A Peek Inside SP500 March Rally Market Internals

By Corey Rosenbloom | March 19, 2010 | 2:22 PM |  0 CommentsTweet This

When assessing the strength or weakness of a recent market move - such as the ‘non-stop’ rally we’ve seen so far in March - it’s important to look beneath the price to see the signals from key Market Internals… and that’s what this post does.

Let’s take a look ‘under the hood’ to see how market internals have shaped the recent rally and what might be in store ahead.

(Click for full-size image)

For internals, I study the Breadth (Advancers minus decliners), TICK, and Volume Difference (volume of advancers minus volume of decliners).

I plot these as lines and then compare price highs to internal highs and look for alignments (confirmation) or divergences (non-confirmations).

What are we seeing now?

Long-term internal divergences as well as short term breadth and “VOLD” divergences.  That’s a solid non-confirmation of the recent highs.

That doesn’t mean price is required to ‘fall off a cliff,’ though we’re seeing some sharp downside action take place this morning (Friday) which could indeed continue, if the signal from internals are correct.

I did want to call attention to the March 2-3 divergences which only managed to result in a slight pullback/consolidation in price before internals suddenly strengthened and price rocketed higher as forecast by the sharp pick-up in internals on March 5th (the “Jobs Report” spike).

Now that we’ve seen new price highs, no internal index has reached the peak seen on March 5th’s powerful trend day.

That sets up a ‘multi-swing’ or long-term (that term is relative) divergence, but we’re also seeing a slight short-term or immediate divergence with the highs on March 17th.

Don’t be surprised to see further downside action develop as a result of these divergences, but keep in mind that bulls have been absolutely dominant so far and have ‘bowled over’ the previous negative divergence in market internals as seen here on March 2nd and 3rd.

Keep a close watch for new lows in internals, which would indeed forecast lower price lows yet to come.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Learn the Secrets of Candlesticks with this Free Article from GFT

 |  | 

Five-Day Broken/ MACD Looks to Cross

By Jeff Pietsch | March 19, 2010 | 1:21 PM |  0 CommentsTweet This

Quad Witching has provided the volatility needed to break the winning streak.  SPY has seemingly found support near $115.75.  In as much as I'm distrusting of that support based on very weak internals (it's easy to see an eventual move to the low $115s) -- it would be typical of recent action to ramp into the close, so I'll respect that support for now even as I'm disinclined to switch long.  Oh, and I have no idea what they are talking about on CNBC, volume has been huge -- the re-balance trade may be contributing.

Never Investment Advice

 |  | 

A Rotator Variation

By Bob Barnes | March 19, 2010 | 9:10 AM |  0 CommentsTweet This

Once again yesterday the Qs demonstrated their momentum edge. closing in the green while SPY and IWM turned red. And once again, not a lot of technical disparity between the top4 slots, which really is indicative of the ongoing broad advance of the markets. That, and a VIX below 17.
I've juggled the metrics columns format once more and I think this is a keeper for a while. The yellow column is still the daily % change, while the column to the right "Price" is, in fact, a Worden Brothers algorithm that calculates a proprietary price volatility value. It's like beta, but it's not. The next column to the right "5 Day' is the 5 day performance of the ETF relative to the performance of the SPY. Beta is , of course, beta. I don't know why Worden can't figure out the VXX beta. . it's currently at -2.16 according to other data vendors.

The Rotator models above and below reflect an ongoing research project that has so far shown considerable promise. I'm using the same 6 period 2 day moving linear regression channel slope to sort the Rotator components and define ranking. FXC and EWC have been the top $ and country for a while now and if you take a peek at the charts (not shown) you'll quickly see that Canada has been on a tear. While the Canadian dollar continues to shine, Mexico has now taken over as the top momentum country. . not exactly sure why. . pre Cinco de Mayo exuberance maybe? These are fairly low risk models as the currencies and the countries tend to trend for extended periods of time and typically flash broad technical signals of impending reversals.

 |  | 

Canada Retail Sales Push USD/CAD Toward Parity

By Greg Michalowski | March 19, 2010 | 8:47 AM |  0 CommentsTweet This

The  USDCAD  has moved to new lows at 1.0061 (trendline support). It is hard to see the USDCAD not testing parity soon.  The upside should be contained by1.0097 now.

 |  | 

Energy Weighs on the Market

By Jeff Pietsch | March 18, 2010 | 1:09 PM |  0 CommentsTweet This

Well, the Financials and Semi's aren't helping the bulls much either. Internals are seeing a slow deterioration along with price. I can't call this, nor do I foresee, a break down by any means (heck the VIX is hardly budging), but this market needs a rest!  Maybe the real question is whether we see a retrace that survives the final hour?

 |  |