December 9 Monday Quick Check on Market Internals and SP500 Breadth

Dec 9, 2013: 2:42 PM CST

As we get the second week in December 2013 underway, let’s quickly update our readings on Market Internals, key levels, and what they reveal about the current picture of price action.

Here’s the S&P 500 with index-specific Breadth (Advancers – Decliners in the S&P 500):

SP500 S&P 500 Breadth Advancers Decliners Color Chart Broader Participation

We can start with the broader perspective from mid-November to present, making specific note of short-term turning points (intraday reversals) and the interplay with the 1,800 “Round Number” Reference level.

Buyers have stepped in to defend the 1,785 level (initial target for downside play under 1,800) yet sellers have similarly stepped in at the 1,810 level.  We can refer to the 1,785 to 1,810 level as the broader “range” or short-term reference levels for traders.

Similarly, the Midpoint or “Round Number Reference Level” intersects the 1,800 key reference level which has served as a mini-magnet for both sides of the market.

Again, we note the divergences with SP500 specific breadth relative to the recent turns in price.

For game-planning, we’ll look to be ‘breakout bullish’ for popped stops/short-squeeze plays above the 1,810 level and otherwise “history repeating with divergences into resistance” bearish if we start to see a push down away from 1,810.

Here’s a closer look at what’s going on with the “Big Three” Market Internals right now:

SP500 SPX Breadth Closer Look Advancers Decliners Intraday Trading

We expand the indicators to include NYSE (broader) Breadth (also showing negative divergences), the NYSE TICK (clearly showing a divergence from the December 6th opening high), and the VOLD or Volume Difference of NYSE Breadth (similarly showing a divergence).

Our “triple negative divergence into resistance” thesis simply tips the odds to favor a downside play away from 1,810.

Is it guaranteed?  Absolutely not, which means we could expect – and look to trade – a “popped stops/short-squeeze” alternate thesis breakout play to new highs.

Continue watching price relative to 1,810 (breakout), 1,800 (round number reference “magnet”), and of course the overlay of Market Internals with price into these levels.

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Corey Rosenbloom, CMT
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