Midday Check on Bullish Market Internals April 20

Apr 20, 2010: 11:54 AM CST

With half the day down, let’s take our usual mid-day check or ‘peek under the hood’ at the S&P 500 Market Internals to see what may be in store for price.

S&P 500 15-min chart:

We’re using the standard Breadth ($ADV), TICK (extremes), and $VOLD (Volume Difference of Advancing Stocks minus Declining Stocks).

Yesterday’s price low  bounced off the 20 day EMA on a positive momentum and ‘internals’ divergence as I mentioned in yesterday’s update “SP500 Teaches the Importance of the 20 day EMA.”

The price low gave us an excellent example of how to combine higher timeframe support with the nuances and signals (positive divergences) from internals and momentum on the lower timeframe – allowing for trade execution.

A day later, we see the bullish result of this bounce and it still continues, as I suspected it might if buyers could push again beyond 1,200, creating yet another “Popped Stops” or “Short Squeeze” rally – forcing bears out of the new positions they just put on.

Now we see another ‘Positive Feedback’ Loop as price skyrockets today to test (or perhaps exceed) the recent swing high at 1,212.

Breadth (the difference between advancing and declining stocks on the day) exceeded the April 14th closing high of 1,627 stocks when it recently hit 1,893 stocks, though we’ve pulled back slightly.

TICK actually is not making new extreme highs, and – though price is higher – the TICK highs are muted, and less than the extremes of yesterday’s close (a divergence).

VOLD – Volume Difference – continues to make new highs on the session, though it’s short of the extreme reading reached on April 14th.

Unless we see marked deterioration in internals, or a sharp move down in price, then we could see yet another ‘upward drift’ or ‘creeper climb’ until we hit 1,212 again and we’ll then see if buyers can thrust beyond the prior high into more “Popped Stops” territory.

Corey Rosenbloom, CMT
Afraid to Trade.com

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2 Comments

2 Responses to “Midday Check on Bullish Market Internals April 20”

  1. tradernina Says:

    Corey,
    the ADD, VOLD, and 3/10 oscillators for monthly charts show negative divergence when compared to the March 2003 lows, does this mean new lows are yet to come, or are these indicators useful only for shorter timframes? Thanks.

  2. Corey Rosenbloom, CMT Says:

    Nina,

    Absolutely true – it's a long-term non-confirmation.

    Internal spikes (new highs) at a turn often confirm the reversal (as we saw after the March 2009 low) but markets often reverse with lengthy negative divergences… but there's no calling a perfect top just because there's a divergence.

    So yes, it's valid on longer frames, but I think the signals are faster and more telling – or at least get better reactions/short-term turns – on shorter frames like I show on the 15 or 5 min charts.