Technometer in an oversold condition…

Click Here For Wyckoff Wave Chart 01-20-2016

Short Term:

Short-term positions to the downside should be closed. There are no new opportunities.

Short-term bulls could continue to consider new opportunities to the upside. New positions to the upside can be taken if the Wyckoff Wave puts in a successful test of today’s low..

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, but weakened, in an overbought position. It is also in danger of being broken.

Short Term: Changed to Down, but weakened and in an oversold position.

Intermediate Term: Down, but weakened and in an oversold position.

Long Term: Neutral.

The stock market, as measured by the Wyckoff Wave, traded lower on increased volume. It closed in the upper half of a wider price spread, in an oversold condition relative to the Technometer. The price spread and volume suggest the presence of supply.

A review of the intra-day waves indicates that, despite the lower close, today was an intra-day failure to the downside. This would indicate that demand had the upper hand in today’s market action.

After a wide gap opening to the downside, supply continued to drive the Wyckoff Wave down to its low for the day, at point H.

Demand returned and the Wyckoff Wave rallied to point I on good and increasing price spread and volume. There demand was withdrawn and the Wyckoff Wave reacted for the last 30 min. of the trading day. Despite that reaction, the Wyckoff Wave rallied into an overbought position relative to its intra-day down trend channel.

After the gap opening, supply was relatively moderate and dried up as the Wyckoff Wave reached point H. This opened the door for demand to come into the market.

During the morning reaction, the Wave was unable to reach the channel’s support line. On the subsequent rally it weakened the channel’s supply line. This is the third time the supply line hasn’t weakened in the last four days.

Today was also the first time, during this intra-day down trend, that good demand came into the market. This gives the Wyckoff Wave an opportunity to continue this minor intra-day rally. It also may briefly react to test the low at point H. A successful test would open the door for a move to the upside.

The Optimism – Pessimism Index reacted. It is in a positive divergence with the Wyckoff Wave when compared with point U. It is in a slightly oversold position relative to its upward trend channel.

The Force Index reacted and is producing high negative readings. There is a mitigating impact on the oversold Technometer.

Tomorrow, the Technometer will open in a slightly oversold condition.

Today, the Wyckoff Wave continued its reaction towards the bottom of the trading range. It moved past point U and is now testing the August Selling Climax at point Q.

As the Wyckoff Wave reacted below point U, the short-term trend was changed to down.

Although today’s market action was negative, the Wyckoff Wave actually finished slightly above its gap opening. Due to the amount of demand that came into the market, today was an intra-day failure to the downside.

Today’s demand, while a positive, did not seem strong enough to call today’s market action a spring of the trading range at point U. However, if strong demand comes into the market tomorrow, that conclusion can be revisited. If it turns out there was a spring, new positions can be taken on the secondary test.

Three other scenarios are possible. The first is a minor rally, followed by a test of today’s low. This would give the Wyckoff Wave an opportunity to rally back towards the top of the trading range.

The second is that the Wyckoff Wave will spring the entire trading range as it moves briefly below point Q.

The third would be that the reaction from point D it is a Sign of Weakness and the Wyckoff Wave will fall through the ice as it reacts sharply through point Q. This scenario has the lowest probability of success.

The positive O – P Index divergence with the Wyckoff Wave is rather significant when compared at point Q. While the Wyckoff Wave is slightly lower than it was at point Q, it’s O – P Index reading is substantially higher. This continues to suggest the lack of effort on this move to the downside.

In addition, a further reaction will place the Technometer in a clearly and possibly extremely oversold condition. Despite the high negative readings and the Force Index, it will be extremely difficult for the Wyckoff Wave to continue to react in this situation.

The high negative Force Index readings suggest it will be difficult for the Wyckoff Wave to put in a substantial rally.

Instead, we could well see a weak rally and a testing reaction on reduced price spread and volume. This would confirm the drying up of supply and give the Wyckoff Wave an opportunity to put in a reasonable move to the upside.

Charts of the Wyckoff Wave are attached.