Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

A Quick April 3 Peek Under the Hood of the Rally

Tue, Apr 3, 4:32 PM ET, by Corey Rosenbloom

I think a lot of traders have been surprised by the persistence of the “Creeper Trend” of early 2012 – along with many investors as well.

Let’s take a quick snap-shot peek at the inner-workings of Breadth, Volume, and the McClellan Oscillator to see what these classic “Market Internal” indicators reveal about the current rally as we move into April 2012.

Here’s a quick chart of the current S&P 500:

Let’s take this chart step-by-step.

First, we have the Daily S&P 500 from August 2011 to present in a candle-stick format with the standard 20 day and 50 day exponential moving averages (EMAs).

Under the chart is the classic colored (up/down) Volume indicator.

Here’s where it gets more detailed. The McClellan Oscillator is a popular smoothed “Breadth” indicator which shows the difference between a 39 period and 19 period exponential moving average of net advancers (stocks positive on the session).

The McClellan Oscillator is built off the final indicator, Breadth or the NYSE Advancing Stocks (positive on the session) minus Declining Stocks (negative on the session).

We use Breadth – and the McClellan Oscillator as a form of “smoothed” Breadth – to assess the health or weakness (confirmation/non-confirmation) of a price trend in motion.

In general, Breadth or Internal readings are STRONGEST at the start of a rally and then deteriorate towards a much weaker relative level as the rally matures and eventually tops and reverses.

There are two points I want to highlight on the chart above:

1. Breadth was STRONGEST during the October 2011 period where the market rallied strongly off the 1,100 bottom.

The strength in Breadth after a down-phase in the market clued us in to a potential stronger future for price – or at least that Market Internals were strong and supportive of a continued rally.

That’s a good lesson for the history books, which brings me to the next point:

2. Breadth deteriorated throughout the strong rally and now is at lower relative highs while price continues its rally

We look for Market Internals to clue us into the strength of a trend in motion, and we have multiple sources of internals revealing “caution” or weakness.

First is Volume itself, which has steadily been trailing off after the strong pick-up (relatively speaking) also in October 2011.

With the exception of last month’s (March 2012) spike, volume has steadily declined as price continued its “Creeper Trend” (as I’ve defined in prior updates).

Not only has Volume declined over time, NYSE Breadth has as well – and by proxy the “smoothed average” of Breadth shown by the McClellan Oscillator.

What does that mean for us now?

At a minimum, now’s probably not the right time to get really excited to the bullish side and plunge in completely long – the time for that was during the strength in volume and Breadth off the October low and on subsequent retracements on the way up in November and December 2011.

On the other hand, we don’t YET have a confirmation breakdown in price to trigger a safe Short-Sale entry – that signal would likely trigger on a big move under 1,400 that carries below 1,375 or even 1,350 (depending on how you define a “breakdown” or trigger).

The situation now is the same it has been for the last few weeks and months – that of a persistent ‘creeper’ trend via Positive Feedback Loop as I’ve updated in prior posts for reference:

Mid-Week Check-up March 7” (retracement to support)

“The Intermarket Picture to Start March”

Triple US Stock Market Check into the Zone” February 14

Pulling Back to the Monthly Perspective in Stocks” February 7

Triple US Index Check on Push to New Recovery Highs” February 3

And there’s always the “Quick Lesson from Intraday Creeper Trends

We all must decide how to balance the fact of the ‘creeping’ price trend with the slew of negative divergences and caution signals – 2012 will be a great reference for this important concept.

Let price be your guide (movement above or beneath a key reference level) and indicators serve as information – not trading triggers.

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: "NYSE" Definition
SDI Glossary: "Short" Definition
SDI Glossary: "Stock" Definition
SDI Glossary: "Trend" Definition
SDI Glossary: "Volume" Definition
This Article's Word Cloud:   Breadth   Check   Corey   Creeper   February   First   March   Market   McClellan   October   Oscillator   Stocks   Trend   Volume   afraidtotrade   after   average   been   chart   confirmation   current   during   from   have   indicator   into   market   motion   move   negative   period   positive   price   prior   rally   reference   session   smoothed   steadily   strength   strong   take   that   time   trend   trigger   well   where   which   with

| More

SP500 Gasping at New Highs with Cautious Divergences
Thu, Jul 24, 1:21 PM ET, by Corey Rosenbloom

We’re seeing a familiar Hollywood script play out with price chugging to new highs as ...

Breaking Down and Away from the Highs in Electronic Arts EA
Wed, Jul 23, 3:21 PM ET, by Corey Rosenbloom

Electronic Arts (EA) surprised to the upside yesterday on earnings but failed to impress traders ...

July 23 Breakout Impulse Update and Stock Scan
Wed, Jul 23, 2:31 PM ET, by Corey Rosenbloom

Once again we ask the question, “How high can this market go?” Today saw a ...

Try Out Seven Days of Professional Market Analysis This Week
Tue, Jul 22, 5:41 PM ET, by Corey Rosenbloom

If you’ve ever wanted to know what’s behind the pay-wall (membership site) of Elliott Wave ...

