Short Term Opportunities To The Downside

Wednesday August 3, 2016

Click here to open the attached charts

What To Do?

Short Term:
There are no short-term opportunities to the upside.
Aggressive short-term bears who took positions should maintain them. In addition new positions can also be considered. These should be closely watched as the expected reaction may not be particularly long or deep.

Intermediate & Long Term:
Their are no intermediate or long term opportunities to the upside.
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: Neutral
Long Term: Neutral

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

A review of the intra-day waves confirms the above. After a gap opening to the downside, the Wyckoff Wave rallied to point Q. The rally lasted for three hours and 35 min.

There was a brief reaction to point R and the Wyckoff Wave rallied during the last hour and 35 min. of the trading day.

Instead of presenting five-minute volume, the intra-day Optimism – Pessimism Index provides an excellent insight into today’s lack of demand.

After a brief rally to point O, supply came into the market and the Wyckoff Wave briefly reacted to point P. It created an intra-day positive divergence with the O – P Index, when compared with point M. This should have been an opportunity for good demand to come into the market and for the rally to continue.

Instead, the Wyckoff Wave continued to rally on low volume. This is shown on the intra-day O – P Index chart. The lack of any effort to the upside on the O – P Index chart, confirms today was a lack of demand day.

While the Wyckoff Wave has moved slightly above the support line drawn from point H, the continued relative weakness suggests that the Wyckoff Wave will react. It is expected to test and probably move through the supply line of the intra-day down trend channel.

The Optimism – Pessimism Index reacted and is testing the supply line of its upward trend channel. It is in harmony with the Wyckoff Wave.

The Force Index rallied slightly. There is a mitigating impact on the oversold Technometer.

Tomorrow, the Technometer will open in an oversold condition.

Today, the Wyckoff Wave put in a poor quality rally to the upside. This was the first part of the reaction back into the trading range scenario. So far, supply had not returned, but it is expected.

The one concern is the oversold Technometer. As mentioned yesterday, when the Wyckoff tools provide conflicting information, it is always best to rely on the relationship between demand and supply. That is why I used the intra-day Optimism – Pessimism Index to demonstrate the lack of demand and poor quality of today’s rally attempt.

Today’s market action makes it difficult to support the Last Point of Support scenario. The Wyckoff Wave is expected to continue to react and return to the trading range that began last August.