Midday Check on Market Internals Apr 12

Apr 12, 2010: 1:39 PM CST

With mid-day just behind us now, let’s take an updated glance at the recent state of market internals as the S&P 500 and other indexes continue their rally to new highs.

(Click link for full-size image)

For internals, we monitor the:

1.  ADD – “Breadth” (NYSE Advancers – Decliners)
2.  TICK (NYSE) for extreme highs and lows
3.  VOLD (NYSE) Volume of Advancers minus Volume of Decliners

I’m showing the recent three-day rally from April 8th (we gapped down and then rallied to new highs in a rally that has been sustained until now).

Internals strengthened as price rose, but fell slightly lower during Friday’s rally to new recovery highs.

Currently, all internals are lower than they were yesterday, in that fewer stocks are advancing on the session than declining (than Friday) and volume is not flowing as much into advancing stocks as declining stocks.

The measures are “$ADD” Breadth and “$VOLD’ Volume Difference of Breadth.

TICK is also making lower ‘extremes’ or spike highs than yesterday, with the exception of a spike to the 1,000 level we just witnessed.

The main idea here and going forward is to watch the dominant short-term trendline I’ve drawn for any potential break of the line.

If sellers cannot take price under the trendline at the 1,196 level, then we’ll just keep on rallying as if there isn’t a care in the world.

A break of the trendline when combined with negative divergences in market internals would likely precede a retracement lower.

Watch price closely into the close today.  Any break above 1,200 should be met with another ‘short squeeze’ or ‘popped stops’ run as conservative bears cover, so watch for that as well.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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