Sideways Trading Continues…

Monday, February 13, 2017
What To Do?
Short Term
Short-term bears should hold short positions and keep stops as previously directed.  We added shorts this morning in our Model Stock and ETF Portfolios, as the gap opening to the upside gave us the overbought Technometer we was looking for.   The Wyckoff Wave rallied intraday to our previous stop level and closed just slightly below it.  We think this level is important, but with the Technometer at overbought levels, we felt justified adding to our individual Stock and ETF short positions.  Many stocks are trading much weaker than the Wyckoff Wave, and that is where we have focused our attention.  The Wave rallying strongly through this level on an increase in volume will force us to begin to cover the rest of our shorts.
Short-term bulls should 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: Up
Long Term: Neutral
The stock market, as measured by the Wyckoff Wave opened higher once again on a gap opening, and then continued the rally until the last two hours of the day, where it once again retraced a portion of the days rally.  Volume was slightly higher from Friday’s trading.  The price spread and volume showed some demand present.
The Technometer reached an overbought level, and should provide some resistance to the rally from these levels.
The Nasdaq and S&P 500 were both up .5% today.
 


A review of the intra-day waves shows the Wave gapping higher, and the O-P making another new high for the rally.  The Wave managed a new high above level “F”, but still lags below the level of “Z” and “B”.
The Force Index closed higher today as well, and is allowing the Wave to push higher.
On Tuesday, the Technometer will open near an overbought reading.  This combined with the Wave/O-P divergence should stop the Wave from rallying strongly.

 
For the last few months, the Wave has been slowly working sideways/lower from the resistance at the top of the trading range.   Volume has been lackluster and volatility low.  It was reported that the S&P hasn’t had a 1% intraday move since December 14th.  This is the longest period of intraday calm in history.  We would expect this to change, and for the reaction to continue to the downside and pickup speed.
Bonds were down slightly today, trading opposite with the stocks.  We think bonds still trade higher…
Our Wyckoff indicators gave us the low in the TLT (20 yr. treasuries) a week ago Friday.  We had a nice start to a rally last week, but we expected stocks to pullback as bonds rally.  So far stocks have continued to hold firm, but we still are of the belief that stocks will work lower from here, as bonds and the TLT continue their rally of last week.
 

Good Trading,
Todd Butterfield