October 1 Midday Check on Market Internals and Structure

Bycjrosen

Let’s take a quick mid-day look at the SPY/market internals and current structure as we begin not only October 2009, but the final quarter of 2009.

Just looking at the price, EMA, and momentum structure, we’re clearly in a down-trend as evidenced by lower swing highs and lows, and the bearish EMA structure above price.

However, there’s hope for bulls – in the form of a positive momentum divergence along with a series of slightly higher lows in the TICK (bottom panel) – both of which are often associated with stronger than normal retracements or outright price reversals.

There’s also a potential 5-wave fractal move ending in these positive divergences at these lows.  Watch for any bullish break above the 20 EMA situated currently at $104.00 (technically $103.98).  That would set-up a potential test of the falling 50 EMA at $104.50 and argue that the lows of the session have formed… or at least that a retracement up would occur in the event that price made lows into the close.

What are the internals showing?  No surprise – all bearish:

The top-left shows the $TRIN (volume measure of flow into advancing or declining stocks).  The fact that the TRIN touched 3.00 today was very, very bearish.  A ratio above 1.0 is bearish; a ratio beneath 1.0 is bullish.

Under the TRIN, we have the Up-Volume ($UVOL – green) plotted along side the Down-Volume ($DVOL) and we see that down-volume is roughly 10 times up volume – ouch.

To the top-right we see the Advancers ($ADV – Green) plotted with Decliners ($DECL – red).  No surprise there – we have 2,452 NYSE stocks down on the day vs. 558 stocks up on the day.

Beneath that we see the simple subtraction of these, which gives us the “Difference” ($ADD) which is a negative 1,897.  This means there’s a difference of almost 1,900 stocks down on the day vs up.

If we’re going to have any hope of a retracement or reversal up as hinted by momentum, we’re going to need to see internals strengthen.

Otherwise, the power of the trend and the negativity of the internals will continue to push price lower into a trend day.

The next hour or two will be critical in terms of seeing whether a “Rounded Reversal” or a “Trend Day Down” is favored.  Watch the internals and how price behaves at a test of the 20 EMA (green) for clues.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

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22 Comments

  3. I was referring to the UVOL vs. DVOL, almost exactly @ 10 now, but the 15 EMA is looming heavy and dropping steep

  4. Another problem for the Bulls, is all major Indices broke thru last week's lows today, the tape has painted a very sloppy ABC correction in the past week (30 or 60 min) could trap Bears again?

  5. what is the advantage of looking at advancers and decliners on one chart and A/D line on another?

  6. Great post. I had not looked at the $TRIN today. I'm sure you probably already saw it, but the $TRAN broke it's March uptrend today…along with many other indexes and such.

  7. I think I'd go insane if I saw yet ANOTHER bear trap! We've triggered valid sell signals, only to see them all fail without exception. I'm more intraday but I feel bad for those trying to swing trade short off valid signals that would work in any market environment but the “melt-up” we seem to be in.

  8. For me, I like to see the exact differential and then look at the rise and fall in the differential itself.

    It's just a different way of looking at the same information – it's hard to see little moves when looking at the $ADD and $DECL – that's why the differential $ADD is helpful.

    Plus, it does the math for you and gives an exact instead of estimated value.

  14. I was referring to the UVOL vs. DVOL, almost exactly @ 10 now, but the 15 EMA is looming heavy and dropping steep

  15. Another problem for the Bulls, is all major Indices broke thru last week's lows today, the tape has painted a very sloppy ABC correction in the past week (30 or 60 min) could trap Bears again?

  16. what is the advantage of looking at advancers and decliners on one chart and A/D line on another?

  17. Great post. I had not looked at the $TRIN today. I'm sure you probably already saw it, but the $TRAN broke it's March uptrend today…along with many other indexes and such.

  18. I think I'd go insane if I saw yet ANOTHER bear trap! We've triggered valid sell signals, only to see them all fail without exception. I'm more intraday but I feel bad for those trying to swing trade short off valid signals that would work in any market environment but the “melt-up” we seem to be in.

  19. For me, I like to see the exact differential and then look at the rise and fall in the differential itself.

    It's just a different way of looking at the same information – it's hard to see little moves when looking at the $ADD and $DECL – that's why the differential $ADD is helpful.

    Plus, it does the math for you and gives an exact instead of estimated value.

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