Some Supply Returns

Wednesday, August 24, 2016

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What To Do?

Short Term:
There are no short-term opportunities to the upside.
Aggressive short-term bears should maintain their positions. They should be closed if the Wyckoff Wave Springs the sideways movement, that began at point G and strong demand returns.

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 and in a new trend channel
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 wider price spread, in a neutral condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves indicates supply was present throughout a good portion of the trading day.

After a small gap opening to the downside, the Wyckoff Wave reacted to point O. While supply was present, it was not overpowering. The reaction lasted for 1 hour and 15 min., But the Wyckoff Wave only lost 66 points.

Then, it put in a poor quality rally to point P. The rally was on a lack of demand.

Supply returned and the Wyckoff Wave reacted for the next 3 hours. Some demand did return during the last 15 min. of the trading day.

While the intra-day trend remains down, a new intra-day down trend channel has been established. The supply line begins at point N and runs through point P. A parallel support line begins at point O. Today’s market action moved the Wyckoff Wave into an oversold position relative to the new down trend channel.

The Wyckoff Wave is also in an intra-day negative divergence with its Optimism – Pessimism Index when compared to both points P and N.

It appears today’s late demand could begin a slight up move that would return the Wyckoff Wave to the trend channel. However, the Wyckoff Wave is expected to continue to react. The test of point E has a good probability of failure. From an intra-day perspective, this would allow the Wyckoff Wave to continue to react. This scenario is supported by the intra-day negative divergences with the O – P Index.

The Optimism – Pessimism Index rallied slightly. It remains in the upper portion of its upward trend channel. From an intermediate or long term perspective, it is in harmony with the Wyckoff Wave.

Tomorrow, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave reacted and is testing the support at the bottom of the sideways move that began at point G. This brings the Spring scenario back into play.

If the Wyckoff Wave Springs this sideways movement, it would have enough potential to rally and test the high at point E. This suggests that if this occurs, a new phase of the trading range with resistance at point E and support at the Spring would be created.

In addition, the gap opening that was created on the reaction to point G would be filled.

This scenario is certainly not a foregone conclusion, but should be monitored.

The Wyckoff Wave could continue to react and, instead of putting in a Spring, could simply test the lows of the sideways movement. This would allow for a minor rally back towards the top of the sideways move from point G. Then, the Wyckoff Wave could continue to drift sideways and wait for some sort of ending action.

Neither of these two scenarios have a higher probability of success. In this case, market action needs to be analyzed and short-term traders, especially those who are holding positions to the downside, should be alert.