Midday Check on Market Internals January 25

Jan 25, 2010: 2:48 PM CST

With a new week upon us, let’s take a quick look at the current picture of S&P 500 Market Internals as seen on the 30min multi-day frame.

We’re seeing the following indicators under the SPY ETF of the SP 500 Index:

BREADTH:  NYSE Net Advancers on the session minus Net Decliners on the session ($ADD)
TICK:  NYSE TICK – NYSE Stocks “ticking up” at a given moment minus those “ticking down” ($TICK)
VOLUME DIFFERENCE:  Volume Flowing INTO Advancing Stocks minus Volume Flowing INTO Declining Stocks ($VOLD)

With the exception perhaps of the $VOLD, you should be able to replicate this chart in your trading software/platform.

I’m showing how divergences in key market internals can precede reversals/retracements (such as that on the run to new highs on declining internals on January 14th).

With the exception of Friday’s strong sell-off into the close, we were seeing positive divergences in the internals listed above as price was cresting lower on the session – an indication that odds were shifting to favor a ‘bounce’  higher.

We are now seeing that bounce, but for now it is taking on the form of a ‘counter-trend’ retracement into resistance bounce, so caution is still warranted.

The Breadth and VOLD made new indicator swing highs while TICK did not, which muddies the waters.  Usually, when you get new indicator highs when price is not making a new high (or after a deep pullback), then this can be an initial sign of strength forecasting higher prices yet to come).

Watch to see if price can rally solidly above $110.50 which would be bullish, and then back above $111.50 (roughly 1,105 and 1,115 respectively in the S&P 500) – both of which would shift the odds in favor of a continued up move.

Until then, odds currently seem to indicate that this is an oversold retracement bounce that should be treated with caution for the time being.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

10 Comments

10 Responses to “Midday Check on Market Internals January 25”

  1. Dan de Man Says:

    Hi Corey,

    I hope things are well. Would you be able to explain how to recreate this in stockcharts.com

    Thanks in advance!

    Dan

  2. Dominick Says:

    Hello Corey.
    I recently started playing with the $tick in the think or swim trading platform and I am trying to get a feel for it. My question is this: Is the $tick better off being used with the SPY/SSO rather than an individual stock, (due to it's composition); and if you are trading an inverse etf such as the SDS, I suppose you should interpret the $tick information… inversely??? If that makes sense.
    Just trying to avoid confusion.

    As always, thanks and have a good one.

  3. Diggy - Forexhabits.com Says:

    Hey Corey!
    First support level of 1085 is reached today and I'm thinking we go to 1075 if not 1067 first before we get a bounce back up to 1100 or so. Just my opinion 🙂

    Thanks for the update!

  4. Corey Rosenbloom, CMT Says:

    Hey Dominick!

    Yes, the TICK is more appropriate for trying to assess turning points/opportunities specifically in the major indexes, but keep in mind that many stocks mirror the movement of the index it is a part of sometimes tick for tick… or at least close enough that it is helpful to have an opinion of what is likely to happen next in the SPY (or QQQQ or DIA or IWM) as an extra layer of confirmation before putting on a trade in a stock.

    Right – you would look opposite if overlaying the TICK with the SDS… or just form an opinion based on what's happening in SPY and then execute your order in SDS.

  5. Corey Rosenbloom, CMT Says:

    Hey Dan!

    I'll look into that, but for now, you could overlay the following symbols underneath in SC:

    $TICK
    $NYAD (Breadth)
    $NYUD (Up-Down Volume)

    or any combination of:

    $NYADV
    $NYUPV
    $NYDEC
    $NYDNV

  6. Diggy - Forexhabits.com Says:

    Hey Corey!
    First support level of 1085 is reached today and I'm thinking we go to 1075 if not 1067 first before we get a bounce back up to 1100 or so. Just my opinion 🙂

    Thanks for the update!

  7. Intraday Market Internals Showing Strength Jan 26 | Afraid to Trade.com Blog Says:

    […] we’re seeing is a continuation of the “Update on Market Internals” post I wrote […]

  8. Corey Rosenbloom, CMT Says:

    Hey Dominick!

    Yes, the TICK is more appropriate for trying to assess turning points/opportunities specifically in the major indexes, but keep in mind that many stocks mirror the movement of the index it is a part of sometimes tick for tick… or at least close enough that it is helpful to have an opinion of what is likely to happen next in the SPY (or QQQQ or DIA or IWM) as an extra layer of confirmation before putting on a trade in a stock.

    Right – you would look opposite if overlaying the TICK with the SDS… or just form an opinion based on what's happening in SPY and then execute your order in SDS.

  9. Corey Rosenbloom, CMT Says:

    Hey Dan!

    I'll look into that, but for now, you could overlay the following symbols underneath in SC:

    $TICK
    $NYAD (Breadth)
    $NYUD (Up-Down Volume)

    or any combination of:

    $NYADV
    $NYUPV
    $NYDEC
    $NYDNV

  10. Intraday Market Internals Showing Strength Jan 26 | Penny Stock Trading System Blog Says:

    […] we’re seeing is a continuation of the “Update on Market Internals” post I wrote […]