This week the Wyckoff Wave penetrated the old resistance line drawn from point J. It then quickly ran into resistance at the top of the trading range (line drawn from point U through point A). This week’s market action was not particularly impressive and came in a time when the Wyckoff Wave needed to “go and go now” if it was going to move into new high ground.
On Tuesday the Wyckoff Wave rallied through the old resistance line and tested the top of the trading range. This was the “go and go now” moment. That didn’t happen. Supply came into the market and drove the Wyckoff Wave back down to the old point J resistance/support line.
While it rallied during Wednesday afternoon, there was little follow through on Thursday and Friday.
Presently the Wyckoff Wave is at the top of the trading range. The question is, will it rally through the resistance and “jumped the Creek” or react back into the trading range?.
The Technometer is in an overbought condition. However, a positive Force Index reading could mitigate any reaction.
The O – P Index has eliminated its negative divergence with the Wyckoff Wave when compared to both points A and U. It remains in a negative inharmonious action with point A. In addition, this week the Index made good progress to the upside that was not matched by the Wyckoff Wave. This means the O – P Index put in a lot of effort, but had little results to show for all that work.
It is also important to note that the reaction to point B exceeded the halfway mark of the previous rally. This adds to the negative scenario.
Regardless, an in-depth review of the Wyckoff Wave can support arguments from both the bulls and bears. When this happens, it is best to drill down and look at the individual stocks that comprise the Wyckoff Wave.
In addition to making up the Wave, these 12 stocks are also Group Leadership Stocks. Each represents an industry and how that industry, as a group, is faring in the market.
The 12 Wyckoff Wave stocks and their related groups are as follows:
AT&T (T) Communications
Boeing (BA) Aerospace
Bank of America (BAC) Financial
Bristol Myers (BMY) Healthcare
Caterpillar (CAT) Industrial Equipment
DuPont (DD) Chemicals
Exxon Mobil Energy
Ford (F) Automotive
Gen. Electric (GE) Manufacturing
IBM (IBM) Technology
Union Pacific (UNP) Transportation
Walmart (WMT) Consumer Goods
It is extremely helpful to compare each Wyckoff Wave stock with the Wyckoff Wave. This tells us if the stock is stronger, weaker or in harmony with the Wyckoff Wave.
The Wyckoff Pulse the Market Charting Service gives us an excellent tool to compare the relative strength/weakness of each stock with the Wyckoff Wave. A relative strength/weakness comparison chart for each Wyckoff Wave stock is attached to this post.
Of the 12 Wyckoff Wave stocks, 3 are stronger than the Wyckoff Wave, 7 are weaker and 2 are in harmony.
In addition, the individual Technometer readings show that 5 of the Wyckoff Wave stocks are in a neutral condition, 4 are overbought and 3 are oversold.
Finally, 6 of the Wyckoff Wave stocks are in a trading range. 5 of these stocks are relatively weaker than the Wyckoff Wave.
All and all an in-depth view of these 12 stocks reveal a group of stocks that are, for the most part moving sideways and waiting for ending action. They do not appear poised and ready to move into new high ground.
While one should never take anything for granted, the scenario that sends the Wyckoff Wave back down into the trading range, has the highest probability of success.
However, the intermediate and long-term scenarios still suggest that the Wyckoff Wave has not yet fulfilled its potential to the upside.
When it will is simply a question of timing. While I could look silly in the next few days, I still believe that before the Wyckoff Wave can go up, it needs to go back down into the trading range and experience ending action.