Supply Needs To Dry Up

Click Here For Wyckoff Wave Chart 02-10-2016

Short Term:
There are no opportunities to the downside

While aggressive short-term bulls should continue to identify new opportunities to the upside, it will be difficult to justify new positions until more supply has dried up.

Intermediate & Long Term:
Intermediate and long-term bulls should maintain existing positions.

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

Market Trends:

Intra-day: Down
Short Term: Neutral
Intermediate Term: Down
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, experienced and intra-day failure to the upside. It closed, on decreased volume, near the bottom of a wider price spread, in a neutral condition relative to the Technometer. The intra-day failure suggests a lack of supply.

A review of the intra-day waves confirms the above, but with a caveat. Some supply was present, but not particularly strong or sustained.

After a small gap opening to the upside, the Wyckoff Wave put in a small reaction to point A. Some demand returned and the Wyckoff Wave rallied to point B.

As the Wyckoff Wave was testing the highs at point K, supply came into the market and the Wyckoff Wave reacted for the rest of the trading day.

The reaction to point C only lasted an hour and 10 min. and demand came in as the Wave rallied to point D.

The Wyckoff Wave spent the last three hours and 55 min., of the trading day reacting back to the supply line of its intra-day up trend channel. The reaction was on relatively narrow price spread and volume.

Today’s market action was not particularly impressive in either direction. Despite the fact that supply was drying up, it appears there is still a fair amount of available supply. This would suggest the Wyckoff Wave will continue to react and return to its intra-day down trend channel and possibly move through that channel to the downside.

The Optimism – Pessimism Index rallied slightly and continues at the supply line of its upward trend channel. It remains in a negative divergence with the Wyckoff Wave when compared with the top of the trading range, at points D, B, Z and X.

The Force Index reacted slightly, but is still producing low negative readings.

Tomorrow, the Technometer will open in a neutral condition.

Today, for the fourth consecutive trading day, the Wyckoff Wave moved sideways after the potential Sign of Strength to point L. The sideways movement has been on relatively wide price spread and volume. This continues to suggest the presence of supply.

This is somewhat troublesome for those of us looking for a Last Point of Support.

While an index or stock can move sideways and put in a Last Point of Support, there needs to be a drying up of supply.

Because the Wyckoff Wave closed right at the top of the minor trading range (line drawn from point J), there is an increased probability it will react back into the trading range.

In addition, the Technometer’s relatively high neutral condition, suggests it could quickly become overbought during any rally.

We are now back in a watch and wait situation.

Charts of the Wyckoff Wave are attached.