How Else Can We Interpret Recent Volume Developments as Bearish?

Nov 11, 2009: 5:07 PM CST

Looking inside the most recent short-term moves in the broader market, we see a stellar signal from reading volume alongside with price.

Using classic volume interpretation methods, we can only come to one conclusion – volume insights are sending a bearish non-confirmation signal as the market grasps at recent highs, and either volume is going to have to pick-up (increase) to keep this rally going… or else price is going to have to fall via the signals from the “Voices of Volume.”

Let’s look at the 15-minute SPY chart from late October’s sell-off to the present rally into fresh highs.

(Click for full-size chart)

Under classic volume analysis, we expect that “Volume Goes with Price.”

Meaning, watch upward moving volume to “confirm” a price move – whether up or down; and watch declining volume to “disconfirm” a price move (again, either up or down).


Rising prices + Rising volume = Bullish (continuation)
Rising prices + Falling volume = Bearish (non-confirm / reversal)

Falling prices + Rising volume = Bearish (continuation)
Falling prices + Falling volume = Bullish (non-confirm / reversal)

You can read more about this in my “Volume Voices” page at the Education Center.

How do we overlay this information into the current chart above?

As price fell from its October 21st peak, volume rose during the entirety of the down/selling phase into the $103.50 lows (from the $110 highs).  That serves as a Bearish Confirmation that sellers are ‘picking up urgency’ to sell and hints – from volume’s voices – that lower prices are ahead.

In yet another “Bear Trap” (see my prior posts:

New S&P 500 Highs Forecast by Sprung Bear Trap

A Look at the 12 Recent Failed Short-Sale Signals in the SP500

… prices did indeed manage to rally to new recovery (fresh 2009) highs… but each day brought lower relative volume, serving as a Bearish Non-Confirmation of higher prices.

The fact that price is rallying so strongly on lower volume is bearish in nature, and is a warning sign to anxious buyers on the sidelines who feel they may have missed this rally.

Now would not be the time to “panic in” to the market, if the voices of volume are correct.

Does that mean that prices are going to fall off a cliff from here?  Not necessarily – but it is a yellow light that serves as a warning – a non-confirmation, or a sign of ‘weakness’ that price alone is not telling you.

Always look ‘under the hood’ of price alone to see what else might be happening.

Corey Rosenbloom, CMT
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Excellent Example of Intraday Reversal Preceded by Divergences

Nov 11, 2009: 12:43 PM CST

This morning’s action gave a great example of the “Divergence” lessons, in that dual TICK and Momentum divergences can forecast intraday price reversals of either short or intermediate term degree.  Let’s take a look.

(Click for full-size image)

We’re seeing the @ESZ09 or December S&P futures contract (instead of the usual SPY I show) on the 1-minute timeframe for enhanced clarity.

Price gapped up off the open and then progressed to new intraday highs on a strong rally to fresh 2009 highs as forecast by my prior post “New S&P 500 Highs Forecast by Fifth Sprung Bear Trap“.

As we achieved those new highs, an internal (and intraday) non-confirmation at the highs set-in, creating a “Dual Divergence” (or double divergence) in both the 3/10 Oscillator (Momentum indicator) and – much more importantly – the NYSE TICK (bottom panel).

That’s not to say that a reversal was absolutely guaranteed, but that internals and momentum were NOT confirming the absolute price highs and that information hinted (forecast) for a retracement down at best and reversal at worst – the reversal came to pass.

As an aside, the current intraday lows are being met with a dual Positive Momentum and TICK divergence.  This could also result in an upwards move or second reversal on the day.  Look to see if you can observe this without me labeling it.

I’ll be discussing this concept in my presentation at the Las Vegas Trader’s Expo which you can attend for free.

My presentation “Best Trades to Take Using TICK and Momentum” will be shown live via webinar, and you can attend that for free as well without having to travel all the way to Las Vegas!

If you have not done so already, register for free with the and then add my presentation into your calendar/schedule.

