Midday Check on Selloff Market Internals May 6

May 6, 2010: 1:11 PM CST

So far, buyers have failed to defend the critical 1,150 level, and Market Internals have taken a dramatic turn to new lows, confirming the sell-off and hinting that lower prices are still yet to come.

Let’s take a look at the signals that Market Internals are sending us:

We follow Breadth, TICK, and VOLD (Volume Difference of Breadth) as the Three Key Internals.

In what looked like a potential for a positive divergence bounce off 1,150 has now turned into a sharp sell-off with internals making new low extremes not seen in months.

For example, on the swing down under 1,150, Breadth (net difference of advancers – decliners) hit -2,500, an extreme not seen since February 4th.  Price continued lower the next day, but found a sharp bottom also the next day, so keep that in mind and look at that level if you have access to Breadth Charts like these.

[UPDATE:  As of 2:40EST, the intraday TICK low so far is -1,611 and Breadth Low – so far – is an extreme -2,963 – this is a full-blown crash).

TICK just hit a new intraday low extreme of -1,614, not seen since November 13, 2008.  Price trailed to new lows after that.

The last time we saw a negative TICK Extreme that low was October 5th, 2008 at -1,684.

VOLD is not making significant new lows, but it did just break under the closing low of yesterday.

VOLD rose this morning because Breadth almost turned positive this morning:  The net difference in advancers and decliners was -66 at the open.  It has now devloved to -2,500 stocks declining.

In fact, at this moment (2:00 EST), 250 NYSE stocks are positive on the session while 2,900 are negative.

In terms of the S&P 500, 35 stocks are positive on the day while 465 are negative.

The picture sent by market internals suggests lower index prices are yet to come, so do be safe.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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