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This Is Where It Gets Interesting February 15, 2014

Posted by Tom in Thoughts.
Tags: , ,

Nice rebound in the markets this week.  As shown on the chart below, we’ve made up all of the losses incurred in January (basis NASDAQ Composite Index).  So now what?  I’ve laid out two scenarios, one Bullish (in green) and the other Bearish (in red).


The Bullish scenario price structure holds the theory that this was a light correction in the overall Bull market.  As labeled, we had a (minor) Selling Climax, then a Spring, broke through “the creek” (resistance) and are prepared for a retrenchment back to an LPS (last point of supply), before we mount an assault to a higher high.  This is classical Wyckoff price structure and is supported by the bullish volume / money stream graph (red histogram) above the price chart.  Note that the money stream is above its previous high.

The Bearish scenario is that this is a false rally and is setting up to fool everyone with a double top formation.  That would say the worst is let to come.  Which is right?  For the Bullish scenario to confirm itself, the retrench level should NOT be lower than 4170, OK maybe 4150.  Selling must be absorbed around that level (light volume and a narrow range bar).   If it goes below that, especially on a closing basis, the Bulls are in trouble.  Right now I favor the Bullish side of this structure.  We’ll see what happens next week.  (click on the above chart to enlarge it for easier viewing)

Here’s a table of what sectors are doing well in the short-term (top 15 of 70):

Top 15 Sectors

Note that “A/D Letter” gives a letter grade to Accumulation (buying) vs. Distribution (selling) and “%A/D” is the relative level of A/D (0 to 100%).  The raw score refers to my proprietary scoring system based on price strength, buying/selling volume and strength related to a stock market index.  It is SHORT term strength and does NOT reflect any long-term trends.

That’s it for now, have a good week.         …………..  Tom  ………….

chart by MetaStock; table by www.HighGrowthStock.com; all used with permission, copyright 2014.



1. hlask - February 16, 2014

Hi Tom,

I’ve been following your posts with interest. I’ve been wondering whether we may be seeing the first stages of a larger structure and could potentially label the January peak, February sell off and bounce as a BC, AR and ST respectively. Brings the 2011 correction to mind.

Best regards



Tom - February 16, 2014

Hi Howard (fellow Wyckoff-ian)- 🙂 Could this be the start of a larger Distribution structure? It sure could be. I’m looking at a weekly chart and could pencil in a Buying Climax on 1-10-14, an Automatic Reaction around 2-7-14 and (currently) in a Secondary Test. One thing that points this out is the lower volume on the ST bar when compared to the BC bar (weekly again). In and of itself, that’s just a sign.
What else do we need to confirm? A Trend Line break (I prefer reverse T-L’s) and a Sign of Weakness (SOW) plus a price break. So far, those have not materialized. Also, I’m a little uncomfortable with the time span between these points; it’s very short . . not the type of structure I’d expect in a longer term one. For now I’ll be aware and look for sign of an Up Thrust (UTAD) forming. In the mean time, I’m riding the wave higher (subject to change at any time)
Thanks for the question and observation. Take Care & Good Trading.

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