July 22 Midday Trend Day Update and Trending Stock Scan
Tue, Jul 22, 1:31 PM ET, by Corey Rosenbloom

How high can this market bounce? Let’s take a look at our new S&P 500 ...

Join Corey Each Tuesday for a Live Morning Market Briefing with TradeStation
Mon, Jul 21, 7:11 PM ET, by Corey Rosenbloom

Start your Tuesday fresh with live market commentary, updates, and analysis from Corey as he ...

July 21 Bounce and Fibonacci Update with Stock Scan
Mon, Jul 21, 1:11 PM ET, by Corey Rosenbloom

With the morning sell-off and current bounce off a key Fibonacci Level, what price targets ...

Focusing on Just the Rallies - an Interesting Pattern Emerges
Fri, Jul 18, 2:40 PM ET, by Corey Rosenbloom

What does price reveal if we focus on “just” the recent rallies? A stealth bullish ...

July 17 Midday Intraday Update and Daily Stock Scan
Thu, Jul 17, 2:43 PM ET, by Corey Rosenbloom

With the geopolitical news affecting markets, traders seem to be adopting a “Sell First, Ask ...

July 16 Stock Scan and Intraday Trading Update
Wed, Jul 16, 2:53 PM ET, by Corey Rosenbloom

The bull trend continues higher today but what levels are important and which stocks are ...

Learn the Five Steps to Spot and Trade Rounded Reversals in a Live Webinar Wednesday
Mon, Jul 14, 5:30 PM ET, by Corey Rosenbloom

Have you ever been stumped by elusive market reversals? Would you like to learn the ...

July 14 Level Watching and Trending Stock Scan Update
Mon, Jul 14, 3:13 PM ET, by Corey Rosenbloom

What should we be watching in today’s market breakout? Let’s start with our “Sector Breadth” ...

Planning a Breakout and Watching Key Levels in Amazon AMZN
Fri, Jul 11, 12:28 PM ET, by Corey Rosenbloom

Amazon.com is showing signs of life this morning with a range breakout into a key ...

July 10 Bear Trap Intraday Update and Stock Scan
Thu, Jul 10, 2:38 PM ET, by Corey Rosenbloom

With price breaking under the rising parallel trendline channel, the expectation was for a logical ...

Join Corey for a Webinar Thursday July 10 on Trading Short Squeeze Breakouts
Wed, Jul 9, 12:47 PM ET, by Corey Rosenbloom

I’m excited to present a featured webinar with Trader Kingdom this Thursday, July 10th at ...

Plotting the New SP500 Price Structure Pathway off Support
Wed, Jul 9, 11:28 AM ET, by Corey Rosenbloom

I wanted to update the simple “Color Price Structure” chart I’ve been showing all week ...

July 8 Sell Swing Intraday Update and Stock Scan
Tue, Jul 8, 2:38 PM ET, by Corey Rosenbloom

Today continued the expected sell-swing already in motion and price achieved its downside target (see ...

Updating SP500 Structure as Expected and Planning the Next Swing Again
Tue, Jul 8, 12:24 PM ET, by Corey Rosenbloom

If you followed yesterday’s morning update, then you’ll find today’s market action is exactly what ...

July 7 Intraday Update Level Planning and Stock Scan
Mon, Jul 7, 3:02 PM ET, by Corey Rosenbloom

What levels are we watching at the moment and which stocks are setting up as ...

Trading Opportunities from July Consecutive Up Closes Stock Scan
Thu, Jul 3, 2:56 PM ET, by Corey Rosenbloom

During the recent non-stop bullish price rally, which stocks have closed the most days in ...

Quick Charting the 12 Strong Trending Dow Stocks at 52 Week Highs
Wed, Jul 2, 4:43 PM ET, by Corey Rosenbloom

Of the 30 stocks in the Dow Jones Industrial Index, which 12 stand “head and ...

The Key Support Level Bonds TLT Must Hold to Prevent a Bearish Reversal
Wed, Jul 2, 2:29 PM ET, by Corey Rosenbloom

What support level must bond fund TLT hold or else trigger a breakdown/reversal event? Let’s ...

Netflix NFLX and the July Breakout through Resistance
Tue, Jul 1, 6:11 PM ET, by Corey Rosenbloom

Like the rest of the market, Netflix shares (NFLX) continued their uptrend with a shattering ...

Updating the Breakout into Open Air for 3D Systems DDD
Mon, Jun 30, 2:46 PM ET, by Corey Rosenbloom

Last week I highlighted a “Tracking a Reversal and Breakout Opportunity for 3D Systems DDD” ...

Charting Another Breakout in Volatile MannKind MNKD
Mon, Jun 30, 1:28 PM ET, by Corey Rosenbloom

Volatile stock MannKind (MNKD) crossed traders’ scans this morning with a breakout opportunity. Let’s take ...

June 26 Bear Flag Stock Market Update and Scan
Thu, Jun 26, 2:43 PM ET, by Corey Rosenbloom

Today’s session resulted in another sharp sell-off and “flag” style retracement for the S&P 500. ...

