Working On A Secondary Test

Friday, October 14, 2016

What To Do?

Short Term:

Short term bulls, who entered the market, should maintain their positions.
New positions can be taken on a successful Secondary Test of the Spring
There are no short-term positions to the downside.

Intermediate & Long Term:

New positions to the upside can be taken on a successful Secondary Test of the Spring.
Long-term positions to the upside should be maintained.

There are no intermediate or long term opportunities to the downside

Market Trends:

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

The stock market, as measured by the Wyckoff Wave, experienced an intra-day failure to the upside. It closed, on slightly increased volume, near the bottom of a narrower price spread, in an oversold condition relative to the Technometer. The intra-day failure suggests the presence of supply.

A review of the intra-day waves confirms the above. After a gap opening to the upside, there was a brief,, fifteen minute follow-through to point K. Then, supply came into the market and the Wyckoff Wave reacted for the rest of the trading day.

During the intra-day reaction, the Wyckoff Wave made a poor attempt to rally (point L to point M), but the rally was on a lack of demand.

There is an intra-day positive divergence with the O-P Index when today’s close is compared with point J.

While supply was certainly present it was not particularly strong. This is shown by the lack of progress to the downside. However, the supply must dry up. This means the Wyckoff Wave can be expected to continue its reaction, on Monday and test the low at point J.

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

The Force Index rallied, but is still producing moderate negative readings. There is a slight mitigating impact on the oversold Technometer.

On Monday, the Technometer will open in an oversold condition.

Today the Wyckoff Wave attempted to continue its rally off the Spring, but ran into supply. It is now reacting. This suggests it is in the process of putting in a Secondary Test of the Spring at point O. If the reaction continues on Monday and produces narrower price spread and lower volume, it will be an indication that the Secondary Test will be successful.

There are a few indications that suggest the test will be successful. The Technometer is more oversold than it was yesterday, at point O. The Wyckoff Wave is slightly higher. When a Technometer becomes oversold at a higher level, than the previous low, it is a positive indication.

In addition, a continued reaction will place the Technometer in a clearly, or even dangerously oversold condition.

The Force Index is beginning to rally. If the rally continues, it’s mitigating impact on the oversold Technometer will be eliminated.

The Optimism – Pessimism Index is making a noticeable effort to the downside. However, it is not being matched by the Wyckoff Wave. This is another positive indication.

Based on today’s lack of progress to the downside and these positive indications, it appears the successful Secondary Test of the Spring scenario has a good probability of success.