SPY Three Push Negative Divergence Intraday Nov 25

Nov 25, 2009: 6:42 PM CST

I wanted to show the morning “External” or “Lengthy” (multi-swing) negative Momentum and TICK divergence that preceded a mid-day retracement which served as an excellent low risk, high probability short-sale opportunity.  Let’s see it on the 1-min SPY chart:

I’d mentioned to subscribers last night that there was an upward bias to Wednesday’s action based on the historical probabilities of an upward bias on the Wednesday prior to Thanksgiving, which tends to be a very low-volume day.

As price began rising off the open, forming higher swing highs and lows, there was a distinct non-confirmation forming on each new price peak in both the 3/10 Momentum Oscillator and – more importantly – the NYSE TICK.

The 3/10 Oscillator formed a long series of lower peaks and the TICK formed three “pushes” or three spike peaks in addition to a declining moving average (red) of the TICK.

To expect higher prices from a confirmation of the TICK (market internals) and price, we would want the absolute TICK value and also moving average of TICK to continue making higher highs along with price.

Anything less is a divergence, and a non-confirmation.

Non-confirmations never guarantee trend reversals, but they sure hint strongly at them – enough so to give short-term edges on the intraday frames.

Entry (short) signals often occur with trendline or moving average breaks (such as occurred at the $111.35 level at 11:00am CST) or – more aggressively – on reversal candles (such as dojis) at the upper Bollinger Band on the 5-min chart (which is not shown above but occurred).

Stops would be placed above the intraday high and retests of prior swing lows would be the minimum target, and a full trend reversal would be the maximum target.

Price only managed to retrace back to the prior 10:00am swing low before forming a positive Momentum Divergence (also at the 50% Fibonacci Retracement) and heading higher into the close.

Therefore, this serves as a great example of the Multi-Swing Divergence concept with an example of only a partial reversal (more commonly known as a retracement) instead of a full reversal – this is why you can’t throw your whole account into a single trade set-up, no matter how strong the probabilities may be.

I describe opportunities like this – in much more educational detail for references – in my “Idealized Trades” subscriber reports.  Subscribe now to get access to multiple educational examples of these specific trade set-ups and concepts that you can begin using on the next trading day.

The more times you see (and learn) these concepts and set-ups, the better you’ll be (and more confident!) in real time to enter these trades and manage them appropriately.

Unlock the mysteries of intraday trading!

Corey Rosenbloom, CMT
Afraid to Trade.com

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

19 Comments

19 Responses to “SPY Three Push Negative Divergence Intraday Nov 25”

  1. BalaB Says:

    Yo Corey!

    Happy T-Day~

    Best,
    Bala
    http://implicittrading.blogspot.com/

  2. Anonymous Says:

    What?! Can't throw you whole account into a single trade set-up?!?

    Well, you're no fun at all!

    Only joking around. 😉 Have a happy Thanksgiving!

  3. Twitted by HSAFunding Says:

    […] This post was Twitted by HSAFunding […]

  4. Dominick Says:

    Have a great Thanksgiving Corey.

  5. Dominick Says:

    Have a great Thanksgiving Corey!

  6. Spyder Says:

    Cory, could you elaborate on the fact that the 3/10 Oscillator mimima formed a long series of higher lows and the TICK minima formed a series of higher lows as well essentially forming a converging triangle with the indications you mention up to about a time of 10:45 on your chart.
    Seems that there is a stalemate up until that time before the MA's move down. In fact each downward retracement was getting weaker up to that time as well. How did you decide to honor one set of indicators over the other to place the trade?

  7. steveo77 Says:

    Ok, I am going to do a little victory lap here…..

    Black Swans do not drift in, they are delivered by a cruise missile in the middle of the night, holidays, or on the weekend.

    http://oahutrading.blogspot.com/2009/11/chart-o

    http://oahutrading.blogspot.com/2009/08/mania-c

    http://oahutrading.blogspot.com/2009/11/blow-of

    http://oahutrading.blogspot.com/2009/11/30-year

    As America tryptophans out and wakes up weary tomorrow, with half a trading day to “panic out with”, this could be very interesting. Looks like nearly “perfect timing” by our financial overlords. Lots of Turkeys (aka Lemmings) getting cooked today.

