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DJIA Analysis
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The Dow initially pulled back after the open, and then recovered almost all of the lost ground by the close on Friday (21st Oct 2016).

In doing so price briefly moved below the low of the most recent supporting bar (Monday 17th), but it refused to continue lower and breakdown, and instead moved back above that low and recovered well.  This action left price on what Wyckoff called the springboard, or a spring.  The expected response is positive to a spring, and if it is going to work, price should accelerate away with some intent, however be aware that springs can and do fail.   Springs work best and most consistently when they appear in an up trend, soon after a breakout, or at the end of a trading range (and they do not work so well, or their response is subdued, when found in a downtrend, or soon after a price breakdown).

Finally, when a spring fails it can be considered a sign of weakness in itself.

DJIA Daily Chart



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Price did respond positively to the spring mentioned yesterday, which was nice.

However the midbar close suggests the rise in price has drawn out some supply.

Just how well the Index can negotiate its way through the congestion on the left, will determine how much the spring pays.....

DJIA Daily Chart



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After drawing out some supply and closing midbar, in response price pulled back to challenge the sellers to come out and take control.

Price came back to the test the top of the previous bar, and closed roughly level with the high.

I expect a test back into the body of this bar is a high chance now, where the position of the close at the end of day may give an insight into the near term direction.

DJIA Daily Chart



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The DJIA pulled back and formed a potential shakeout.

The high close suggests demand has come in from below (again).

In response to a shakeout, the expectation is for an acceleration higher,  or a lower volume test bar......

DJIA Daily Chart



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The Dow initially made an attempt to respond positively to the shakeout, however there was just not enough demand present to sustain the gains, and the Index eventually closed as a downbar.

The price action appears finely balanced right now, where there has been no upside follow through after potential strength, but there has been continual support coming in when price appears potentially weak.  

Richard Wyckoff said in his book 'Studies in tape Reading' -

"Successful tape reading is a study of force, it requires the ability to judge which side has the greatest pulling power, and one must have the courage to go with that side.  There are critical points which occur in each swing, just as in the life of a business or individual. At these junctures it seems as though a feather's weight more on either side would determine the immediate trend. Anyone who can spot these points has much to win and little to lose"

It appears the Dow is in a position right now, where just a feather's weight more on one side or the other may tip the balance....watch carefully...

DJIA Daily Chart


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On the daily chart it appears price attempted to rise, but failed, and saw some weakness, but recovered on Friday.

And all this happened on above average volume....

 

There is obviously still supply present, and price will usually find it difficult to rise (sustainably) with too much supply present.

The supply and demand still remain finely balanced at this level, so for me the most likely response is an attempted test, or a price failure of some kind.

I'm expecting an attempted test or mini shakeout (basic test etc.)

 

DJIA Daily Chart



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The Index printed a very narrow down bar, but with above average volume.

Narrow spread high volume bars should always be respected, because something will be going on, even if the answer is difficult to understand at the time.  In general, narrow spread downbars, where the next bar is up, suggests buying or absorption of supply, and inversely, a narrow spread upbar, where the next bar is down, suggests that the narrow spread bar contained mostly (hidden) selling.

So the next bar will potentially offer some important information to add to the story unfolding on the chart right now.

Also note the relatively long period of sideways price action, along with some tight clustering of closes recently.  This is sometimes described as price coiling itself up like a spring (not a Wyckoff style spring), and effectively this coiling action is said to be a form of price generating and storing energy, which will be released at some point.  The result when this stored energy is eventually released from the tight clustering or coiling action is a strong or powerful move of some sort.  And generally, the longer this clustering or coiling goes on for, the larger and more powerful the eventual move is expected to be.

DJIA Daily Chart



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The Index pushed lower with a wide spread on Tuesday.  Volume was lower than the previous two bars, but was still above average.

And the close was well off the daily lows, which infers some (speculative ??) buying came in at the lows.

Overall, the Index just remains within the sideways trading range it has been in for some time now.

Wednesday's bar now becomes quite important- if Tuesday's bar is in fact a shakeout of some sort, an upbar or a low volume potential test bar should result.  And if this was actually the beginning of a (serious ??) price breakdown, another downbar should result.  And when the demand lines of the recent trading range are clearly broken, expect any speculative positions opened on Tuesday to be quickly dumped, and that added supply will only increase the spread or range of the down bar, potentially forcing price even lower.

 

DJIA Daily Chart



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The Index saw price close lower again, spread narrowed considerably, and volume reduced to a little below average.  

However it did close within the spread or range of the previous bar, and did not close clearly below the potential support level.

Either way price is looking quite tenuous at the minute, but we'll wait for another bar to confirm a shakeout or breakdown will occur.

 

DJIA Daily Chart



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Price continues to come off, although spread is narrowing and volume is reducing.  This suggests selling pressure has reduced somewhat, however the continued lower lows (bar by bar) suggest any support being found may only be temporary.  

The double SR lines overhead are likely to offer resistance now, so any recovery will be more difficult in the short term (but not impossible).

DJIA Daily Chart



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The Index made an attempt to rally on Friday, but the gains failed to hold and the price eventually closed lower than the previous day's low on increased volume.  It is interesting that the volume was highest for a couple of days, but spread did not increase.  This suggests that while there may be an element of support at this level, it may only be temporary support at this stage, or at least to expect some increased volatility as price resolves itself at this level.

DJIA Daily Chart

 



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The Index accelerated higher with a wider spread, but slightly reduced volume, which suggests there was a lack of selling pressure in the market.

The next bar will be important, as it will offer some confirmation of what was actually going on inside this bar.

Always be wary of widespread upbars until they prove they are legitimate, because often (but not always) they contain a considerable hidden selling.

DJIA Daily Chart



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Price continued higher and stalled at the trading range highs on lower, and below average volume.

The low volume infers there was little conviction for a serious push higher, which suggests price may fall back into the trading range, or perhaps shakeout prior to a second challenge.

DJIA Daily Chart



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Instead of pulling back and shaking out or testing, the Index accelerated higher and briefly challenged the all time highs.

Volume was very high (always be suspect of high volume widespread upbars, until they are confirmed to be strong).

There is some serious momentum generated now, which may carry price even higher before anything else happens.

However, that very high volume would normally be tested at some time (it doesn't Have to, it just Often is).

So don't be surprised if price makes a new high, but then pulls back and tests for supply (looking for low volume, or selling pressure, if price is to continue higher). The pull back or testing may only be shallow and/or brief if the momentum remains strong....we'll see......

DJIA Daily Chart

 



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The Index sliced higher, easily breaking out above the previous highs.

Spread did narrow a little, and volume, although reduced, was well above average.

Volume like that is usually tested at some point in time, and I expect that the breakout above the previous highs may be tested at some point as well.

So once this euphoria settles a little, a pullback and some testing maybe the order of the day....we'll see......

 

DJIA Daily Chart

 



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