Short-term bears should consider closing positions and taking profits

Click Here For Wyckoff Wave Chart 06-27-2016

Today’s market letter is being produced using our new charting service software. This is because the data supplier for the original software was unable to provide five-minute price data. While we are still tweaking the software, I believe the charts provide readable and accurate data to go along with the commentary. Any comments you may have are greatly appreciated.

What To Do?

Short Term:

Their are no short-term opportunities to the upside.

Short-term bears should consider closing positions and taking profits. New positions can be taken if the next rally was of poor quality.

Intermediate & Long Term:

Their are no intermediate or long term opportunities to the upside.

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

Market Trends:

Intra-day: Changed to Neutral

Short Term: Neutral

Intermediate Term: Neutral

Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded lower on decreased volume. It closed in the lower half of a narrower price spread, in a slightly oversold condition relative to the Technometer. The price spread and volume suggest a lack of supply.

A review of the intra-day waves confirms the above. After a gap opening to the downside supply continued to drive the Wyckoff Wave down to point D. There supply dried up and the Wyckoff Wave moved sideways for the rest of the trading day.

The rally from points D to E was on good demand, but the reaction to point F suggested a withdrawal of supply. That reaction lasted three hours and 40 min. and did so on relatively narrow price spread and reduced volume. At point F the Wyckoff Wave was testing the earlier low at point D. Although the Wave fell slightly below point D, it was only a 10 point difference and suggests the test was successful.

A new intra-day trend channel was drawn with the supply line through points X and V. The parallel support line was drawn through point A. The Wyckoff Wave weakened the trend channel on the rally off point C and broke the trend at point D. This changes the intra-day trend from down to neutral.

Some demand did return later in the trading day. This could give the Wyckoff Wave the impetus to put in a rally. The rally may just be a weak effort as the Wyckoff Wave adjusts to the steep reaction. It also may be a rally to test the high at point X. The former has a higher probability of success.

The Optimism – Pessimism Index reacted and has returned to harmony, with the Wyckoff Wave. It has also returned to its upward trend channel, having slightly penetrated the channel’s supply line.

The Force Index reacted and continues to produce strong negative readings. There is a mitigating impact on the oversold Technometer.

Tomorrow, the Technometer will open in a low neutral condition.

Today, the Wyckoff Wave continued its reaction off point C. It is now in a position to test the May lows at point Z. This would be a reasonable place for the Wyckoff Wave to encounter support.

As mentioned above, the Wyckoff Wave may put in a short rally out of the strong reaction. The strong negative Force Index reading suggests the rally will have a difficult time making progress.

The Wyckoff Wave is sending signs that the reaction is weakening. However, we may be looking at a normal corrective rally before continuing to the downside.