Looking at the USDJPY on the weekly time frame we see the market has now reached the end of such a distribution phase and should result in the unfolding of a down trend. The distribution phase has taken from the end of 2014 and is only now beginning to go into selling mode.
Wyckoff identified 5 Phases (A to E) that the market pases through during the Trading Range ( TR ). In these phases events mark specific market activities:
(PS) Preliminary Supply: Where substantial selling begins to provide pronounced resistance after an upmove.
and spread widen and provide a signal that the upmove may be approaching its end.
( BC ) Buying Climax: Widening spread and buying climaxes. Buying by the public is being filled by larger professional interests at prices near a top.
(AR) Automatic Reaction: Buying is exhausted and supply continues and a AR follows the BC . The low of this selloff defines the bottom of the Trading Range ( TR ).
( ST ) Secondary Test(s): A revisit of the area of the Buying Climax to test the demand/supply balance.. If a top is confirmed the supply outweighs demand and and spread should be diminished as the market approaches the of the BC .
(SOW) Sign of Weakness: Usually occur on increased spread and . Supply is showing dominance. A break through the will likely be followed by attempts to get back above it. A failure to get back above firm support may mean the end of the distribution.
(LPSY) Last Point of Supply: after we test of support on a SOW, a feeble rally attempt on narrow spread shows us the difficulty the market is having in making a further rise. may be light or heavy, showing weak demand or
substantial supply. It is at these LPSY’s that the last waves of distribution are being unloaded before markdown is to begin.
After a break a rally attempt is thwarted. The rally meets a last wave of supply before markdown ensues.
LPSY’s are good places to initiate a short position or to add to already profitable ones.
Based on this evaluation it is my view that we are now in the markdown phase and a good down trend is to unfold.
Currently the market could still retrace to test the Long-term S&R at 111 but following that a strong downtrend is expected.