Short-term bears can continue to identify candidates to the downside

Click Here For Wyckoff Wave Chart 06-07-2016

Short Term:

Their are no short-term opportunities to the upside.

Short-term bears can continue to identify candidates to the downside. Positions can be taken if supply enters the market tomorrow. However, they should be closely watched as the reaction may not be particularly deep.

Intermediate & Long Term:

Intermediate and long-term bulls should maintain existing positions. However, this is a good place to close trades that have reached objectives and eliminate any underperforming positions. Cash should be held in preparation for ending action and a move to the upside.

There are no intermediate or long term opportunities to the downside.

Market Trends:

Intra-day: Up

Short Term: Neutral

Intermediate Term: Neutral

Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on slightly increased volume. It closed near the bottom of a narrower price spread, in a dangerously overbought condition relative to the Technometer. The price spread and volume suggest the presence of supply.

A review of the intra-day waves confirms the above. After a small gap opening to the upside, demand came into the market and the Wyckoff Wave rallied to point X. The rally was on the first intra-day wave, which lasted 1 hour and 15 min.

Supply returned and the Wyckoff Wave reacted for the rest of the trading day.

After moving into an overbought position, relative to its intra-day up trend channel, the Wyckoff Wave returned to the trend channel.

Today’s supply, while certainly present, was moderate and not particularly dominant. In my opinion, yesterday’s lack of demand and the inability of the Wyckoff Wave to continue past point X, after only one intra-day wave, suggests the up trend is vulnerable.

This makes the Wyckoff Wave extremely susceptible to a reaction that will not only weaken the up trend channel, but react to test the lows at points O and Q.

The Optimism – Pessimism Index rallied. It remains in a significantly overbought position relative to its upward trend channel. The negative inharmonious action with the Wyckoff Wave, when compared with point V continues to be in effect.

The Force Index rallied and is producing moderate positive readings. There is a mitigating impact on the dangerously overbought Technometer.

Tomorrow, the Technometer will open in a dangerously overbought condition.

Today, the Wyckoff Wave attempted to rally through the resistance line drawn from point V. The attempt failed and some supply came into the market. This caused the Wyckoff Wave to react and put in a poor close.

The Technometer has moved into a dangerously overbought condition. While this is certainly medicated by the strong Force Index readings, it will still be difficult for the Wyckoff Wave to advance in the face of these Technometer readings. The impact of the strong Force Index will probably be seen in the length and depth of any reaction.

Today’s market action did not appear to be an upthrust. An upthrust is defined by decreased price spread, increased volume and a poor close. While the price spread was decreased, volume was barely increased. The Wyckoff Wave did put in a poor close.

However, if an upthrust had taken place, there would’ve been stronger supply present on the intra-day chart. That chart indicated supply was moderate and not dominant.

The presence of supply also suggests the Wyckoff Wave is not “jumping the Creek” and moving into new high ground. If that was to happen, strong and sustained demand would’ve come into the market. Instead, after one intra-day up wave, demand was withdrawn. This is not indicative of a strong move into new high ground.

Even though the Wyckoff Wave did not react, today’s high was probably another top in the developing trading range. If the Wyckoff Wave reacts, as expected, the resistance line drawn from point V will be adjusted to reflect today’s high.

While I probably sound like a broken record, nothing in this market analysis suggests anything different than a reaction to test the low at point Z.

While the relative strength of the market is a positive, the expected reaction, which is not expected to be particularly deep, will signal a continuation of the sideways trading range.