I will be speaking (and the webinar will be broadcast live for you) on Thursday, November 19th at 1:15 – 2:15 PST / 4:15 – 5:15 EST (just after market close).

Be sure to stop by and say ‘hey’ if you’ll be attending the Expo and join me live for the webinar if not!

Corey Rosenbloom, CMT

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Two Quick Intraday Fibonacci Retracement Examples

Nov 10, 2009: 5:42 PM CST

Today’s intraday price action gave me a chance to show you two specific Fibonacci Retracement grid examples of how to use the “Fibonacci Retracement” tool to find potential trade entries or reversals in price.  Let’s take a look at them and learn how to use this tool.

When  you draw a Fibonacci Retracement grid, you are trying to answer the following question:

How Far will Price Retrace and then Reverse in the Opposite Direction?”

We don’t draw Fibonacci grids for the fun of it, but always for a specific purpose and always after we discern that a strong price swing has completed and we want to enter a trade, but we don’t know where price might reverse, giving us the lowest risk entry.

Fibonacci Retracement grids can help answer that question – but like anything – no tool is 100% accurate or effective all the time.  It’s just a helpful tool.

Obviously hindsight is great and we can see what happened in the future, but try and pretend we can’t as you study this chart.

Price made a move to new lows on the session and then began to head higher.

Maybe you saw this as a bear flag and wanted to do one of two trading strategies:

1.  Trade Long (buy) to play for as much of the retracement as you could

2.  Wait to find a spot where price is going to reverse and then start heading lower, and you want to enter as close to that reversal point as possible

A Fibonacci Retracement Grid can help in both cases.

Starting with the “impulse” high and then drawing to the “impulse low( which could have been done around 10:30 CST if not shortly thereafter), your software will provide the 38.2%, 50.0%, and 61.8% retracement levels as horizontal lines.

Price could reverse at any of these levels, but it’s generally better to treat these as a “Zone” as opposed to waiting to see exact price reversals… though sometimes we do get precise turns within pennies of one of these zones (which never ceases to amaze me).

In the first example, price rose to the 50% retracement level and then formed a strong bearish candle in advance of collapsing to a new low on the session.  Again, this grid could have been drawn in advance of this reversal in price.

On the second example, we have an upward impulse and then we want to know how far DOWN price might retrace before reversing.

This retracement was deeper, finding support finally at the 61.8% retracement on two candles that formed long lower shadows (that’s generally bullish).

In both cases, the Fibonacci grid helped us with trade entry, exit, and expectation.

It takes about 20 seconds to draw a Fibonacci grid, and each 5-minute bar is composed of 300 seconds.

I used this grid as a “Teaching Moment” in today’s “Idealized Trades” report, in which I share “Teaching Moments” like this to open your awareness to different intraday trading strategies using the examples that occurred in that day’s trading activity.

It’s a great way to follow-along and learn these concepts in more detail and broaden your awareness of professional trading strategies and techniques you can learn and apply in real-time.

Check out more information on this growing service – Idealized Trades Reports, which also includes “levels and opportunities to watch” for tomorrow’s trading session.

For more information about Fibonacci Grids, see my “Fibonacci Information” page at our free Education Center.

Corey Rosenbloom, CMT

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Updated Weekly View of Targets for Silver

Nov 10, 2009: 11:28 AM CST

Since my last post on Silver Prices on October 5th, Silver prices have achieved the $18.00 per ounce price target and have hovered underneath that resistance level since then.  Let’s take a quick look at silver prices and make a note as to how silver is failing to match the recent highs in gold.

Look back to my prior October 5th post entitled “Advanced Fibonacci Confluence Projection in SLV Silver ETF” not only to see the prior analysis which targeted $18.00 as a key level to play for and then find potential resistance, but also for the dominant confluence Fibonacci Projections that led to that level (a brief lesson in advanced Fibonacci methods).

I wrote, “All four Fibonacci tools reveal confluence at the $18.00 per share level, which is above price currently.  This makes it both a potential “scalp” target to play for, and also a possible low-risk, high probability short-sell trade if this level does hold as “Confluence Resistance”.”

