Watch shorts closely

Short-term bears who took positions to the downside should watch them closely. These positions could be in jeopardy if good demand returns tomorrow. If the Wyckoff Wave continues to react, new positions to the downside may still be taken. However, don’t chase.

There are no short-term opportunities to the upside.

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: Up.

Intermediate Term: Down and in an overbought position relative to the trend.

Long Term:  Neutral

The stock market, as measured by the Wyckoff Wave, traded lower on increased volume. It closed in the lower half of a wider price spread, in an overbought condition relative to the Technometer. The price spread and volume suggest the presence of supply.

A review of the intra-day waves confirms the above. After a wide gap opening to the downside, supply drove the Wyckoff Wave down to point U. There was a poor quality rally, on a lack of demand, to point V. Supply returned and the Wyckoff Wave reacted for the rest of the trading day.

It is important to note that the afternoon supply was not a strong as it was in the morning.

The Wyckoff Wave returned to its intra-day up trend channel and tomorrow, should test the low at point U. If that test is unsuccessful, there is a good probability the Wyckoff Wave will react through the trend channels support line. This would put the intra-day up trend in jeopardy.

Due to the Wave’s continued persistence to the upside on the rally from point V, this should not be taken for granted. Short-term traders who have taken positions to the downside should watch closely to see if demand comes into the market on Wednesday.

The Optimism – Pessimism Index reacted. It remains in a negative divergence with the Wyckoff Wave when compared with points D, B, Z and X.

The Force Index rallied slightly and continues to produce moderate negative readings. There is no mitigating impact on the overbought Technometer.

Tomorrow, the Technometer will open in a neutral condition.

Today, the Wyckoff Wave appears to have tested the short-term uptrend channel’s support line and has begun to react.

Due to the relative persistence to the upside, the channel’s support line needs to be weakened to confirm this scenario.

It is significant that the Wave was unable to reach the channels supply line. It is also expected to continue to encounter overhanging supply from the sideways movement that began at point V.

The negative divergences with the O – P Index and the relatively weak Force Index add credence to the reaction scenario.

This suggests the Wyckoff Wave will continue to react and weaken the short-term uptrend channel.