Interesting SP500 Market Internals August 14

Aug 14, 2012: 9:10 AM CST

If the bulls were any stronger, we’d be seeing a straight up rally in the market!

Let’s take a quick morning look at the interesting situation in SP500 Market Internals as price continues to defy expectations at the highs.

S&P 500 30-min intraday perspective:

We’re focusing on two Market Internals Indicators:  NYSE Breadth and VOLD (Volume Difference of Breadth).

In general, strength in Breadth (particularly coming off a recent low or support zone) tends to precede a future rally in price (reference July 13, July 27, and August 3) while divergences between Price and Breadth often precede pauses or retracement/reversals (like July 19 and July 30).

While Breadth and VOLD (and volume itself) have been declining steadily, price (buyers) seem not to have noticed.

The IF/THEN Logic continues to call for bullishness above 1,400 (particularly 1,410) and caution/bearishness under the 1,395 support line.

Instead, price continues consolidating/trading at the high of the range, not just on the intraday frame (see 15-min chart below) but on the Daily S&P 500 Chart.

Let’s zoom the perspective to the 15-min chart to highlight the current situation:

The 15-min chart emphasizes the mid-July divergence and reversal situation which has not yet repeated itself with the current divergence-into-resistance situation.

In general, the longer price continues defying the odds, eventually the odds tip to the bullish side given the resilience of buyers to hold this market up at the highs, or the inability of sellers to push this market lower.

Price still moves by supply and demand, not indicators, and the potential still exists for a power breakout to the upside via “Popped Stops/Short-Squeeze” just as the expected downside resolution exists.

The trigger points continue to be 1,410 to the upside (targeting 1,422’s new recovery high of 2012) and the recent support shelf at 1,395.

Bias (demanding that price must break higher or collapse lower) has no place in the current environment – study the key levels and adapt accordingly, even if price doesn’t seem logical at all.

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!

1 Comment

One Response to “Interesting SP500 Market Internals August 14”

  1. Hans Holland Says:

    Hi Corey,
    I use Stockcharts.com.
    You are using $ADD and $VOLD.
    But these are not available in Stockcharts.com.
    What should I choose or whats comes most close to $ADD and $VOLD?
    Thanks for helping,
    Hans