Spring of the trading range

The Wyckoff Wave experienced a sharp sell off into late Wednesday/early Thursday, and then finished the week recovering some of the losses.  For the week we closed lower on an increase in volume, which shows supply was present.

The Technometer registered an oversold reading on the selloff.

The S&P was down approximately .4% for the week and the Nasdaq was down  .6%.

The Wyckoff Wave had a quick selloff thru the support of the recent trading range, and sprung this area.  It then rallied Thursday/Friday off of this low.  We warned in our Wednesday’s “Daily Pulse of the Market” update of a possible spring setting up for Thursday due to the oversold Technometer reading.  The oversold reading put us on the lookout for a possible recovery in price to relieve the oversold condition.

On the selloff into Wednesday the O-P touched another new low for the downtrend from “J” while the Wyckoff Wave sprung the previous support levels at “M” and “N”.   The Wave touching a new low Wednesday removed the divergence that we have had between the Wave/O-P. The O-P thus far, has not rallied as strong as we would have expected off of the Spring  and actually made a new low Thursday at the close.   Up volume did not come in as strong as could have been expected, so because of this we would like to see this Spring tested early this week.   A successful test would allow the taking of long positions.  A unsuccessful test will allow further downside.

The Force Index closed the week at -306 and still providing quite a bit downside pull on the market.

Lumber Liquidators (LL) experienced a strong rally this week after its successful backup, and has much higher objectives from its point and figure chart as we had discussed on Twitter Wednesday.  Please follow our Twitter as we will be giving more updates on there versus just this once a week review.  We are still liking the action in the following stocks, AGCO, HXL, ELY, IDCC, LL, LVS, RNET, WMT)

We are still holding a few short positions and look to cover a successful test of the spring.  We also are now holding a few long positions with stops in place.  We continue to look for stocks that are outperforming to the upside, and could lead us higher after this correction has run its course. Stocks that are having normal reactions, or preferably back up to the creeks.

The bond market was up strongly for the week.  We are standing aside.
Good Trading,

Todd Butterfield

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