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With over half the trading day behind us, let’s take a quick check on the pulse of the three key Market Internals for mid-day April 6, 2010.
 Click on image to enlarge!
For internals, we monitor the:
- ADD - “Breadth” (NYSE Advancers - Decliners)
- TICK (NYSE) for extreme highs and lows
- VOLD (NYSE) Volume of Advancers minus Volume of Decliners
The S&P 500 creeped to a new recovery high today at 1,188, but it did so on weakening market internals in all three indexes.
All internals are up on the session from the morning gap-down and - with the exception of breadth - are signaling strength in the market as confirmation, hinting that higher prices are likely.
Remember, a ‘breadth divergence’ means that fewer stocks are ‘net advancing’ on the day when comparing index price highs - breadth divergences are important in terms of participation of stocks in new index highs - price and breadth should make new highs together.
While we’re seeing bullish signals when comparing price of today’s morning session to afternoon session, we’re seeing a much more bearish picture when comparing market internals to the past few days.
Specifically, a Breadth Extreme high was made on the morning of April 1st at a net positive difference of 1,892 advancers, hinting that higher prices were yet to come (and they did). This was confirmed with a TICK extreme high and then followed up on the close of the session with a VOLD extreme high (of 670,000).
Since then, all internals - with the exception of yesterday’s ‘end-of-day’ spike in the TICK - have trailed lower, signaling non-confirmations.
To recap - when internals make new highs, it signals that odds favor higher price highs yet to come.
When higher price highs come but internals deteriorate (diverge), it signals a non-confirmation and odds favoring a retracement/reversal swing.
As such, keep focused on the two rising trendlines I’ve drawn at the 1,085 short-term support level (also 50 EMA on 5-min chart) and then the 1,083 trendline support as drawn.
I know all this ‘range-bound business’ is frustrating, but we have to play with the hands the market deals us each day.
For more daily updates from Corey, visit his blog at Afraid to Trade.com |