  8. Corey Rosenbloom, CMT Says:

    Hey Spyder,

    When looking at negative divergences, one needs to compare price swing highs to oscillator and/or TICK highs – oscillator lows are of little consequence/interest.

    We want to see oscillator/TICK highs confirming price swing highs, else a divergence sets in.

    It's not so much a statlemate, as the oscillator and TICK were failing to confirm the price highs, highlighting the non-confirmation and hinting at a reversal/deep retracement.

    Again, we're not looking at price lows and oscillator lows when discussing a negative divergence.

    I want the TICK and 3/10 to be in alignment as much as possible, but I give deference to the TICK as it refers to market internals while the 3/10 is just a derivative of price.

  9. Corey Rosenbloom, CMT Says:

    Thanks Dominick! You too!

  10. Corey Rosenbloom, CMT Says:

    Haha – well don't let me stop you, but this is a good example of how powerful trade set-ups can produce minimal results – though the negative divergence was up against the bullish bias of a pre-holiday session.

    Although, as of this writing, global markets are down around 3% around the world as the American markets are closed, so if Friday pulls the US Markets lower, then the multi-divergence would have 'worked' only with one final push higher toward the end of the day.

  11. Corey Rosenbloom, CMT Says:

    Thanks Bala!

    You too! Really liking your new blog – I encourage all readers to visit. Thank you for all the kind words.

  12. Spyder Says:

    Thanks,Corey (This time I spelled your name right- sorry about the Typo)

  13. Spyder Says:

    Cory, could you elaborate on the fact that the 3/10 Oscillator mimima formed a long series of higher lows and the TICK minima formed a series of higher lows as well essentially forming a converging triangle with the indications you mention up to about a time of 10:45 on your chart.
    Seems that there is a stalemate up until that time before the MA's move down. In fact each downward retracement was getting weaker up to that time as well. How did you decide to honor one set of indicators over the other to place the trade?

  14. steveo77 Says:

    Ok, I am going to do a little victory lap here…..

    Black Swans do not drift in, they are delivered by a cruise missile in the middle of the night, holidays, or on the weekend.

    http://oahutrading.blogspot.com/2009/11/chart-o

    http://oahutrading.blogspot.com/2009/08/mania-c

    http://oahutrading.blogspot.com/2009/11/blow-of

    http://oahutrading.blogspot.com/2009/11/30-year

    As America tryptophans out and wakes up weary tomorrow, with half a trading day to “panic out with”, this could be very interesting. Looks like nearly “perfect timing” by our financial overlords. Lots of Turkeys (aka Lemmings) getting cooked today.

  15. Corey Rosenbloom, CMT Says:

    Hey Spyder,

    When looking at negative divergences, one needs to compare price swing highs to oscillator and/or TICK highs – oscillator lows are of little consequence/interest.

    We want to see oscillator/TICK highs confirming price swing highs, else a divergence sets in.

    It's not so much a statlemate, as the oscillator and TICK were failing to confirm the price highs, highlighting the non-confirmation and hinting at a reversal/deep retracement.

    Again, we're not looking at price lows and oscillator lows when discussing a negative divergence.

    I want the TICK and 3/10 to be in alignment as much as possible, but I give deference to the TICK as it refers to market internals while the 3/10 is just a derivative of price.

  16. Corey Rosenbloom, CMT Says:

    Thanks Dominick! You too!

  17. Corey Rosenbloom, CMT Says:

    Haha – well don't let me stop you, but this is a good example of how powerful trade set-ups can produce minimal results – though the negative divergence was up against the bullish bias of a pre-holiday session.

    Although, as of this writing, global markets are down around 3% around the world as the American markets are closed, so if Friday pulls the US Markets lower, then the multi-divergence would have 'worked' only with one final push higher toward the end of the day.

  18. Corey Rosenbloom, CMT Says:

    Thanks Bala!

    You too! Really liking your new blog – I encourage all readers to visit. Thank you for all the kind words.

  19. Spyder Says:

    Thanks,Corey (This time I spelled your name right- sorry about the Typo)