Waiting for Successful Test of Lows…

There are no opportunities to the downside

Short-term bulls should continue to consider new opportunities to the upside. However, they should wait for a successful test of the lows before new positions can be taken. Despite today’s strong rally, a successful test has not been confirmed.

Intermediate and long-term bulls should maintain existing positions.

There are no intermediate or long term opportunities to the downside.

Intra-day: Changed to Up

Short Term: Changed to Neutral

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

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, near the top of a wider price spread, in a slightly overbought condition relative to the Technometer. The intra-day failure suggests the presence of demand.

A review of the intra-day waves confirms the above. After a fairly wide gap opening to the upside and a brief 5 min. follow-through to point G, supply came into the market and the Wyckoff Wave reacted sharply to point H.

Demand returned and the Wyckoff Wave rallied to point I. It backed off slightly to point J and then continued its strong move to the upside.

The Wyckoff Wave is presently encountering some resistance as it tests the high at point M and the supply line of the new intra-day up trend channel.

The narrowing of price spread during the afternoon rally suggests the Wyckoff Wave may not be able to work through the resistance created by the high at point M. It may well test the new trend channel supply line and react.

The Optimism – Pessimism Index rallied and is testing the supply line of its upward trend channel. To the upside, it is in a negative divergence with the Wyckoff Wave when compared with points B, V, X, T and R.

The Force Index rallied and is producing low negative readings.

Tomorrow, the Technometer will open in an overbought condition.

Today, the Wyckoff Wave put in its first strong rally in a long time. The strong market action changes the short-term trend from down to neutral.

Today’s morning  reaction held above points I and G. Despite the strong demand, this does not necessarily mean the Wyckoff Wave is going to continue to rally back to the top of the trading range.

The relatively wide price spread and high volume, to the right of the low at point G, suggest there are still some supply and this market and it would be helpful if it dried up.

This is supported by the overbought Technometer and negative O – P Index divergences.

In addition, the Wyckoff Wave encountered resistance during the last hour of the trading day. This resistance is in the area of point J, H and the support line of the intermediate-term downtrend channel.

This all suggests that the Wyckoff Wave may still need to react on lower price spread and volume, before making a strong move to the upside.

It is difficult to call this week’s market action a successful test of the bottom of the trading range.

While it is certainly possible the Wyckoff Wave could continue a strong rally off the bottom of the trading range, the conditions described above continue to suggest progress to the upside would be difficult until supply has been reduced.

However, today’s positive market action strongly suggests it will be difficult for the Wyckoff Wave to react back through the support at the bottom of the trading range.

There is a good possibility the Wyckoff Wave will be unable to work through the resistance and, once again react to test the lows at points I and G.