Midweek Check on NASDAQ and SPX Market Internals

Jul 28, 2010: 11:32 AM CST

It’s mid-week and time for an update on key market internals as half the week is behind us.

Are market internals confirming the recent push higher?  Let’s take a look.

First, the S&P 500:

The quick answer is “No, not really,” as seen above in the Breadth, TICK Extremes, and VOLD.

All three have been tailing lower since their respective peaks on July 22nd.  Price has pushed to new swing highs, despite NOT being supported by healthy market internals.

As always, that’s a caution sign that internals are diverging and momentum is weakening – doesn’t imply immediate reversal, but it’s not bullish.

Look for a solid break under 1,105 or preferably under the known reference level of 1,100 to confirm a reversal and end to the upswing.

June showed us that markets can extend on deteriorating divergences, but the longer they do so without a meaningful correction, the higher the risk is for a mini-crash (like the 10 day down-streak from 1,130 to 1,010 in June).

There’s something interesting I wanted to point out in the NASDAQ market-specific internals – and it’s slightly bullish.  We’ll see how that signal plays out soon:

Using the same three metrics – Breadth, TICK, and VOLD – but this time using NASDAQ-specific internals, we see a similar picture to the S&P 500, with all three internals forming peaks on July 22nd (suggesting higher index prices were likely yet to come) and then trailed off as price rose as anticipated by the strength in internals.

That’s the formation of a classic divergence, or non-confirmation that is so common ahead of a market turn.

But look closely – price broke lower today in the NASDAQ but TICK did not push to new lows and VOLD – though negative – is higher than its reading yesterday.  That’s bullish, and worth noticing.

It’d make our job a lot easier if internals were all heading lower along with price, which would suggest lower prices yet to come, but so far that’s not quite the case, and this is a bullish non-confirm short-term in the NASDAQ.

Though we’re under the horizontal support line right now, look for any push back above 2,280 to be met with further buying.

Otherwise, this little push-up in internals could be a false signal, and then look for a move under 2,260 to confirm a downswing likely ahead … though I’d like to see that met with a decline in internals to new lows beneath those on July 27.

Keep a close watch on these levels going forward.

Corey Rosenbloom, CMT
Afraid to Trade.com

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


5 Responses to “Midweek Check on NASDAQ and SPX Market Internals”

  1. Vic Says:

    hi corey,
    where can I find the Tick, vold and breadth data? couldn't find them on stockcharts.com.

  2. Corey Rosenbloom, CMT Says:

    Hi Victor,

    Sure – you can use the following symbols respectively:

    $NYAD = breadth
    $NYUD = NYSE Up – Down Volume

  3. terlyn Says:

    So glad you said that about waiting until breaking 110.50.

  4. terlyn Says:

    There is symmetry on the 5-minute charts over three days.

  5. terlyn Says:

    Did you mean that for day trading or swing trading?