Waiting Game

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, or the resistance at point J, before new positions can be taken. Long positions should not be taken when the Technometer is overbought.

Intermediate and long-term bulls should maintain existing positions.

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

Intra-day: Up

Short Term: Neutral

Intermediate Term: Down

Long Term:  Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased, but relatively high volume. It closed in the upper half of a narrower price spread, in an overbought condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves confirms the above. After a minor gap opening to the downside, demand came into the market and the Wyckoff Wave rallied strongly to point K.

There demand was withdrawn, some supply returned and the Wave reacted to point L. Then, it rallied, on a lack of demand, to point M. The reaction to point and was more on a lack of demand then a drying up of supply.

The Wyckoff Wave attempted to rally during the last hour of the trading day. So far, the rally has been unimpressive.

A second intra-day up trend channel has been drawn with support lines through point H and J. The parallel supply line is drawn through point G. I considered drawing this yesterday, but settled for the lower angle of advance. This second trend channel is more helpful in analyzing the day’s market action. Regardless, the intra-day trend is still up.

The Wyckoff Wave moved into an overbought position at point K. After being slightly oversold, at the close, it was back at the up trend channel’s support line.

Point M was lower and was a possible test of point K. Point N held at the earlier low at point L. This suggests the Wyckoff Wave may test the high at point K again tomorrow.

Today’s lack of demand, rather than the drying up of supply, continues to suggest the Wyckoff Wave will make little additional progress to the upside. There is a good possibility the test of point K will be successful and the Wyckoff Wave will react back into the original intra-day up trend channel.

The Optimism – Pessimism Index rallied rather slightly. It continues in its negative divergence with the Wyckoff Wave is compared with points B, X, V, T, and B. It is testing the supply line of its upward trend channel.

The Force Index rallied and continues to produce low negative readings.

Tomorrow, the Technometer will open in a neutral condition.

Today the Wyckoff Wave continued to rally. It moved through the resistance at points H and J and rallied back into the intermediate downtrend channel.

This continued relative strength should eliminate the reaction through the bottom of the trading range scenario from consideration.

The real question is, will the Wyckoff Wave continued to rally back towards the top of the trading range, or will react and test the trading range support, before making that rally?

The overbought Technometer continues to indicate it will be difficult for the Wyckoff Wave to put in a significant rally. However, the Force Index is trending upward and producing low negative readings.

The O – P Index’s negative divergence with the Wyckoff Wave suggest the Wave is not responding to the significant effort being put in by the O – P Index.

These are all indications that it will be difficult for the Wyckoff Wave to continue its advance.

Before rallying, the Wyckoff Wave moved sideways for nine trading days. It established a resistance area at points H and J. Yesterday and today the Wyckoff Wave rallies through those resistance areas on good price spread and volume.

The area to the right of point G could be considered a mini trading range. There was no Spring, but the Wyckoff Wave could be putting in a minor Sign of Strength.  Remember, ending action does not require a Spring.

If the Wyckoff Wave reacts to the area of resistance at point J, it  could provide an entry point for short-term trades to the upside.

Wyckoff discipline suggests not making trades when the Technometer is in an overbought position. It also does not support “chasing”.

If the reaction begins, as expected, it will be important to pay attention to the Technometer readings and see if there is a good entry point to the upside.