Strangely Enough, Market Internals DO Matter – an Update
Apr 16, 2010: 3:19 PM CSTJust when it seemed like this market would continue its journey to the moon, we had a major one-day (at least) snap-back in price that erased the gains of the last week, plunging us in one day to an intraday low price not seen since last Thursday, April 8th.
Today’s post is an update of my afternoon post “SP500 Market Internals Send Strong Warning Signal,” and I hope you took advantage from the lesson I wrote in yesterday’s post.
Today’s sharp downside action reminds us that – eventually – internals DO matter.
After peaking yesterday morning at 1,212, the S&P 500 (and other indexes) flashed dramatic non-confirmation or massive negative divergences in market internals, including Breadth, TICK Extremes, and Breadth Volume Difference.
I wrote yesterday:
“Thus, internals are sending a strong “warning signal” that would be a sell-signal (or protect capital signal) if we see a break under the trendline or the intraday swing low at 1,208.”
I had also emphasized the importance of Trendlines, and to watch for confirmation (and an official sell-signal) with a break to the downside (under 1,208) of the rising trendline.
Today’s chart reveals why it’s very important to watch for key non-confirmations in market internals, but that divergences are not enough to generate sell signals. We need breaks in trendlines to increase our confidence in a trading signal.
All the typical cliches apply: “What goes up, must come down,” “The higher the rise, the lower the fall,” etc.
If you don’t already, pay particular attention through the trading day from the signals that market internals send – they really do matter.
To learn more and follow my in-depth analysis and commentary each day, become a member to our Idealized Trades Daily Report service.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
