on the downside.

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, opened unchanged in light holiday trading.  It then spent the majority of the day at unchanged to slightly higher, before closing fractionally higher for our Santa Claus rally.  Volume was light in pre-holiday trading.

The Wyckoff Wave closed slightly higher on the day with volume much lower today to start the long weekend.  The price spread and volume showed lack of demand today.

The Technometer is registering overbought with a reading of 50.

The Nasdaq and S&P 500 was both slightly higher as well today.

A review of the intra-day waves confirms the above.  After opening unchanged on the day, the Wave traded sideways before closing on the highs of the day.   Volume continued to decline as has been the pattern all week.

Volume has not expanded on the downside the last two days, so not much new to report there.

The Intra-day Optimism-Pessimism Index was slightly higher today and registered a new high for the move, while the Wyckoff Wave is slightly below its high from two days ago.

The Optimism-Pessimism Index closed slightly higher.

The Force Index closed higher today.

On Monday, the Technometer will open in an overbought condition.

Today, the Wyckoff Wave traded slightly higher on an expected decrease in volume.  The reaction we have been expecting over the last few weeks has not materialized.  All indications are that we will still see a reaction from these levels.   The Technometer has returned to overbought levels once again which should help us get a reaction started.

The recent rally to “X” 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 did nothing to change our previous comments.

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

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