We have been watching this stock market grind up for what seems to be weeks on end. This is a classic low volatility grinding rally. It continues to creep along ever higher, absorbing whatever small supply (mostly profit-taking) occurs. No big pullbacks. Difficult to get long. Difficult and dangerous for those traders who become easily frustrated at ‘missing out’ of previous trading opportunities.
Stock Market Sell-Off
Yesterday, we saw the stock market sell off bit. More importantly, bigger volume came in to the downside. You can see that clearly on the daily chart. The larger-scale Weis Wave (45K Ticks and 3-point reversals) also showed supply. As usual, the Weis Wave gave indications that a sell-off yesterday was likely.
The day before (February 28) saw the market trading in a narrow range. Nothing notable for a low volatility market. Except for the wave volume. We see a pick-up in downside volume. I’ve highlighted this wave with an ‘A’. Now, price action went sideways, so this could just be more absorption of supply like we have seen so many times earlier. The next wave up, however, began to tell a different story.
On the rally up to B, we see wave volume diminish significantly. The wave itself also shortened. This signaled to savvy traders that sellers may wake up and enter the market. And they did, selling the market down on wave C with an increased downside volume. On smaller intraday time frames, we had a solid trading day with upthrusts, a spring, and lower low/lower high setups (not shown).
What to Watch for Today
We did see some buying come in very late in the day. The daily chart shows the market closing well off its lows. Did buyers step back in? Well, yes, they did. But the question now becomes: Will they overcome the selling seen yesterday and push this market back up? They have done it before in this uptrend, several times (for example, see February 15 & 16).
Today, watch for a lower high to be painted, possibly around the 1370 level where the market has run into intraday difficulty in the recent past. As usual, the Weis Wave will be of help in this. This could trigger another sell-off today. If the market decides to push on through and sellers retreat, however, we can see a retest of yesterday’s high and perhaps even new highs. We shall see.
For those interested, you can learn more about how to use the Weis Wave here: Weis Wave Plug-in
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