The Test Continues

Monday, July 18, 2016

Click here to open the attached chart

What To Do?

Watch and Wait

Short Term:
There are no short-term opportunities to the upside.
There are no short-term opportunities 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: Neutral
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, experienced and intra-day failure to the downside. It closed, on increased volume in the upper half of a narrower price spread, in a low neutral condition relative to the Technometer. The intra-day failure suggests the presence of demand.

A review of the intra-day waves indicates that, especially after the first hour and a half of the trading day, supply was more dominant. After a small gap opening to the downside, the Wyckoff Wave continued to react to point I. While the reaction only lasted 10 min., it was, on good price spread and volume. This indicated the presence of early supply.

Then, demand came into the market and the Wyckoff Wave rallied to point J. Supply returned as the Wyckoff Wave reacted to point K. At point K the Wyckoff Wave began a long slow rally on relatively reduced price spread and volume. The rally lasted for two hours and 35 min., but only gained 139 points. This indicated a lack of demand. In addition the Wyckoff Wave became vulnerable to a third appearance of supply.
It did, and the Wyckoff Wave reacted for the rest of the trading day.

While supply did come into the market, after the first strong down wave, the Wyckoff Wave moved sideways. This suggests supply is not yet taken control. It also suggests the Wyckoff Wave is vulnerable to react tomorrow.

The Optimism – Pessimism Index rallied and is at the supply line of its upward trend channel. It continues in harmony with the Wyckoff Wave.

The Force Index continues to report low positive readings.

Tomorrow, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave attempted to both rally and react. Supply was stronger than demand and the Wyckoff Wave appears to be continuing to test last Thursday’s high.

The poor quality demand, especially on the second intra-day rally, continues to suggest the test will be successful and the Wyckoff Wave will react back towards the highs at points A and C.

The market action on the last three trading days also suggests the Wyckoff Wave is beginning to “roll over”. This usually suggests a reaction is coming.

As mentioned over the weekend, it will be extremely important to pay attention to the quality of the reaction, especially the amount of supply that comes into the market.

This will provide insight as to whether the Wyckoff Wave will hold at the resistance line drawn through point C or continue to react back into the trading range and test the lows at point D.