Fun With Current Charts, Wyckoff Style

Accumulation, Markup, Distribution and Markdown are the four basic stages of the
Wyckoff Cycle. Prior posts have been focused on the primary phases of Accumulation.
There is still more to do, but lets take a break and explore the current market
circumstances, which are very interesting. Consider this an introduction to the
principles of Distribution with the promise that we will explore this topic in great detail
in the not to distant future.

(Click to view a live version)

The $INDU set a trading range with a Buying Climax and an Automatic Reaction. These
two points frame the trading range for the foreseeable future. Here we are in June and
for the most part that December action is holding true up to today. Also note that on
Thursday of last week the $INDU dipped back below the December BCLX peak. We
draw horizontal lines from the peak of the BCLX and the low of the AR to establish the
outer ranges of the potential Distribution range. Note how price could climb above the
BCLX peak but could not stay above nor pull away.
The Up Thrust after Distribution (UTAD) is an interesting development. As a last act in
the Distribution area, price will sometimes make a higher high by a marginal amount as
it did here. Then it will turn back into the range. In the classic UTAD what follows is a
short sharp drop to the bottom of the trading range. These slides tend to be volatile.
The chart shows volume expanding on the price declines off each of the recent peaks

(red arrows). This is evidence of active selling.

Wyckoffians think in terms of scenarios and tactics. What the bulls need here is a
reversal at or above 17,600 and a resumption of the uptrend by charging to a new high.
17,068 is the Automatic Reaction (AR) and is the next target. If price gets to and
through this level (even briefly), we would label such a decline a Sign of Weakness
(SOW). The subsequent rally would reveal much about whether the entire structure is a
large Distribution with further potential for decline, or a Stepping Stone
Reaccumulation (we will spend much time on the SSR which is a most important
formation). Keep in mind that the character of the classic UTAD is to whoosh down
quickly and with volatility.

(Click to view a live version)

The Russell 2000 iShares (IWM) has a different look from the $INDU. The BCLX and
the AR arrived in late March. Note how well they contain the subsequent price action. A
decline off the Secondary Test (ST) comes on expanding volume and is a sign of active
selling and results in a Sign of Weakness (SOW). The May rally does not take the IWM
to a new high and we label it a ST. Later the label may change to a Last Point of Supply
(LPSY). The primary distinction between the two is that a ST decline to the prior lows
of the Distribution Range and the LPSY is the last rally point prior to a larger
downtrend. The volatility of the last four bars is somewhat high, and there is no further
upward progress. We would conclude this to be churning near the highs. The bulls
need a follow through of prices to new highs soon. Otherwise testing the bottom of the

trading range or declining further is a real possibility.

Stay tuned as we continue to learn about all things Wyckoff and periodically include
current market updates.
All the Best, Bruce