Checking on Market Internals for September 13

Sep 13, 2011: 10:26 AM CST

What are Market Internals revealing about the current position of the S&P 500?

Let’s take a look at the current structure and make note of prior reversals via Market Internal Divergences:

Let’s take the somewhat busy chart step-by-step for clarification.

What we’re seeing is the 15-min S&P 500 Index with two different Market Internal gauges:

  • $ADD = NYSE Breadth (the number of advancing issues on the session minus declining issues)
  • $VOLD:  NYSE Volume Difference (Volume flowing into advancers minus volume flowing into decliners)

While these essentially measure the same thing – internal breadth or depth of participation of issues – it’s helpful to separate the two.

In the chart above, we can see Market Internal Divergences with the Index – these frequently occur at short-term turning points in the market.

It’s still better to wait for a trendline breakthrough – after a divergence – before positioning yourself for a reversal.

With the reference chart above, let’s now turn to the current 5-min structure to see the divergence and outcome:

First, we had a clear negative internal divergence on the open of Thursday, September 8th into the 1,200 area.

The outcome was a breakdown of the rising trendline as drawn, which set-up a nice trade to play for lower prices on the breakdown from the divergence.

Price traded to the 1,140 level and formed another lengthy/clear positive internal divergence, which resulted yesterday in a trendline breakthrough and subsequent reversal (trade) higher that took us back into the 1,180 level – no divergence exists at the moment.

For a bit of extra reference, take a look at my market update yesterday which showed the S&P 500 trading into a critically important rising ‘flag’ trendline of support.

LESSON:  When you can spot a positive market internal divergence intraday in conjunction with a test of a critical support area on the daily chart, it often sets up good trades to play for higher probability short-term reversals (like this).

What now?

We’ve already seen a good move up after the positive divergence and breakthrough from yesterday’s session, as price traded into a minor overhead intraday resistance level at 1,180.

Further price strength/buying above 1,180 would be expected to carry higher to the 1,200 resistance cluster.

Otherwise, watch the market carefully as it trades currently under the little resistance area at 1,180 with respect to the 1,160 support.

Use the charts above as great references for the “Market Internal Divergence” concept of short-term reversal plays.

For further reference, view prior updates/lessons on Market Internal Divergences:

The Good Signal from Market Internal Divergences into Resistance

May 18 Check-up on Bullishly Diverging Market Internals

May 3 Check on Massively Divergent Market Internals

Intraday Swing Trading with the TICK (another Market Internal)

Checking on Market Internal Divergences and Structure March 28

Market Internal Check (Feb 28) Shows “Make or Break” Level (lesson)

How Market Internals Helped You Avoid March 1 Gap-Flap Trap

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!

3 Comments

3 Responses to “Checking on Market Internals for September 13”

  1. Sim Says:

    Could nt agree more . This is what I keep telling my readers ( scant though they might be ) on my blog..keep the bigger trend in mind while you play the intra day divergences… adds to your pips.

  2. Monclernimei Says:

     thank
    you for sharing!

    <a<br>href=”http://www.moncler-outlet.org/“>Moncler
    Outlet

    </a<br>

  3. Stepping Inside the SP500 Rally into 1220 Resistance | Afraid to Trade.com Blog Says:

    […] posted a prior update on S&P 500 Market Internals on September 13th, which highlighted the positive divergences that led to last week’s expected upper-swing into […]