Update on SP500 Intraday Triangle and Market Internals

Sep 29, 2010: 1:43 PM CST

You may be asking, “What are Market Internals saying about the recent price action in the S&P 500?”

Good question!  Let’s take a look at current intraday market internals and also note the developing ascending triangle price pattern that is forming – and of course the trendline price boundaries to watch for clues for a breakout or breakdown.

The S&P 500 5-min chart:

Click for full-size image.

Let’s start first with the Internals.

Given that price is forming a sideways trading range, internals for the most part are doing the same.

I highlighted the two recent price peaks (highs) so you can compare what Market Internals revealed at those points – and you’ll notice that in both cases, a negative divergence formed.

Internals (Breadth and VOLD) peaked on September 24th’s spike, and though price pushed higher recently, internals did not.

TICK did make a slight new extreme high on yesterday’s close (price spike), but that was right after making a new TICK low not seen since September 23rd.

In summary, internals are consolidating and diverging along with price – not really showing conviction in either direction.

So now let’s turn to the short-term price pattern – an ascending triangle – that is forming intraday.

The upper boundary at the 1,148 to 1,150 resistance is clear, but the lower rising support trendline is not as clear.

I drew a longer-term rising trendline (blue) that ends currently at 1,144.

The shorter term (red) trendline ends a little higher – right where we are now at 1,146.

However you slice it, look for a breakdown under 1,144 or 1,140 to be a potential short-sale trigger, just as a breakout above 1,150 would be a potential long/buy trigger.

Even though we call them “Ascending Triangles,” it’s best to think of them as price compression patterns that do NOT have any inherent bullish or bearish bias.

Price alternates between range compression (triangles, for example) and range expansion (breakout moves), so it’s best not to try to outsmart the market and be caught on the wrong side of a big breakout – which is forecast from the price compression (triangle) pattern.

Let’s see what happens next!

Corey Rosenbloom, CMT
Afraid to Trade.com

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

2 Comments

2 Responses to “Update on SP500 Intraday Triangle and Market Internals”

  1. Alex Says:

    Hi Corey,

    I haven't posted in a while, but I still follow your blog regularly 🙂

    I noticed lately that the OBV on SPY, DIA, and IWM are all looking rather weak even as prices are rising. This hasn't happened throughout the rally off the March '09 lows.

    Do you ever use OBV in your analysis to confirm trends? And should we be concerned about this?

  2. Social Wars Hack Says:

    Social Wars Hack…

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