As we start Wednesday morning with a bullish gap, let’s take a quick step inside the market for a “Breadth Check-up” on the S&P 500.

Here’s the intraday chart structure:

What we’re seeing is the S&P 500 Index on the 5-min frame with two Market Internals that show Breadth:

• $ADD:  NYSE Breadth (Advancing Issues minus Declining Issues)
• $VOLD:  Volume Difference of Advancing Issues and Declining Issues

Before we discuss the current structure, let’s review the most recent negative divergence that developed on May 10th into the 1,365 resistance area.

Breadth and VOLD peaked with price on May 10th, yet price pushed the next session back to 1,365 but this time we saw a visual decline – negative divergence – in both Breadth and VOLD.

This mid-morning situation (divergence) was the intraday peak ahead of the current decline to the 1,330 level.

Similarly, Breadth and VOLD pushed to new lows on May 14th (Monday) with price near the 1,340 index level.

Yesterday (May 15th) resulted in a price push UNDER the support level… but both Breadth and VOLD failed to register new internal lows, locking in a Positive Divergence.

Now, Wednesday’s session opens with a bullish gap and initial upward impulse which has resulted in a push-up in Breadth as well.

In sum, Breadth and VOLD – Market Internals – suggests at least initial price strength/bullishness as a result of their positive divergences.

We’ll look to price today and tomorrow for confirmation/follow-through with this potential bullish signal with respect to the key 1,340 index level.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

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India’s “Nifty 50″ Stock Index currently faces a key inflection support level at the 4,800 level.

Let’s take a quick look at the Index and plan for potential action at this visual chart level.

First, let’s see the Confluence Support Line that develops from the Weekly Chart:

Again, a quick glance shows the 4,800 Index level as the visual focal point for potential confluence support on the chart.

This builds from the flat 200 day Simple Moving Average currently resting at 4,819 and the 38.2% “Bull Market” Fibonacci Retracement at 4,873.

It’s worth noting that Confluence Support Levels are not mystical levels were price is required to reverse; instead, they are levels that often drive additional interest and trading activity that could shift the supply/demand balance.

In other words, buyers have a low-risk, high-reward potential opportunity that could spark a bounce here potentially to target at least 5,250.

However, if collective selling activity is stronger that collective buying activity at this key level, then it would open the index to target lower support levels such as 4,500.

In this way, we follow price as it trades relative to key inflection areas – the index has the potential for bullish movement above 4,800 or else bearish continuation under 4,800 to respective targets.

Let’s see a closer picture on the Daily Chart:

The Daily Chart again highlights the 4,800 region – not the exact number – as a key inflection or turning point for price.

The Index reversed initially higher off 4,750 then traded minimally under 4,700 with positive momentum divergences ahead of a power-rally/bounce in early 2012.

Consider the 4,800 region to be a very important reference level as price (buyers and sellers) again interact at this key level.

Short-sellers may decide to take profits (exit positions) near this level while buyers may decide to put on new swing-trading positions.

The interaction here – and whether sellers can collectively break this support level – will be key in playing the next few weeks in the market.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

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The Summer session of the Trader’s Expo is rapidly approaching!

It’s time to go ahead and make plans to attend the Traders Expo in Dallas, Texas June 6-8 if you will be able to attend.

If you’ve attended a prior Traders Expo, you know how fun and beneficial they are for you as a developing trader.

Not only do you get the opportunity to learn from dozens of leading traders presenting educational sessions on current market conditions and strategies, you also have plenty of time to network and meet fellow traders with whom you can keep in touch and learn from each other.

As a new or developing trader – particularly if you trade alone at home – it can be very encouraging to meet others who are sharing similar experiences – good and bad – as you are.

The Expo is a stellar venue for building camaraderie with others and keeping in touch with what’s new in the trading industry.

You also can demo the latest in trader software and technology at the large Exhibit Hall between educational sessions.

Speaking of educational sessions, there are always so many sessions from which to choose depending on what type of trader you are (day, swing, position), market you trade (commodities, FOREX, stocks, ETFs, futures), along with your experience level (new, intermediate, and advanced).

I’ll be presenting two sessions at the Expo on June 7th – mainly designed for intraday traders:

Intraday Trading Tricks with the TICK:  Kick-offs and Divergence Signals

How to Identify and Trade Range Days

Visit the homepage of the Dallas Traders Expo to see a full listing of speakers and sessions you’ll be able to attend.

Other educational speakers include Brian Shannon, Larry Williams, John Carter, Kathy Lien, Anne-Marie Baiynd, Chris Terry, Scott Andrews, Harry Boxer, and Robert Miner – just to name a few!

