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May 18 Checkup on Bullishly Diverging Market Internals

Wed, May 18, 12:21 PM ET, by Corey Rosenbloom

What are the “Big Three” Market Internals saying about the current structure in the S&P 500?

Let’s take a look:

I shared this chart in yesterday’s Idealized Trades member report, and we’re already seeing the bullish follow-through today that was suggested from the picture in Market Internals.

To recap, the “Big Three” Internals are Breadth, TICK (Extremes), and VOLD (Volume Difference of Breadth).

All Three are forming positive divergences with respect to Tuesday’s swing low at 1,320 which suggests a bullish resolution that already appears to be underway this morning.

Given this initial bullish strength this morning, the key now will be watching the falling trendline that connects the upper swing highs that ends near the 1,335 region – where we are at this moment.

Further bullish breakouts will confirm that a further/continued upward swing is expected, and that yesterday’s “breakdown” was another mean Bear Trap.

Otherwise, watch out if this morning move up is all we get from the bullish internals position – watch if we begin to head lower from the 1,335 trendline.

For educational reference, I also highlighted the most recent situation where all three internals were negatively divergent – right ahead of the sharp down-move at the beginning of May.

You can see how the divergences developed, price broke the rising trendline (signal), and the resulting follow-through to the downside.

Internals never guarantee a future move, but they can be powerful indicators of the next likely market swing/reversal, so it’s always a good idea to watch these in conjunction with developing price structure.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey's new book The Complete Trading Course (Wiley Finance) is now available!

blog.afraidtotrade.com


SDI Glossary: "price" Definition
SDI Glossary: "Finance" Definition
SDI Glossary: "TA" Definition
SDI Glossary: "TICK" Definition
SDI Glossary: "Volume" Definition
This Article's Word Cloud:   Breadth   Corey   Extremes   Internals   Market   Three   Trade   Tuesday   What   about   afraidtotrade   ahead   already   available   beginning   book   broke   bullish   confirm   conjunction   developed   divergences   educational   falling   follow   forming   from   guarantee   internals   likely   morning   most   move   position   positive   price   reference   right   structure   swing   that   this   through   today   trendline   watch   where   will   with   yesterday

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