Testing Support

Tuesday, October 12, 2016

What To Do?

No changes from yesterday

Short Term:
Short term bulls, who entered the market, should maintain their positions.
New positions can be taken if the Wyckoff Wave either successfully tests the support line drawn from point D, or on a Spring of that support.
If I am incorrect and the Wyckoff Wave reacts sharply through the support, position should be closed.
There are no short-term positions to the downside.

Intermediate & Long Term:
Their are no intermediate or long term opportunities to the upside.
Long-term positions to the upside should be maintained.
New positions to the upside can be taken on a successful Spring.

There are no intermediate or long term opportunities to the downside

Market Trends:

Intra-day: Changed to Neutral
Short Term: Neutral.
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded slightly lower on decreased volume. It closed in the lower half of a narrower price spread, in a slightly oversold condition relative to the Technometer. The price spread and volume suggest a lack of supply.

A review of the intra-day waves indicates today was a lack of demand day. After a gap opening to the upside, the Wyckoff Wave continued its rally to point G. The rally was on good demand and weakened the intra-day down trend channel, using the reverse use of trend lines.

However, supply came into the market and the Wyckoff Wave reacted back to point H. Then the Wyckoff Wave spent the next 3 1/2 hours in a poor quality rally to point I. Finally, it reacted for the last 40 min. of the trading day.

The intra-day O-P Index is in a positive divergence with the Wyckoff Wave when compared with points H and F.

Today’s market action weakened and then broke the intra-day down trend channel, using the reverse use of trend lines. The intra-day trend is changed to neutral.

It is important to note that the reaction to point H held above the earlier reaction to point F.

While today was a lack of demand day, primarily because of the poor quality rally from points H to I, there were several positive indications. These included:
A) the breaking of the intra-day down trend channel, using the reverse use of trend lines,
B) that point H was higher than point F and
C) the positive O-P Index divergence.

This suggests it will be difficult for the Wyckoff Wave to continue to react and is vulnerable to rally.

The Optimism – Pessimism Index reacted slightly. It remains in a very short-term positive divergence with the Wyckoff Wave when compared with point K. It also remains in a longer term positive inharmonious action with the Wyckoff Wave when compared with point D.

The Force Index continues to react and is producing moderately negative readings. There is a mitigating impact on the slightly oversold Technometer.

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

Today, the Wyckoff Wave again tested the support line drawn from point D and rallied off that support. However, the rally was not of particularly good quality. This gives the Wyckoff Wave another opportunity to react and retest that support.

Today’s market action continues suggests that the rally off the support scenario continues to have the highest probability of success.

However, the poor quality intra-day rally does open the door for supply to come into the market and drive the Wyckoff Wave through the support. The lack of strong supply, the slightly oversold Technometer and the positive O-P Index indications suggest that any penetration of support would be a Spring.

If the Wyckoff Wave was going to react strongly back into the trading range, supply would’ve come in to the market. The Wyckoff Wave would not have been able to successfully test the support, both on Tuesday and today. That reduces the probability of that scenario success.

Although I was surprised it did not happen today, tomorrow may bring additional clarification to the market. Regardless of the timing, the Wyckoff Wave should put in a rally sometime in the relatively near future..