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What Would Dick Do ? April 29, 2016

Posted by Tom in Thoughts.
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April 29, 2016 – What would Richard do?; meaning Richard Wyckoff . . . right now?  Well it’s best not to listen to the “experts” on the financial channels because they are wrong about as much as they are right (I give them the benefit of that doubt).  Let’s look at the chart below –

NASDAQ

Now I’m NOT the traditional Wyckoff analyst, especially when it comes to looking at derivatives (indexes, ETF’s futures, etc.).  Why?  Because there is not the strict Supply /Demand relationship that stocks have.  In short, derivatives don’t have a defined amount of shares available (supply) . . . . derivatives can always “make more” shares or contracts (to meet demand).  Thus when looking at an index (like above) we’re likely not going to see the “purity” of classic Wyckoff bars.

Is this a Distribution Structure?  No I just don’t see it, even if I loosen up my classic Wyckoff definitions.  I don’t see a significant Buying Climax, nor an Up Thrust (higher price bar) with Lack of Demand (low volume).  At this point it just looks like a Shake Out before re-accumulation.  Thus I don’t expect the market to get very much weaker but likely forming a new, lower base of some time period so the Smart Money can re-accumulate shares at lower prices.  Then the mark up will resume.

Now I could be totally wrong, and this market just continues to get weaker and the selling (volume) increases to form a major correction.  If that is the case, we should see continued weakness after Monday morning (weak hands will sell into this on Monday morning).  This softness has been expected so hopefully folks are not too long, or at least have “hedged out” via inverse funds or the VIX ETF.

The pie chart below shows that the stocks in the broad S&P 1500 has not shown major selling . . yet.

A-D SP 1500

Sectors that are strong now continue to be Precious Metals, Basic Materials, Oil & gas, (some) Banks and (yes) even Latin America.  In any case, let’s be careful in here.  Let’s observe price bar spreads (difference between the high & low of the day), the Closing price within that spread and the Volume of that bar.  Did the bar close weak (low) on high volume?  (i.e. major selling) or are the market movers just flushing out the weak hands? (below average volume)  We’ll likely know next week.

Have a good week & Good Trading.           …………….  Tom  ……………

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