US Equities in Wyckoff Phase B SOW Reaction Rally; Lower Soon!
Updated
Read Wyckoff, heed the master. Having reached an ATH, big players prop up share prices in order to distribute their supply to retail investors (YOU!) at highest possible price. Tops take months to unwind, this one now going on for three months and probably gonna get one more massive bear flag rally after this selloff corrective structure completes. Pls read the phases below and visit the source document to study the pattern; once price enters Phase D it breaks below TR and the waterfall begins. It will get really really scary ugly then, a bottomless plunge.
NB: Rally stalled exactly at the 0.62 Fibo on 1/12/22. Perfect retracement. Expect a measured move down to or near 4500 next week.
Following the corrective structure another rally may ensue to a lower high in Feb. J Powell has already suggested the first rate hike might be in March, so holding rates at Jan meeting will likely spark another stupid pop. This would be a Wyckoff UTAD rally, these may or may not occur (see below). IMO we had UTAD from Santa Rally in December, tough to label these until the structure fully reveals, do expect a last squeeze before break.
This is not investing advice, it's a notion. I'll give you free advice, worth every penny you pay for it: IF you're in the Market LONG, GTFO NOW!. IF you're not in the market, STFO and do not get Risk On! LOL Thereyago. Don't say I didn't tellya. Trade at ur own risk, GLTA!
Wyckoff Abbs (source and a must read; school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method):
TR—trading range
PSY—preliminary supply, where large interests begin to unload shares in quantity after a pronounced up-move. Volume expands and price spread widens, signaling that a change in trend may be approaching.
BC—buying climax, during which there are often marked increases in volume and price spread. The force of buying reaches a climax, with heavy or urgent buying by the public being filled by professional interests at prices near a top. A BC often coincides with a great earnings report or other good news, since the large operators require huge demand from the public to sell their shares without depressing the stock price.
AR—automatic reaction. With intense buying substantially diminished after the BC and heavy supply continuing, an AR takes place. The low of this selloff helps define the lower boundary of the distribution TR.
ST—secondary test, in which price revisits the area of the BC to test the demand/supply balance at these price levels. For a top to be confirmed, supply must outweigh demand; volume and spread should thus decrease as price approaches the resistance area of the BC. An ST may take the form of an upthrust (UT), in which price moves above the resistance represented by the BC and possibly other STs before quickly reversing to close below resistance. After a UT, price often tests the lower boundary of the TR.
SOW—sign of weakness, observable as a down-move to (or slightly past) the lower boundary of the TR, usually occurring on increased spread and volume. The AR and the initial SOW(s) indicate a change of character in the price action of the stock: supply is now dominant.
LPSY—last point of supply. After testing support on a SOW, a feeble rally on narrow spread shows that the market is having considerable difficulty advancing. This inability to rally may be due to weak demand, substantial supply or both. LPSYs represent exhaustion of demand and the last waves of large operators’ distribution before markdown begins in earnest.
UTAD—upthrust after distribution. A UTAD is the distributional counterpart to the spring and terminal shakeout in the accumulation TR. It occurs in the latter stages of the TR and provides a definitive test of new demand after a breakout above TR resistance. Analogous to springs and shakeouts, a UTAD is not a required structural element: A UTAD MAY NOT OCCUR.
Phase A: Phase A in a distribution TR marks the stopping of the prior uptrend. Up to this point, demand has been dominant and the first significant evidence of supply entering the market is provided by preliminary supply (PSY) and the buying climax (BC). These events are usually followed by an automatic reaction (AR) and a secondary test (ST) of the BC, often upon diminished volume. However, the uptrend may also terminate without climactic action, instead demonstrating exhaustion of demand with decreasing spread and volume; less upward progress is made on each rally before significant supply emerges.
In a redistribution TR within a larger downtrend, Phase A may look more like the start of an accumulation TR (e.g., with climactic price and volume action to the downside). However, Phases B through E of a re-distribution TR can be analyzed in a similar manner to the distribution TR at the market top.
Phase B: The function of Phase B is to build a cause in preparation for a new downtrend. During this time, institutions and large professional interests are disposing of their long inventory and initiating short positions in anticipation of the next markdown. The points about Phase B in distribution are similar to those made for Phase B in accumulation, except that the large interests are net sellers of shares as the TR evolves, with the goal of exhausting as much of the remaining demand as possible. This process leaves clues that the supply/demand balance has tilted toward supply instead of demand. For instance, SOWs are usually accompanied by significantly increased spread and volume to the downside.
