Waiting For The Secondary Test

Wednesday, October 19, 2016

What To Do?

No changes from yesterday.

Short Term:

Short term bulls, who have already entered the market, should maintain their positions.
It continues to appear that the Wyckoff Wave is putting in a successful Secondary Test. Therefore, new short-term positions to the upside can be taken.
There are no short-term positions to the downside.

Intermediate & Long Term:

As it appears the Wyckoff Wave is putting in a successful Secondary Test, new positions to the upside can be taken
Long-term positions to the upside should be maintained.

There are no intermediate or long term opportunities to the downside

Market Trends:

Intra-day:  Up
Short Term: Neutral.
Intermediate Term: Neutral
Long Term: Neutral

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed in the lower half of a slightly narrower price spread, in a nearly oversold condition relative to the Technometer. The price spread and volume suggest a lack of demand.

A review of the intra-day waves indicates that the first hour and 45 minutes of the trading day featured the presence of demand. Then the Wyckoff Wave reacted on a lack of supply.

After a small gap opening to the upside, demand remained and the Wyckoff Wave rallied strongly to point T. Then, demand was withdrawn.

The Wyckoff Wave spent the next five hours and 15 minutes in a long slow reaction on relatively reduced price spread and lower volume.

The intra-day Optimism – Pessimism Index is in a positive divergence with the Wyckoff Wave when compared with point J. It is also in a positive inharmonious action with the Wave when compared with points S, Q, N and L.

The morning rally and the slow afternoon declined kept the Wyckoff Wave within its intra-day up trend channel. It is presently testing the channel’s support line.

However, the intra-day up trend channel is in jeopardy as the Wyckoff Wave has not able to rally and test the channels supply line (drawn from point K).

The Wyckoff Wave rallied off the intra-day low at point J. At the same time the O-P Index has either reacted or move sideways. This suggests that while the Wyckoff Wave may react and even test the lows at points U and N, a good rally is still in the offing.

The Optimism – Pessimism Index reacted slightly. It is in a slight positive divergence with the Wyckoff Wave when compared with point K. The longer-term positive inharmonious action, when compared with point D, remains in place.

The Force Index reacted and continues to produce moderately negative readings.

Tomorrow, the Technometer will open in a nearly oversold condition.

Today, the Wyckoff Wave attempted to rally. This could have been the beginning of a Sign of Strength. The Sign of Strength would naturally follow a successful Secondary Test of the Spring at point O.

Unfortunately, for the bulls, the rally only lasted a short time. However, supply did not come into the market. Instead the Wyckoff Wave put in a long slow reaction and continued to dry up supply. This market behavior is not normal for a rally off a successful Secondary Test. Once the test is completed, the index or stock will rally strongly and quickly leave the area around the Spring.

Because that isn’t happening, it is quite possible the secondary test has not been completed. This means the Wyckoff Wave could react for the next couple of days and dry up and the existing supply.

The nearly oversold Technometer and the bullish relationship between the Wyckoff Wave and its O-P Index strongly suggest there will be a successful Secondary Test.

The Wyckoff Wave is not expected to react strongly through the support line drawn from point D. It’s just a matter of a little patience and market discipline.