Charting Market Internals Divergences off Key Support

Aug 20, 2013: 12:03 PM CST

One of my favorite set-ups takes into account a visual intraday divergence into a known higher timeframe key support or inflection level.

That’s what happened this morning – as I highlighted in yesterday’s planning post – and it has resulted in a stellar rally and great real-world educational example.

Let’s step inside the market this morning to note the ongoing Positive Internal Divergences at a key level and the ‘snap-back’ rally that developed.

Market Internal Divergences SP500 SPX Higher Timeframe Support Trade Tactic Reversal

First, take a moment to refresh the commentary from yesterday afternoon’s “Planning the Next Move off the Key S&P 500 Level of 1,650” which set the stage for today’s rally outcome.

I mentioned it would be important to note any divergences or ‘strength’ in Internals relative to the 1,650 level and that’s precisely what occurred, both with the higher indicator lows relative to the August 15 ‘collapse’ day and the strong bullish open this morning on the retest of yesterday’s index low.

While price opened at the same level as yesterday’s close, it became clear very early that internals were showing ‘hidden’ strength by trading positive and spiking higher throughout the opening session.

Here’s a zoomed-in perspective on S&P 500 Breadth (number of stocks advancing on the session minus those declining on the session) and NYSE TICK (a measure of buying or selling pressure):

SPX SP500 Market Internal Divergence Intraday TICK Breadth Advance Decline Reversal

Note also that price broke either an “arc” or tight trendline pattern along with a straight trendline on the return back above our “round number” 1,650 index level.

So far, the index has ‘snapped back’ just shy of the prior high into 1,660 which becomes the new focal point for trade planning.

Take a moment to study last night’s post with bull/bear planning off a key level and the real-time price interaction with this level (this morning) along with the message sent by bullish Market Internals (at support).

These are the kinds of specific evening game-planning and real-world educational reference lessons I discuss each night for premium Idealized Trades Members.

Corey Rosenbloom, CMT
Afraid to

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2 Responses to “Charting Market Internals Divergences off Key Support”

  1. Wednesday links: acting with certainty | Abnormal Returns Says:

    […] Market divergences are piling up.  (Mark Hulbert, Afraid to Trade) […]

  2. Wednesday links: acting with certainty Says:

    […] Market divergences are piling up.  (Mark Hulbert, Afraid to Trade) […]