Midday Check on SP500 Market Internals Feb 11

Feb 11, 2010: 12:31 PM CST

Let’s step inside the recent retracement rally and view the current state of the three key “Market Internals” and what clues those internals are revealing.

SP500 Market Internal Glance:


(Click on image for full-size view)

Before looking at the current state of the Internals, let’s take a moment to see why watching internals with price is helpful.

The top panel – $ADD – is the “Breadth” or Advancers minus Decliners.

The middle panel is the old-fashioned NYSE TICK.

Finally, the lower panel is the VOLD – Volume Difference (volume of advancing stocks minus volume of declining stocks).

Many times, a divergence with price and market internals will forecast a reversal swing, as seen two times on the chart above on February 2nd and February 5th.

The February 2nd rally back to 1,100 ended on a Negative Divergence.

The February 5th decline under 1,050 ended on a Positive Divergence.

What’s happening now?

We’re in a consolidation/correction/rally phase with a slight negative divergence forming in internals, though that’s not quite locked into place because price has not yet – as of noon EST Thursday – formed a new rally high above 1,080.

Thus we can’t yet technically call it a ‘divergence,’ but we are not seeing ‘hidden strength’ in the internals either.

The main idea going forward is that we would need to be bullish if internals broke the swing highs I have labeled with a vertical line, which include:

1,992 more stocks advancing than declining in Breadth
677,000 more shares in Up Volume than Down Volume in VOLD

Until then, market internals are giving us a muted, cautious stance as price struggles to test the 1,080 level.

Corey Rosenbloom, CMT
Afraid to Trade

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

2 Comments

2 Responses to “Midday Check on SP500 Market Internals Feb 11”

  1. samirghadiali Says:

    Dear Corey,
    Maybe today your favorite trade setup of 20 ema pullback emerged at 10206 in Dow & 1090 in spx. Be prepared.

  2. samirghadiali Says:

    Dear Corey,
    Maybe today your favorite trade setup of 20 ema pullback emerged at 10206 in Dow & 1090 in spx. Be prepared.