Phase C: In distribution, Phase C may reveal itself via an upthrust (UT) or UTAD. As noted above, a UT is the opposite of a spring. It is a price move above TR resistance that quickly reverses and closes in the TR. This is a test of the remaining demand. It is also a bull trap—it appears to signal the resumption of the uptrend but in reality is intended to “wrong-foot” uninformed break-out traders. A UT or UTAD allows large interests to mislead the public about the future trend direction and, subsequently, sell additional shares at elevated prices to such break-out traders and investors before the markdown begins. In addition, a UTAD may induce smaller traders in short positions to cover and surrender their shares to the larger interests who have engineered this move.
Aggressive traders may wish to initiate short positions after a UT or UTAD. The risk/reward ratio is often quite favorable. However, the “smart money” repeatedly stops out traders who initiate such short positions with one UT after another, so it is often safer to wait until Phase D and an LPSY.
Often demand is so weak in a distribution TR that price does not reach the level of the BC or initial ST. In this case, Phase C's test of demand may be represented by a UT of a lower high within the TR.
Phase D: Phase D arrives after the tests in Phase C show us the last gasps of demand. During Phase D, price travels to or through TR support. The evidence that supply is clearly dominant increases either with a clear break of support or with a decline below the mid-point of the TR after a UT or UTAD. There are often multiple weak rallies within Phase D; these LPSYs represent excellent opportunities to initiate or add to profitable short positions. Anyone still in a long position during Phase D is asking for trouble.
Phase E: Phase E depicts the unfolding of the downtrend; the stock leaves the TR and supply is in control. Once TR support is broken on a major SOW, this breakdown is often tested with a rally that fails at or near support. This also represents a high-probability opportunity to sell short. Subsequent rallies during the markdown are usually feeble. Traders who have taken short positions can trail their stops as price declines. After a significant down-move, climactic action may signal the beginning of a re-distribution TR or of accumulation.
NB: Rally stalled exactly at the 0.62 Fibo on 1/12/22. Perfect retracement. Expect a measured move down to or near 4500 next week.
Following the corrective structure another rally may ensue to a lower high in Feb. J Powell has already suggested the first rate hike might be in March, so holding rates at Jan meeting will likely spark another stupid pop. This would be a Wyckoff UTAD rally, these may or may not occur (see below). IMO we had UTAD from Santa Rally in December, tough to label these until the structure fully reveals, do expect a last squeeze before break.
This is not investing advice, it's a notion. I'll give you free advice, worth every penny you pay for it: IF you're in the Market LONG, GTFO NOW!. IF you're not in the market, STFO and do not get Risk On! LOL Thereyago. Don't say I didn't tellya. Trade at ur own risk, GLTA!
Wyckoff Abbs (source and a must read; school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method):
TR—trading range
PSY—preliminary supply, where large interests begin to unload shares in quantity after a pronounced up-move. Volume expands and price spread widens, signaling that a change in trend may be approaching.
BC—buying climax, during which there are often marked increases in volume and price spread. The force of buying reaches a climax, with heavy or urgent buying by the public being filled by professional interests at prices near a top. A BC often coincides with a great earnings report or other good news, since the large operators require huge demand from the public to sell their shares without depressing the stock price.
AR—automatic reaction. With intense buying substantially diminished after the BC and heavy supply continuing, an AR takes place. The low of this selloff helps define the lower boundary of the distribution TR.
ST—secondary test, in which price revisits the area of the BC to test the demand/supply balance at these price levels. For a top to be confirmed, supply must outweigh demand; volume and spread should thus decrease as price approaches the resistance area of the BC. An ST may take the form of an upthrust (UT), in which price moves above the resistance represented by the BC and possibly other STs before quickly reversing to close below resistance. After a UT, price often tests the lower boundary of the TR.
SOW—sign of weakness, observable as a down-move to (or slightly past) the lower boundary of the TR, usually occurring on increased spread and volume. The AR and the initial SOW(s) indicate a change of character in the price action of the stock: supply is now dominant.
LPSY—last point of supply. After testing support on a SOW, a feeble rally on narrow spread shows that the market is having considerable difficulty advancing. This inability to rally may be due to weak demand, substantial supply or both. LPSYs represent exhaustion of demand and the last waves of large operators’ distribution before markdown begins in earnest.
