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Anticipating Today’s Sell-Off

Each week in Deep Practice we spend time reviewing the US Stock market and what to expect — both near term and intermediate term.  Last night, we discussed in detail how weakness had come into the market over the past few days and what that means.  We also talked about today and the strong likelihood of downside follow-through from yesterday’s sell-off — both why it was likely to occur and what that would look like.  Traders in Deep Practice were well-prepared for today’s down trend action.

A Serious Group of Traders

What is Deep Practice?  Deep Practice is a group of traders who meet on my desktop (i.e., I share my screen with everyone) to seriously study and practice the Wyckoff Method of reading the market by its own action through price bars and volume.  We usually look at the current market and then walk-forward a previous market, assessing the market action, identifying Wyckoff principles as they are unfolding on the chart, and initiating and managing trades.

It’s a serious group and everyone has a chance to participate, offer comments, and ask questions.  We also usually address a challenge one of the members is having (e.g., a situation that is frequently challenging for the trader or even just a trade that didn’t work out).  It’s done anonymously and in the spirit of: ‘How can we best learn from this?’ Its a practice that all members find of high value.  There is no other group like it. 

Details

Interested?  We meet once a week for 60–90-minutes.  All sessions are recorded, and many members view the recordings later because of time zone differences and find it of high value (and, many send in questions and comments that are addressed the following week).  We cover swing trading stocks, day trading ES and currencies, and other markets by request (not all markets every week, of course — this is very focused).  We keep the costs low, so that isn’t a barrier to entry. 

You are invited to learn more here: Deep Practice.  Oh, almost forgot!  You will get access to the last four weeks’ worth of Deep Practice recordings immediately, so you can start right in.

S&Ps Reach Anticipated Level!

On Monday, we had a free review of the US Stock Market.  We looked at a series of charts and also how I expected the market to trade this week, based on overall market structure.  On Monday, I said that the 1385 level was a key level that the market would likely revisit.  Today, we sold off and came into that level.

We will be doing free webinars every other week, as time permits.  We will talk about how the market traded and what we can expect next — all from the Wyckoff perspective.  Watch this site for the next one. 

If you missed Monday’s webinar, we have it available as a recording on the site.  Click on the Free Resources button near the top of the page (under the Wall Street photos — see image below) for access.  If you haven’t already registered for the site, it will ask you to do so — it’s quick, easy, and painless.  Then you will have access to this webinar and the other free resources we have.  Enjoy!

The webinar will run for 45 minutes, or so.  It’s free.  All you need to do is register at the link below:

Free Webinar Registration Link

Many traders in our community know that we have a dog called Asta. Asta is a super smart dog. He does everything with us, hiking, riding in the car, Lowes shopping trips, and above all, supervising Gary’s teaching.

I don’t know how many dogs out there who know how to eat peanuts, but Asta does as the video shows (go to youtube and search for Asta Dog Cracking Peanuts). The photo is Asta hiking in the White Mountains.

So now when you hear Asta in Gary’s classes, you know who is making the noises:)

Well, that’s not quite right.  Here is a brief interview I did with Tim Bourquin of the Money Show Video network on the topic, shot at the New York Traders’ Expo in February.  Click on the image below to access the video.  Enjoy!

Dr. Gary at Traders’ Expo Interview

What’s Next?

So higher prices are unlikely in the next few days, and given the market’s structure, maybe longer.

With Friday’s poor price action on sustained volume (slightly higher volume) and last week’s volume increasing on a poor weekly close, lower prices are likely.

Key Levels

We can see on the accompanying charts where key levels are.  First support comes in at 1352.50 in the futures market (ES).  This was Tuesday’s low.  Will the market simply test this low and then rally higher?  Given Friday’s price and volume action, that seems less likely.

If the market pushes down below Tuesday’s low, the next level is the 1332.75 low painted March 6th in the futures (ES), or 1340.03 in the cash index.  Should we get there towards the end of this week, we will be hitting an oversold level.  It would be a logical level from which the market would bounce, as longer term, we remain in an uptrend — but that is getting ahead of ourselves.  Let watch closely and see how the market handles the 1352.50 support.  At the moment, I see lower odds of holding, but it all depends on how the market approaches and acts at that level.

What’s Next?

Buying was definitely aggressive.  The rally today ran farther than expected and volume was good, indicating strong buying.  Will we see follow through?  I think we will.

Watch tomorrow’s close

Look at the weekly chart.  Tomorrow (Friday) completes the last weekly bar.  You can already see that it dipped down into support and rallied aggressively.  If we close near today’s close or higher, we will have recorded a very bullish week — one that reacted and strongly rebounded off last year’s high.  It will represent a successful test of last year’s high.  So watch tomorrow’s close.  If it is firm and completes a bullish week, we can expect follow-though next week and at least a test of our highs so far this year, and likely new highs in the near future.

What’s Next?

Initial reaction target reached

We have had five down days in a row.  That’s a fair run, and the market is looking a bit over sold.  I am expecting some consolidation to come in.  Any further push down tomorrow in the morning session will unlikely get very far beyond the 1350 level (maybe 1345 in the futures).  The upside at this moment appears limited to around the 1386 level in the cash market, unless we see evidence of buyers stepping in aggressively.

We do see a pickup in downside volume today.  Supply is active.  If we do consolidate next, we can anticipate further downside, depending on the characteristics of the consolidation.