Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks

May 26, 2011: 2:49 PM CST

If you’re an intraday trader of stock market index futures or ETFs, you probably noticed visible surges of buy/bullish volume into these funds today and Wednesday.

Let’s zoom-in on this bullish volume action and put it in context of the critical higher timeframe support level at 1,300 in the S&P 500.

First, the SPY ETF Intraday:

The chart above is the 4-min (to show more bars than the typical 5-min) view of the intraday SPY (S&P 500 ETF) from Wednesday the 25th to Thursday May 26th.

I’ve highlighted periods of unusual surges in bullish/buy volume which has corresponded in all cases with sharp impulse rallies in the fund price.

This picture is similar in the other index ETFs – DIA (Dow Jones), QQQ (NASDAQ) and IWM (Russell 2000) – but is more evident in the SPY chart.

What the bullish volume action suggests is that large-scale funds are either scaling into positions or are removing hedges, or bears are taking profits/scaling out as the market pushes into the critical support level near 1,300 (in the S&P 500).

As long as this bullish activity continues, it suggests stock prices will rally higher off this inflection pivot.

Why might 1,300 be a very important “Make or Break” level for the market?

Let’s take a look at the basic Weekly Chart of the S&P 500:

The rising 20 week EMA rests currently at 1,309.65 – two insignificant points under the recent weekly low at 1,311.

When you combine the bullish surge in volume this week with the major inflection point of the 20w EMA – combined with the psychological “Round Number” at 1,300 – we have odds shifting back to the bullish camp in the evolving market structure.

Of course, a firm breakdown under 1,300 will send many of these buyers scrambling for the “sell/exit” button, but that hasn’t happened yet.

Instead, we’re seeing buyers put risk back on the table, as evidenced by the buy-volume inflows intraday as price tests this dual-confluence, critical inflection point in the index.

Based on these two simple facts, the market is back in the domain of the bulls unless proven otherwise with a breakdown under 1,300.

In other words, it’s once again the bulls’ game to lose.

Corey Rosenbloom, CMT
Afraid to Trade.com

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6 Comments

6 Responses to “Stepping Inside the Recent Intraday Bullish Volume Flow into Stocks”

  1. kevin stout Says:

    great posts lately, i have been studying my charts like a hawk this week for any signs that confirm a move one side to other.  This latest bull move today just might be the confirmation I need, but I'd like to see a strong weekly settle tomorrow. 

    to go along with your closing statement, it truly is the bulls' game to lose but I mean the Chicago Bulls.

  2. CapCube Says:

    P O M O

  3. Corey Rosenbloom, CMT Says:

    Agreed, but how do I fit that into a professional conversation?  🙂

  4. Corey Rosenbloom, CMT Says:

    Hahah too funny! 

    I'd like to see a move above 1,340 – that's the falling “flag” trendline and just general price confluence.  Likely a lot of bearish/short-sale stops above there that would fuel a breakout.

  5. CapCube Says:

    Just something to keep in mind when looking at the volume spikes.

  6. Triple Stock Index Check to Start the May 31 week | Afraid to Trade.com Blog Says:

    […] as long as the market remains above the 1,300 level, it is in the domain of the buyers/bulls, and as I mentioned when highlighting very bullish volume early last week, “It’s the bulls’ game to lose now.”  That remains […]