Fun and Profit with Market Internal Divergences: April 21 Update

Apr 21, 2010: 1:31 PM CST

Reading Market Internals is essential for intraday traders and also is helpful for swing traders, if you compare days to days and swing highs to corresponding internal highs.

Let’s get an update for April 21 and then also note the three recent clean divergences – all of which have produced a turn in the market place.

Will the current divergence do the same?

For a running dialog (to see how the analysis played out in real-time), and more information on the three Internals (Breadth, TICK Extremes, and Volume Difference), see the prior updates related to the chart above:

April 15Market Internals Send Strong Warning Signal

April 16Strangely Enough, Market Internals DO Matter

April 20: Mid-Day Check on Bullish Market Internals

I’ll let the chart speak for itself.

As we scurried to a new index high (above yesterday, that is), breaking above $121.00, NONE of the three-key market internals were confirming the swing high.

In fact, ALL were diverging, sending their own warning signal to be cautious and watch for any potential trendline or moving average breaks as sell-signals.

It looks like we’re seeing the sell-off now that the divergence forecast right off the open.

Take time to study these charts and how incorporating market internals into you trading can clue you in to potential intraday (and even multi-day) reversals.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

8 Comments

8 Responses to “Fun and Profit with Market Internal Divergences: April 21 Update”

  1. Mitch Says:

    Hi Corey,
    There were a lot of failed Wyckoff signals of Strength/Weakness today. Are there any criteria you use to filter out some of these signals?

  2. tradernina Says:

    Corey,
    Comparing weekly charts for some of the averages, found that while most indices are making new highs, the DJ utilities in not making new highs. Your comments/observations appreciated. Thanks.

  3. bill Says:

    Great stuff, but this type of bread divergence works only sometimes. I've seen the market blast higher and ignore such divergences, so always be careful and flexible. Money management is key.

  4. Corey Rosenbloom, CMT Says:

    Agreed!

    It can be helpful on a very short-term basis but nothing – not even internals – is perfect.

  5. Corey Rosenbloom, CMT Says:

    I may do an update post on that – good thought! Thanks!

  6. Corey Rosenbloom, CMT Says:

    That's true – admittedly it threw me for a loop yesterday (new TICK highs when price is not making new highs on the session – happened in the morning mostly).

    When the market isn't doing what it's expected to do, it can lead to a larger than normal reaction in the opposite direction.

    Until then, watch price and trendlines when other indicators – even internals – aren't checking out like they should.

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