Wyckoff Stock Market Institute.com

Pulse of the Market Report

 Wednesday, October 5, 2011

The stock market, as measured by the Wyckoff Wave, traded higher on decreased volume. It closed at the top of a narrower price spread, just barely in an over sold condition, relative to the Technometer.

The Optimism - Pessimism Index and the Force Index are in harmony with the Wyckoff Wave. However, the Force Index is advancing at a slightly faster pace.

The price and volume suggest a some withdrawal of demand. The strong close suggests the Wave will make an attempt to continue the advance tomorrow.

Yesterday, the Wyckoff Wave sprung the trading range. The increase in volume would make this a number two spring. Number two spring's need to be successfully tested before there can be a Sign of Strength (SOS) and a Last Point of Support.

Even though demand is being withdrawn, the Wave has rallied nicely off the spring and has exceeded the halfway point of the reaction from point G to point H.

All short-sellers should have closed their positions and taken profits. Those wishing to take positions to the upside, and did not do so on the spring, can do so on a successful secondary test.

As we have not had a successful secondary test of the spring, a new short-term uptrend channel cannot yet be drawn. Therefore, the short term trend of the Wyckoff Wave is still down. The intermediate term trend is neutral.

Because we have experienced an important signal that an up move may be beginning, short-term traders and aggressive intermediate-term traders can trade against the trend. However, everyone should be extremely cautious and be aware that there can certainly be either a poor or a failed test of the spring.

This is an especially important time to not only use stop orders, but watch the market carefully for weakness or changes in direction.

An updated chart of the Wyckoff Wave is attached.