Quick March 12 Checkup on Market Internals at the Highs

With a week of ‘creeping trend’ behavior, what are key Market Internals revealing about yet another “new recovery” high made this morning?

Let’s take a look at the message from recent and current market internals on the S&P 500:

Starting with the past and moving to the present, I highlight (yellow) to periods where internals surged higher with price which was a form of confirmation that suggested (at least from internals) that higher price highs were likely yet to come (trend continuation).

In both examples the market did push to a higher swing high.

I highlighted one red period – February 28th – where internals declined sharply from the prior day’s session ahead of a sharp retracement lower in price.

In general, when market internals confirm new price highs, it suggests trend continuity.

When market internals, however, diverge or fail to confirm new price highs, it suggests at best caution and perhaps even a short-term reversal (or deep retracement).

Throughout March, we see yet another compression pattern in the NYSE TICK though the intraday TICK lows have expanded on the last two session (breaking under the rising trendline).

The most recent NYSE TICK high of 979 developed on March 4th when the SP500 traded at the 1,540 index level.

The current push to this morning’s “new recovery high” into 1,557 showed a corresponding intraday TICK high value of 478.

In simple terms, with the S&P 500 17 points higher, the NYSE TICK registered a value 508 points lower.

Let’s take a closer look at the current ‘creeper’ progression to today’s new recovery high:

The chart above takes internals a step further and reveals ONLY the S&P 500 Breadth index, which is the difference of stocks that are positive on the session minus those lower on the session.

For today’s new recovery high, the SP500 Breadth registered a value of roughly 6 stocks net positive on the session.

Roughly 250 stocks were positive on the session at this moment while 244 were negative on the session.

Contrast that with the present moment I took the screencap and current SP-Breadth registers -189 (roughly 162 stocks positive and 338 stocks negative at that moment).

I also drew a simple rising “Arc Trendline” to highlight the short-term ‘creeping’ trend in price and the trendline break that occurred after this morning’s “very weak” new index high.

In sum, it’s a warning/caution sign unless price can return within the trendline boundaries or else we see a surge of buying push internals higher than they are now, perhaps during tomorrow’s session.

Continue watching the 1,550 index level as a short-term bull/bear barrier level and also keep following market internals on your charts as you assess and trade the price movement intraday.

Corey Rosenbloom, CMT
Afraid to Trade.com

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