Silver has yet to overcome the $18.00 level, so any break above this zone would be very significant and very bullish both for Silver and Gold.

A slight negative momentum divergence has formed at the $18.00 level, which is a bearish non-confirmation of the higher prices at potential resistance.

Given that prices have ‘bumped up’ against this level over the last few weeks, this level could be ripe for the breaking which would lead to long (buy) entry opportunities.  Otherwise, if this level continues to hold as resistance, it would be a potential bearish omen for both silver and gold.  Thus we need to watch it closely in the coming weeks.

I mentioned that Silver was not ‘keeping pace’ with Gold prices, so let’s see a simple chart of gold and how Silver remains well-below its early 2008 peak while gold has soared to new price highs above $1,100.

Gold is well-above its $1,000 peak in 2008 and early 2009, though it also is forming a slight negative momentum divergence.

Rather than analyze gold here (I chart monthly, weekly, and daily analysis on gold for subscribers to the Weekly Intermarket Membership service), I wanted to compare gold prices to silver, and highlight the interesting non-confirmation.

I think this is in part due to gold’s status as a ‘reserve currency’ amid inflation fears and a falling US Dollar, which isn’t necessarily the case with Silver as both a precious and industrial metal.

Let’s keep watching to see if silver prices can breach $18.00 per ounce and how that development would play out for the short-term future of both silver and gold.

Corey Rosenbloom, CMT
Afraid to

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New SP500 Highs Forecast by Fifth Sprung Bear Trap

Nov 9, 2009: 11:28 AM CST

Well, folks, the bulls have done it again – it looks like buyers have sprung an amazing fifth Bear Trap in the last few months that – if recent history repeats – will lead to another new high in the S&P 500.

Let’s take a look at the prior four traps that led to new highs:

What I’m showing is the daily S&P 500 from early June, 2009.

The highlighted regions represent the unyielding price rise (almost literally straight up for 8 or 9 days at a time) that came directly after a classic breaking of support via the 20 (or 50) period exponential moving average.

Generally, a break in a moving average triggers sell orders in the expectation that support is broken.

Stop-losses are placed above the entry (usually back above the average) and any sort of upward movement triggers a vicious cycle where stop-losses become “buy to cover” orders, further driving prices higher with buying pressure.

A Bear Trap is thus sprung when a valid or classic sell signal is generated and then price moves upwards into the ‘pocket’ of stop-losses from the short-sellers.  To be a bear trap, a valid sell signal has to occur.

1.  The Head and Shoulders Pattern neckline was broken, in addition to price breaking under the 200 day SMA, generating a very powerful sell signal… that led to an even MORE powerful rally when the signal failed.

2.  A break of the 20 day EMA after a strong selling bar (down-day) triggered entry… and as price moved higher back above the 20 EMA, a flood of stop-losses helped drive the index higher four days in a row.

3.  Using the exact same logic as before, but this time the “Melt-Up” avalanche yielded almost 9 up-days in a row with only a one-day doji pause.

4.  This time price broke solidly on another strong selling bar under the 20 EMA, but technically supported off the confluence of the 50 day EMA and the lower Bollinger.  Still, the rise back above the 20 EMA coincided with another (almost) 9 day price rise with only a minor pause.

5.  It looks like it’s happening again, in that a break of both the 20 and 50 day EMA triggered in more short-sellers… and now we’re having their stop-losses taken out yet again which – if history since July is any guide – will lead to a new price high in the S&P 500.

Take a moment to read my prior post entitled, “A Look at the 12 Most Recent Failed Sell-Signals in the S&P 500” for additional, detailed insights.

There was a similar post I wrote entitled “Recent Failed Sell Signals and Short Squeezes in the SPY” which is a prior discussion on this concept.

Also, this post is almost identical to my ‘prediction post’ of the same logic that forecast the most recent price highs – “If History Repeats, Will it Mean New Highs for S&P 500?

Be aware of the current “character” or behavior of the market and realize the nuances like this that can help prevent losses or translate into gains.

Corey Rosenbloom, CMT
Afraid to

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