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.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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