And if you’re unable to attend the Expo, you’ll be able to view live webcasts of some educational presentations as they take place during the Expo (check for details as it gets closer to the Expo).

I sincerely hope you can join us all in Dallas!

Corey

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Here’s an update to a prior volume-centric post that highlighted the April trend towards Distribution Volume in the US Equity Markets.

The recent sharp sell-off confirmed the earlier signals and added to the broader Distribution Picture.

Let’s take a look at the current “Volume Only” color-coded SPY and DIA (S&P 500 and Dow Jones ETF) charts:

Dow Jones ETF:  DIA

Start with the April 11th original “April Distribution Volume Trends” for background information and to see what the Distribution Volume picture was in early April.

To recap, according to classical Technical Analysis, volume should confirm price (part of Dow Theory).

What this means is that if Volume and Price move in the SAME direction, expect the price movement to continue.

Instead, if Volume and Price move in opposite directions, expect a future reversal.

Beyond this, we can compare how volume performs on upswings (rallies) or down-swings (declines) in price to get a sense of the bigger picture of money flow.

This can help us see if money is aggressively flowing IN to a rising market (which is bullish) or flowing out of a falling market (which is bearish).

Now, back to the current picture.

I color-coded the recent intraday swings as either “rallies” or “declines” accordingly so that we could clearly see the trend or progression of volume – rising or falling.

It should be clear that during green rallies, volume has been declining or falling (again as price is rising) and that during sell-offs or declines, volume has been progressively rising.

This points to a broader pattern of Distribution – less enthusiasm/activity during rallies and more activity/transactions during declines.

Put in the larger context of an over-extended rally and the seasonal “Sell in May and Go Away” sentiment, this at least paints a picture of caution for the equity markets.

We’ll always let price be the main guiding factor, but for the moment, volume trends/signals paint a cautious to outright bearish picture that we need to monitor closely in the weeks ahead.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

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One of the big headlines of today was the sharp decline and breakdown under chart-based support in Gold.

Let’s take a look at what happened, what levels are important here, and what current structure reveals.

First, the intraday 30-min “Structure” Chart of Gold:

When we’re assessing “Market Structure” or “Swing Structure,” we simply note the progression of price highs and lows to create a reference.

Take a moment to review a recent “Multi-Timeframe Structure” lesson using Silver to highlight the concept.

We use structure to determine uptrends, downtrends, or – in the case of gold’s intraday chart – sideways trends.

On the chart above, we can see gold “building” a sideways structure (trend) with clear converging ‘Symmetrical Triangle” trendlines.

The immediate levels going into today’s session were $1,630 for lower support and $1,660 for upper resistance.

Pre-market, Gold broke the ’structure’ and an intraday trend day or sharp sell-off resulted from the initial movement out of the Triangle structure.

With the intraday triangle image in mind, let’s pull-up the perspective to the Daily Chart:

As I’ve been highlighting to Weekly Inter-market Members lately, Gold has been bouncing off the short-term $1,620/$1,630 level and failing (giving short-term retracement entries) into the overhead 50 day EMA.

Today’s session broke this pattern that developed in March and now the market faces a critical “Make or Break” support test at the $1,600 round-number easy reference line.

While $1,600 is easy to remember, it’s also an important polarity level, serving as support multiple times as seen with the horizontal yellow highlight above.

Buyers continued to step-in to support (purchase) gold at the $1,600 level with the exception of a two-swing breakdown in December 2011.

Keeping it very simple, $1,600 is thus the key “Bull/Bear” reference level – gold has a bullish bias while price is above $1,600 or else a bearish bias while under it.

A continued sell-off here suggests $1,550 or even $1,525 would be the next support level (or target price if you are short-selling under $1,600).

Gold’s Momentum/Volatility Cycles

I also wanted to highlight the persistent “Momentum Compression” (almost like a triangle pattern) in the 3/10 Momentum Oscillator.

Periods of price expansion or ‘big impulse/trending’ moves tend to emerge from low-volatility or compressed periods in price.

Stated differently, price in general tends to alternate (rotate) between sustained periods of high then low (then high) volatility.

We would call the July to October 2011 period as “high volatility” which gave-way to the recent multi-month compression or reduction in volatility.

One would suspect a future higher volatility period would result, particularly if we see a breakthrough trigger under $1,600 (for the bearish side) or alternately above $1,700 (to the bullish side).

Nevertheless, while $1,600 may seem too simple to be a key level to watch, it is the important reference level for the immediate future.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available!

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