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Thursday, July 08, 2010 3:09:00 PM
July 8 Check on SPX Declining Market Internals
Jul 8, 2010: 1:37 PM CST
While market internals recently turned positive to suggest a rally higher, now that the rally higher has materialized, these same market internals are turning lower in a negative divergence, suggesting a different story.
Let’s take a look at the current chart of the S&P 500 and market internals:
The chart shows the S&P 500 index 15-min chart with the Breadth, TICK, and Volume Difference beneath the price chart.
As is the usual case, we look at recent extremes in price and then compare market internal readings to these highs, asking whether or not internals are confirming or disconfirming the recent price swing.
In this case, they are not, as price rallied to 1,070, but all three internals went lower on the morning rally.
That’s a classic non-confirmation and negative divergence which warns of caution and a possible downside move ahead, if the signal from internals holds true.
The official trigger would be a break back under the 1,050 level, though a break under 1,060 would be the early reversal signal for aggressive traders.
When price breaks trendlines after forming negative internal divergences, that sets up an opportunity to trade in favor of a reversal in price. Notice that we’re already under the rising trendline drawn from yesterday – price broke that just as I captured the image for this chart.
Keep watching internals as the market challenges the current levels.
http://blog.afraidtotrade.com/july-8-check-on-spx-declining-market-internals/
Jul 8, 2010: 1:37 PM CST
While market internals recently turned positive to suggest a rally higher, now that the rally higher has materialized, these same market internals are turning lower in a negative divergence, suggesting a different story.
Let’s take a look at the current chart of the S&P 500 and market internals:
The chart shows the S&P 500 index 15-min chart with the Breadth, TICK, and Volume Difference beneath the price chart.
As is the usual case, we look at recent extremes in price and then compare market internal readings to these highs, asking whether or not internals are confirming or disconfirming the recent price swing.
In this case, they are not, as price rallied to 1,070, but all three internals went lower on the morning rally.
That’s a classic non-confirmation and negative divergence which warns of caution and a possible downside move ahead, if the signal from internals holds true.
The official trigger would be a break back under the 1,050 level, though a break under 1,060 would be the early reversal signal for aggressive traders.
When price breaks trendlines after forming negative internal divergences, that sets up an opportunity to trade in favor of a reversal in price. Notice that we’re already under the rising trendline drawn from yesterday – price broke that just as I captured the image for this chart.
Keep watching internals as the market challenges the current levels.
http://blog.afraidtotrade.com/july-8-check-on-spx-declining-market-internals/
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