UTAD—upthrust after distribution. A UTAD is the distributional counterpart to the spring and terminal shakeout in the accumulation TR. It occurs in the latter stages of the TR and provides a definitive test of new demand after a breakout above TR resistance. Analogous to springs and shakeouts, a UTAD is not a required structural element: A UTAD MAY NOT OCCUR.
Phase A: Phase A in a distribution TR marks the stopping of the prior uptrend. Up to this point, demand has been dominant and the first significant evidence of supply entering the market is provided by preliminary supply (PSY) and the buying climax (BC). These events are usually followed by an automatic reaction (AR) and a secondary test (ST) of the BC, often upon diminished volume. However, the uptrend may also terminate without climactic action, instead demonstrating exhaustion of demand with decreasing spread and volume; less upward progress is made on each rally before significant supply emerges.
In a redistribution TR within a larger downtrend, Phase A may look more like the start of an accumulation TR (e.g., with climactic price and volume action to the downside). However, Phases B through E of a re-distribution TR can be analyzed in a similar manner to the distribution TR at the market top.
Phase B: The function of Phase B is to build a cause in preparation for a new downtrend. During this time, institutions and large professional interests are disposing of their long inventory and initiating short positions in anticipation of the next markdown. The points about Phase B in distribution are similar to those made for Phase B in accumulation, except that the large interests are net sellers of shares as the TR evolves, with the goal of exhausting as much of the remaining demand as possible. This process leaves clues that the supply/demand balance has tilted toward supply instead of demand. For instance, SOWs are usually accompanied by significantly increased spread and volume to the downside.
Phase C: In distribution, Phase C may reveal itself via an upthrust (UT) or UTAD. As noted above, a UT is the opposite of a spring. It is a price move above TR resistance that quickly reverses and closes in the TR. This is a test of the remaining demand. It is also a bull trap—it appears to signal the resumption of the uptrend but in reality is intended to “wrong-foot” uninformed break-out traders. A UT or UTAD allows large interests to mislead the public about the future trend direction and, subsequently, sell additional shares at elevated prices to such break-out traders and investors before the markdown begins. In addition, a UTAD may induce smaller traders in short positions to cover and surrender their shares to the larger interests who have engineered this move.
Aggressive traders may wish to initiate short positions after a UT or UTAD. The risk/reward ratio is often quite favorable. However, the “smart money” repeatedly stops out traders who initiate such short positions with one UT after another, so it is often safer to wait until Phase D and an LPSY.
Often demand is so weak in a distribution TR that price does not reach the level of the BC or initial ST. In this case, Phase C's test of demand may be represented by a UT of a lower high within the TR.
Phase D: Phase D arrives after the tests in Phase C show us the last gasps of demand. During Phase D, price travels to or through TR support. The evidence that supply is clearly dominant increases either with a clear break of support or with a decline below the mid-point of the TR after a UT or UTAD. There are often multiple weak rallies within Phase D; these LPSYs represent excellent opportunities to initiate or add to profitable short positions. Anyone still in a long position during Phase D is asking for trouble.
Phase E: Phase E depicts the unfolding of the downtrend; the stock leaves the TR and supply is in control. Once TR support is broken on a major SOW, this breakdown is often tested with a rally that fails at or near support. This also represents a high-probability opportunity to sell short. Subsequent rallies during the markdown are usually feeble. Traders who have taken short positions can trail their stops as price declines. After a significant down-move, climactic action may signal the beginning of a re-distribution TR or of accumulation.
Trade active
Played fade da gap for bank. Looks like it may have settled around 10:30, tried a few longs, made pennies.Note
NB: SPX futurz were low as 4705, kind of expect MMs to fill that in day sometime, so be cautioous about getting real long here IMONote
NQW futurz were low as 15835, within 20 pips here at 10:30, close shorts IMO get ready to bounce when O/N gap filledNote
Wow there she goesTrade active
I'll be quite honest didn't expect it to sell so fast so soon. Did carry puts down to the gapfill then closed expecting a bounce. There was a bit of bounce but the downdraft was surprising!I did okay but had done much better to take a short and hold it. Now opening QQQ 19 Jan short in the 382P, 30 bear spreads, shorting Fridays' 376s, see if it bounces or just gaps down and goes lower.
