Quick Updating August 6 Market Internals on Fall from All Time Highs

Aug 6, 2013: 10:12 AM CST

With the recent breakout to all-time highs in the SP500, what message did Market Internals send and what are they revealing with today’s sharp reversal and initial Bull Trap?

Let’s take a look and study the recent message from Market Internals:

Big Three Market Internals TICK Breadth ADD Vold Volume Difference

A quick glance of the “Big Three” Market Internals (broader NYSE Breadth, TICK, and Volume Difference of Breadth) revealed a second period of visual negative divergences or non-confirmation with price.

The most recent divergent period was the mid-July region as highlighted – the outcome was merely a small pullback or retracement against the dominant uptrend which ended with the August 1 breakout above 1,700.

After a spike or initial confirmation with internals on the SP500 break above 1,700 (suggesting upside continuation – which also occurred to the 1,708 level), we now see clear negative divergences that undercut the breakout event.

We can also view SP500-specific internals for a truly amazing picture:

SP500 Market Internals Breadth Advance Decline

The chart above shows the SP500 index with SP500-specific breadth (the indicator is the difference in advancing and declining stocks at a given moment on the chart).

For example, a breadth reading of 200 would reveal that 350 stocks were advancing at a given moment and 150 stocks were declining at that same moment.

Here’s what’s truly amazing to me – let’s see it on the zoomed-in 5-min chart:

SP500 Market Internals Breadth Advance Decline 5min

On August 2, as the SP500 traded above 1,708 to new all-time highs, breadth was totally flat at the closing high.

Even worse, throughout the entire trading session where price clawed its way higher from an opening downside gap, breadth was persistently negative – more stocks were trading lower on the session than those trading higher.

As August 5th developed, there was not a single moment where SP500 Breadth was positive – Breadth was negative all session long, despite the SP500 trading into the “all time high” territory again.

As a caveat, internals do not forecast the future, but they do pull back the curtain on what’s going on behind the market, or behind the index value itself.

Breadth answers the question “How many stocks are participating in this rally?”

Yes, price can continue rising on declining volume as mid-July reminded us, but eventually price tends to reflect what’s going on with Internals

Divergences tend to resolve at least with a sideways consolidation if not an outright retracement, which is what we’re seeing this morning.

Continue following price along-side market internals and the breakdown event from this morning’s session (which developed from two days of negative internals).

Join fellow members to receive daily commentary and detailed analysis each evening by joining our membership services, for daily or weekly commentary, education (free education website), and timely analysis.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “Quick Updating August 6 Market Internals on Fall from All Time Highs”

  1. theyenguy Says:

    On Tuesday, August 6, 2013, the world passed through peak prosperity, and peak stock wealth, as all forms of wealth, Gold, GLD, Silver, SLV, Commodities, DBC, World Stocks, VT, Major World Currencies, DBV, Emerging Market Currencies, CEW, and Credit, AGG, traded lower, as the Interest Rate on the US Ten Year Note, ^TNX, traded higher to 2.64%, on the exhaustion of the world central banks’ monetary authority.

    Thus, an Elliott Wave 5 High was attained the week ending August 2, 2013, in World Stocks, VT, the S&P 500, SPY, the Russell 2000, IWM, Global Producers, FXR, Small Cap Pure Value Stocks, RZV, Dividend Growth, VIG, and a whole host of other ETFs, such as nation investment in Ireland, EIRL; and an Elliot Wave 2 High was attained in Utility Stocks, XLU, and Global Utilities, DBU.

    Permabear Doomster reports The chart of Volatility holds moderate gains.

    Yahoo Finance reports all forms of fiat wealth traded lower as Aggregate Credit, AGG, traded, lower, as the Interest Rate on the US Ten Year Note, ^TNX, traded higher to 2.64%.

    Major World Currencies, DBV, and Emerging Market Currencies, CEW, traded lower.

    The EUR/JPY closed lower again to close at 130.08, as the Yen, FXY, rose more than the Euro, FXE, today.

    Commodities, DBC, such as Oil, USO, Natural Gas, UNG, Base Metals, DBB, Gold, GLD, and Silver, SLV, traded lower.

    World Stocks, VT, traded 0.5% lower; stock sectors trading lower included the following:

    US Infrastructure, PKB, 2.7%, traded lower on lower TREX, PGTI, EXP, USG, MAS,

    Drug Stores, DRST, 2.2, traded lower on lower RAD, WAG, CVS,

    Home Builders, ITB, 2.1,

    Biotechnology, IBB, 2.1, on lower REGN, CELG, MNKD, BIIB,

    Design Build, FLM, 1.5, traded lower on lower KBR, FLR, JEC, URS,

    Global Producers, FXR, 1.5, traded lower on lower WHR, GM, IR, LYB, ERJ, SNE,

    Transportation, XTN, 1.5, on lower, UNP, KSU, R,

    Solar Stocks, TAN, 1.5,

    Regional Airlines, REAI, seen in this Finviz Screener, traded lower 1.5% lower,

    Small Cap Industrial, PSCI, 1.1, traded lower on lower HEES, WTS, JBT, KDN,

    Retailers, XRT, 1.1, traded lower on lower BODY, PSUN.

    Regional Banks, KRE, 1.0 on lower FFIN, FIBK, RF, NASB, CFFI, SUBK

    Of note, the Russell 2000, IWM, traded 1.0% lower.

    Metal and Mining sectors traded lower on prospects of diminished global growth.

    Silver Miners, SIL, 7.0%

    Junior Silver Miners, SILJ, 6.5, on lower SSRI

    Gold Miners, GDX, 5.3 on South Africa’s, lower AU, GFI, HMY; as well as IAG, AUY, BRD, NEM, BVN, NEM, RGOLD, GOLD and GG

    Junior Gold Miners, GDXJ, 5.2, on lower JAG, ANV, TGD, NV, VGZ, SRA

    Metal Manufacturing, XME, 2.5

    Copper Miners, COPX, 2.0

    Global Industrial Miners, PICK, 1.6

    Uranium Miners, URA, 1.5

    Rare Earth Miners, REMX, 1.5

    Steel, SLX, 1.5%

    Energy shares traded lower on a lower price of Oil, USO.

    Small Cap Energy, PSCE, 1.8%, on lower EPM, CIE, PDCE, EGN, BCEI, GPOR, MRO,

    Energy Service, OIH, and IEZ, 1.2, on lower HLX, EXH, HLX, OII,

    Taiwan, EWT, South Korea, EWY, South Africa, EZA, led Nation Investment, EFA, lower. India, INP, Russia, RSX, Brazil, EWZ, and China, YAO, led the BRICS, EEB, lower, as India Banks, HDB, and IBN, Brazil Banks, ITUB, BBD, BBDO, Chinese Financials, CHIX, and the Emerging Market Financials, EMFN, traded lower. The Philippines, EPHE, Chile, ECH, and Argentina, ARGT, led Small Cap Nation Investment, IFSM, and the Emerging Markets, EEM, lower.

    Yield Bearing sectors, Water Resources, PHO, Global Utilities, GBU, and Electric Utilities, XLU, traded lower.

  2. Quick Lessons from the August SP500 Bull Trap | Afraid to Trade.com Blog Says:

    […] volume is lower than average, market internals diverge with price, and we see a consolidation/sideways price pattern as opposed to a straight-up impulse, it greatly […]