Watch shorts closely

Short term bears who took positions to the downside should watch tomorrow mornings action closely. Position should be closed, unless good supply comes into the market. If supply continues, positions can be maintained.

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.

Market Trends:

Intra-day: Changed to Up

Short Term: Up, but weakened.

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 higher on slightly increased volume. It closed in the upper quarter of a wider price spread, in a high neutral condition relative to the Technometer. The price spread and volume suggest the presence of demand.

A review of the intra-day waves confirms the above. After a small, 5 min., rally, the Wyckoff Wave reacted to point H. There, good demand came into the market and the Wyckoff Wave rallied strongly to point I.

At point I the Wyckoff Wave was approaching the supply line of the new intra-day up trend channel. There, demand was withdrawn and the Wave moved sideways for the last hour and 25 min. of the trading day. Supply did return during the last 20 minutes before the close.

The Wyckoff Wave moved through the resistance line drawn from the high at point X (point P on the daily chart). It will be important to see if today’s late supply continues and drives the Wyckoff Wave back below this resistance line.

If that happens and supply is relatively strong, we could be seeing an intra-day upthrust. This scenario is helped by the natural resistance as the Wyckoff Wave approaches the new up trend channel’s supply line.

This gives the Wyckoff Wave an opportunity to react tomorrow. It will be important to watch the quality of that reaction.

The Optimism – Pessimism Index rallied slightly and remains in an overbought position relative to its upward trend channel. The short-term negative divergence with point P has been eliminated. The negative divergences with points D, B, Z and X remain in place.

The Force Index reacted slightly, but is still producing moderate negative readings.

Tomorrow, the Technometer will open in a high neutral condition.

The leprechauns are not on the side of the bears. Today, the Wyckoff Wave put in a good rally and is testing the support line of the short trend up trend channel. Today’s good demand was the strongest since late February. It also gives the Wyckoff Wave an opportunity to continue its rally and test the top of the trading range.

However, the Wyckoff Wave is running into resistance in several different areas.

1. It is attempting to reenter its short-term uptrend channel.

2. It is in the middle of the sideways movement that began at point V.

3. As reviewed in the intra-day analysis, the Wyckoff Wave encountered supply as it moves slightly through the high at point P (point X on the intra-day chart)

These, plus the negative O-P Index divergences suggest the Wyckoff Wave will attempt to react tomorrow. The key will be the quality of the reaction.

If supply is sustained, the Wyckoff Wave will successfully test its return to its short-term uptrend channel and react towards the old resistance/support line drawn from point L.

If supply is not sustained and dries up, the Wyckoff Wave can return to its short-term uptrend channel and test the top of the trading range.

Most probably, these scenarios will be confirmed or denied tomorrow morning.

In for a dime, in for a dollar: I still feel the reaction back towards the bottom of the trading range scenario has the highest probability of success.