Note
Yeah rolled those short legs and closed that EOD OMG. Now price is at critical juncture. This COULD be a higher low and MIGHT bounce higher from here, but I doubt this.Most likely is a weak technical dead cat bounce followed by more selling. Could really tank off Friday on risk-off.
I tried taking calls a few times and gave back some of my gets. Probably not worth fooling with longs yet.
If you look back at Sep 2020 correction the secondary selling wave was ferocious and I expect something similar now, could give a 1.3 extension on the C leg.
IF this is impulsive 3rd wave, then we got a LOT lower to go still...
Note
Remember AH action in PM late trade is not predictive of the next session AM opening prices. Could gap down. Would not buy longs AH, lousy spreads and high risk!Note
See latest idea linked. Price is on the TL and break below would signal beginning of a real bearish move. Remember the purpose of Wyckoff's distribution is to continually prop up the price so smart money can sell to the rest of us. We saw exactly that this morning and in yesterday's session also, opened higher, started out rather bullish (retail opens the market) but ended all bloody (pros closed it).
Note
Here we go again... AM rally, fades, retracement, weaker EODNote
Well well strong finish; but is it a bull trap? Will find out soon.Note
Wouldn't chase the shorts!Note
Played fade the gap for pennies, weak as all get out, might close after noon or Weds, could tank more first, eh?Note
NQ may be printing a higher low; YM holding prices down on lousy bank ERs. ES remains depressed near open gap price from YM components... tough to make anything here IMONote
Filled in the chart, oversold on big gap... fill soon?!Note
The real stock market is Russell 2K. It leads both up and down moves. Trading at long-term support here near 2K. Watch it and follow RTY. This gap WILL fill and a pump over 2-3 days IS LIKELY IMO. Don't get caught short!see my linked idea.
Trade active
Flipping calls for puts was good on this gap n go. usually I do try to fade the gaps but today felt different, gap n go always a possible and melts puts. Better to watch when uncertain!Now price hangs at the gap opening price, will it fill today or tomorrow> Stay tuned. SOME rallies the gap will NOT fill, if this is headed up to close the down gap from week before at 2660, might just head up there.
The chart fills in nicely, the ATH was Santa Rally, DO NOT expect a higher high than Santa, he gave us UTAD following a BC and UT retest in Nov/Dec. All bearish patterns now but plenty of opportunities to lose money fast buying puts at the wrong time and price!
Note
Helluva gap fillNote
NB: Chart projected SOW eanding phase 19-21 Jan. Here it is. Probably real close to a pivot IMO. Take care!Note
Probly gonna pivot somewhere in here soon, a retracement likely as BTD gamblers pile on. Most participants now have never seen a real bear market and have never heard of Wyckoff or Elliott. NB: When former Soviets invade Ukraine this week or next the whole thing will unwind, be ready IMO
Note
Probably a selling climax IMONote
Now trades 200 pips under the 200 DMA. Expect bounce to the MA then another sell to LOTWNote
Retraced half the day's selloff in PM. Might be a near-term bottom in atm. Expect a weak bounce and lower.Note
Here comes a bounce. panicky put holders will sell their FOMO'd spendy overpriced contracts for loss, market makers will then cover the shares and futures they sold short to hedge the puts they wrote, buying up proceeds by algorithms rapidly, this why bear market rallies so fierce; GLTANote
Be REAL careful here folks, Look to see if we get the "Twin Peaks" formation, a double lower top, if it appears we are definitely going lower, it will be Phase D accelerating sooner than projected. The end move will be ferocious and frightening, capitulation by terrified bulls who realize too late that BTFD isn't working will be a massive selloff. SPX went off 600 pips from ATH to 4240 low. IF this whole move was just Wave 1 of an EW impulse, we got maybe 1200 more to go, index might end up around 3240-3440 before this is done.Note
May be entering Phase D already. Watch for 'twin peaks.' Double top at lower high signals imminent throwover.Note
Peaks formed get readyNote
Hanging on... don't short too soon, I always do fgsNote
Review the chart, NB: 'Giant Bear Flag' might be expected before the Big DipNote
Look for the 'Twin Peaks' of failed rally before throwover... forming now IMO... thin air, weak liftNote
Looks to be in 'Y-X' leg up, could give measured move to a lower high and grind out a bear flag for days or weeks.Global event likely spark throwover late Feb > March IMO; Ukraine?
Note
Double lower top is ominous IMO.... have a look at Dec 2018!
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