Negative Market Internal Divergence Undercuts Highs for April 26

Apr 26, 2010: 12:16 PM CST

The S&P 500 began Monday April 26th on a push to new recovery highs, but it did so laboriously, forming negative divergences in all three key market internals we monitor.

With that in mind, let’s take a look at current lunchtime market internals in the S&P 500 for April 26:

This is a standard update post on mid-day internals.  For reference, view prior posts including:

Fun and Profit with Market Internal Divergences – April 21

April 15Market Internals Send Strong Warning Signal

April 16Strangely Enough, Market Internals DO Matter

April 20: Mid-Day Check on Bullish Market Internals

We’re now in another ‘divergent’ situation with price scraping to new highs and internals failing to confirm the push to new highs at the 1,220 level.

That doesn’t mean a reversal is imminent, but that you should be more cautious with your longs and be prepared to sell or short (scalp) on a break under the trendline and moving averages at the 1,214 area as shown above.

Divergences often need price to slice through trendlines before being confirmed, or before you adjust positions – as price can rally higher despite divergences.

Watch these levels and the situation in internals going into the close today.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

7 Comments

7 Responses to “Negative Market Internal Divergence Undercuts Highs for April 26”

  1. TheYenGuy Says:

    Yes, it does appear that a short selling opportunity has developed today.

    Sarah Mulholland of Bloomberg reports that “Bonds backed by commercial real estate loans are gaining as investors flush with cash seek higher returns and the economic recovery gains steam. Yields on senior top-rated securities backed by mortgage payments for skyscrapers, hotels and shopping malls fell 0.11 percentage point to 2.19 percentage points more than Treasuries. The $700 billion market for commercial-mortgage backed securities 'has seen a violent rally' as gains across credit markets push buyers toward investments with higher yields, according to Bank of America Corp.”

    This has translated into a boom in real estate shares as seen in the chart of IYR
    http://finance.yahoo.com/q/bc?t=5d&s=IYR&l=on&z

    This has created an awesome opportunity to go short real estate by investing in the 200% Bear Real Estate ETF, SRS at the end of the day, today.

    Other 200% short ETFs include SJH,SCC,SSG,SMN,SMK,BZQ,EEV, and KRU. Personally I am invested in gold and gold alone having made purchases of gold coins and gold at BullionVault.com

  2. Delivery Tips Says:

    Really Good Blog.

  3. Doug Jones Says:

    Corey, very insightful as always. but still does it really matter more than just a day? How long can this type of market character remain? Who would dare short now even with the all of the obvious warnings and divergences?

  4. Corey Rosenbloom, CMT Says:

    Good point, Doug!

    I should clarify in the posts that I'm mainly discussing opportunities for the duration of the trading day and potentially into the next day only. This isn't meant to be a discourse on anything more than the next immediate swing, and then the next day, we take an updated look at the internals.

    We did get the sell-off into the close that was forecast by the weakening in internals, but tomorrow, we'll have to re-examine internals and play the game all over again.

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  6. SP500 Market Internals Update for April 27: Sell-off Edition | Afraid to Trade.com Blog Says:

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