Testing Support – Again

Monday, September 19, 2016

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What To Do?

Short Term:
Short term bulls, who entered the market, should maintain their positions. There are still opportunities for new positions to the upside.
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.

There are no intermediate or long term opportunities to the downside

Market Trends:

Intra-day: Neutral
Short Term: Down, but weakened and in an overbought condition.
Intermediate Term: Neutral
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, in the bottom quarter of a very slightly wider price spread, in clearly oversold condition relative to the Technometer. The intra-day failure suggests a lack of demand.

A review of the intra-day waves indicates today was a lack of supply day. After a nice gap opening to the upside and a 25 min. rally to point M, demand was withdrawn and the Wyckoff Wave reacted to point N.

The reaction lasted for three hours and 40 min. While some supply was present it was not sustained and volume was relatively low.

Then the Wyckoff Wave rallied to point O. As the rally progressed demand was withdrawn. The Wyckoff Wave was unable to reach the earlier high at point M. The rally lasted for one hour and 15 min.

The Wyckoff Wave spent the last hour and 5 min. of the trading day reacting. The reaction was on increased volume, but the Wyckoff Wave made little progress to the downside. This suggests the presence of some demand. That is consistent with the market action over the last five trading days.

The reaction to point N held at the same level as the earlier reaction to point L. This created an intra-day support point and the support line has been drawn in green.

The Wyckoff Wave is expected to test that support. There is a good probability the test will be successful. However, the Wyckoff Wave could continue to react back to point D, before attempting to rally.

The successful test scenario is supported by the O-P Index’s intra-day positive divergence when compared to points N, L and even point D.

The Optimism – Pessimism Index reacted. It continues in a positive inharmonious action with the Wyckoff Wave, when compared with point D.

Tomorrow, the Technometer will open in clearly oversold condition.

Today, the Wyckoff Wave attempted to rally off the support line drawn from point D. While it had a good 30 min. move to the upside, there was not enough demand present to sustain the rally.

Supply returned and the Wyckoff Wave reacted. It now appears ready to retest that support line.

The good news for the bulls was that volume was noticeably reduced. In addition the intra-day market action also suggested a lack of supply.

In addition to the clearly oversold Technometer, the Wyckoff Wave has been unable to return to its short-term down trend channel.

The positive inharmonious action with the O-P Index is noticeably reduced, but still present.

All this suggests the Wyckoff Wave will successfully test the supply line drawn from point D and rallied back towards the top of this phase of the trading range and test the highs at point E.