If you are a swing trader, it can be helpful to drop to the intraday or lower frames to assess the current structure and indicator combinations to plan your next plays.
Of course, intraday traders will be keenly aware of the indicator signals and key levels, but it can help to put your market in the context of what signals develop in related markets.
Let’s take a quick step inside the intraday chart of the Risk-On S&P 500 and Crude Oil markets and compare what we see there to the intraday Risk-Off US Dollar Index.
Here’s the overlay chart of the S&P 500 (@ES) and Crude Oil (@CL) Futures:
In the Intermarket Picture, Stocks and Crude Oil tend to trade (or trend) together in a similar or at least related fashion.
We see that to be the case so far in August with respect to the August 3rd bullish spike and the continuation up-trend to the present.
This uptrend has been strong but undercut slightly by the presence of negative 3/10 Momentum Divergences as highlighted.
Take a moment to view the broader perspective on the S&P 500 from our August 6 SP500 Update, which shows a resistance cluster at 1,400 (where we are currently).
While there are many other factors to observe, let’s keep our focus on the recent rally into resistance with visual negative divergences.
The chart picture is just the opposite in the Risk-Off US Dollar Index:
Using the same 3/10 MACD Momentum Oscillator, we see a corresponding positive momentum divergence relative to the recent sell-off triggered from the August 3 reversal in the Dollar Index (which corresponded with a surge in stocks and Oil).
The key reference support level to watch in the Dollar is the 82 level which corresponds to 1,400 in the S&P 500 or the $94 level in Oil at the moment.
Like the prior “game-plan” update, this allows us to create an unbiased IF/THEN logic for the next potential movement in these markets:
Should the divergences ‘work’ at the corresponding barrier levels, the next move would be a slight reversal to test lower levels in the S&P 500 and Oil and higher levels in the Dollar Index.
Should instead the trends in motion overrule (or override) the visual divergences, a breakthrough above 1,400 in the S&P 500 and the $94/$95 level in Oil could result in yet another “short-squeeze” or “popped stops” impulse beyond the barrier levels which would likely result in a breakdown under 82 in the US Dollar Index.
We’re not fortune tellers as traders, so there’s no demanding that price MUST reverse from these levels or that price MUST continue the intraday trends (ignoring divergences) and break through them.
These levels give parameters to enter and manage on real-time trades as they develop, depending on how price reacts to these levels (entries and stops, should the trends resume suddenly).
Corey Rosenbloom, CMT
Afraid to Trade.com
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