The EURUSD FOREX pair has been respecting dominant Andrews Pitchfork trend channels both on the way up and on the way down. It serves as an educational example and current reference levels for areas to watch going forward in time.
The S&P 500 began Monday April 26th on a push to new recovery highs, but it did so laboriously, forming negative divergences in all three key market internals we monitor.
With that in mind, let’s take a look at current lunchtime market internals in the S&P 500 for April 26:
With Goldman Sachs (GS) frequently mentioned in the news in the wake of the fraud allegations, intraday traders have sought to profit from the swings and price movement that has occurred since GS fell so sharply on April 16th.
Let’s take a look at the ‘wakes’ or aftermath of the sell-off, failed ‘bounce,’ sucker gaps, and current breakdown from the descending triangle that formed.
In a prior post from April 19th entitled “The S&P 500 Teaches the Importance of the Rising 20 day EMA,” I highlighted how the intraday low was the exact value of the rising 20 day EMA… and now the market has bounced yet again off that level on Thursday, underscoring the importance of watching higher timeframes on intraday charts.
Reading Market Internals is essential for intraday traders and also is helpful for swing traders, if you compare days to days and swing highs to corresponding internal highs.
Let’s get an update for April 21 and then also note the three recent clean divergences – all of which have produced a turn in the market place.
You know I’m a big fan of studying price patterns and looking for those patterns to repeat, and it appears that we have a near-identical repetition – on a smaller scale – of the move down and rally from the February low, which has played out over the last few trading days.
Let’s see them and compare.
With half the day down, let’s take our usual mid-day check or ‘peek under the hood’ at the S&P 500 Market Internals to see what may be in store for price.
As I mentioned in this weekend’s update (S&P 500 at Support… For Now), we should be watching the 1,190 level which was a trendline support (which broke), but as an alternate important price to watch, we should expect at least a partial bounce (if not larger) as price tests the rising 20 day EMA at 1,180.
So far, that’s exactly what happened.
Let’s take a quick moment to see this great example of how intraday traders (particularly of index futures) could have benefited from expecting a potential ‘bounce’ or support zone on the lower timeframes by keeping in mind the EMA structure on the higher timeframe (in this case, the daily).
Just 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.
For those of you who follow key market internals on an intraday basis, you almost certainly noticed that today’s break to new recovery highs in the S&P 500 was not confirmed (really in any way) by any of the three key market internals. That’s a warning signal but not yet a ‘reversal’ signal unless we see follow-through with lower prices.
Let’s take a quick look at the internals and intraday chart as we wind down into the close on April 15th.