June 25 GDP Surprise Market Update and Stock Scan
Wed, Jun 25, 2:39 PM ET, by Corey Rosenbloom

The S&P 500 is retracing the losses from yesterday’s Morning Bull Trap and afternoon collapse ...

June 24 Rounded Reversal Intraday Trading Update
Tue, Jun 24, 2:43 PM ET, by Corey Rosenbloom

Well that was exciting! The S&P 500 initially triggered the alternate breakout (above 1,964) thesis ...

Tracking a Reversal and Breakout Buy Signal Trade in DDD
Mon, Jun 23, 7:13 PM ET, by Corey Rosenbloom

A potential breakout buy (and short-term trend reversal) signal is developing in 3D Printing Stock ...

June 23 Intraday Trading Update and Stock Scan
Mon, Jun 23, 2:33 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

Friday June 20 Market Update and Stock Scan
Fri, Jun 20, 2:48 PM ET, by Corey Rosenbloom

After a continuation of the Fed-Day rally, stocks paused today in a consolidation range. Let’s ...

Trade and Price Pathway Planning for Amazon AMZN
Thu, Jun 19, 3:48 PM ET, by Corey Rosenbloom

With the recent announcement of Amazon’s new phone, shares initially surged but then retraced all ...

June 19 Intraday Trading and Stock Scan Update
Thu, Jun 19, 1:46 PM ET, by Corey Rosenbloom

After yesterday’s Fed Day surprise breakout, the market is taking a break and consolidating after ...

June 17 Intraday Trading Stock Scan and Market Update
Tue, Jun 17, 2:44 PM ET, by Corey Rosenbloom

While yesterday’s session developed a clear Range Day, today’s session is balancing on the edge ...

LULU Reveals a Valuable Lesson on Enormous Distribution Top Patterns
Tue, Jun 17, 12:28 PM ET, by Corey Rosenbloom

Traders are often drawn to reversal patterns, and Lululemon (LULU) gives us a textbook lesson ...

June 16 Range and Stock Scan Intraday Trading Update
Mon, Jun 16, 2:43 PM ET, by Corey Rosenbloom

We’re seeing another Range Day develop so far in the market. Let’s update our intraday ...

Daily and Weekly Updating Apple AAPL Retracement for June 16
Mon, Jun 16, 12:28 PM ET, by Corey Rosenbloom

Apple shares (AAPL) continued their breakout and bull trend impulse after the late-April gap breakout ...

June 12 Sell Swing Continues Midday Stock Scan and Update
Thu, Jun 12, 2:38 PM ET, by Corey Rosenbloom

Although it should be happening, it’s still surprising to see the market actually decline after ...

June 11 Breakdown Sell Day Stock Scan and Update
Wed, Jun 11, 2:43 PM ET, by Corey Rosenbloom

We’re finally seeing some downside action! I was beginning to think that the market could ...

How Overextended is the SP500 Right Now in June?
Tue, Jun 10, 4:54 PM ET, by Corey Rosenbloom

I wanted to take a quick look at the current strong rally and objectively compare ...

June 10 Range Trading Stock Scan and Intraday Update
Tue, Jun 10, 2:39 PM ET, by Corey Rosenbloom

Today’s session gave us something a little different than the usual “straight up” price action ...

June 9 Intraday Reversal Stock Scan and Trading Update
Mon, Jun 9, 2:41 PM ET, by Corey Rosenbloom

While the breakout “short-squeeze” impulse market initially continued this morning through new highs, we saw ...

June 6 Similar Stimulus Short Squeeze Breakout Stock Scan
Fri, Jun 6, 2:11 PM ET, by Corey Rosenbloom

The breakout and impulsive bullish price action – continuing the large short-squeeze – extended into ...

June Divergence and Reversal Lessons from Commodities Corn Wheat and Coffee
Thu, Jun 5, 6:11 PM ET, by Corey Rosenbloom

Recent swings and reversals in commodity markets give us an example to study lengthy divergences ...

Putting Things into Perspective with Monthly Market Charting
Thu, Jun 5, 1:51 PM ET, by Corey Rosenbloom

Intraday traders often get caught off-guard by surprise movement that defies the logic of their ...

June 5 Stimulus Short Squeeze Breakout and Stock Scan
Thu, Jun 5, 1:21 PM ET, by Corey Rosenbloom

Sellers can’t seem to stop this freight train of a bullish market in breakout mode. ...

Under Armour UA Breakouts and Reversals into June
Wed, Jun 4, 6:11 PM ET, by Corey Rosenbloom

Under Armor topped our stock scanning list this morning, and I wanted to expand on ...

June 4 Additional Breakout Update and Stock Scan
Wed, Jun 4, 2:11 PM ET, by Corey Rosenbloom

Buyers did it again with a clean, impulsive, short-squeeze fueled breakout to all-time highs in ...

June 3 Reversal Retracement Stock Scan and Midday Update
Tue, Jun 3, 2:11 PM ET, by Corey Rosenbloom

Wow – price actually can trade lower! For a while that is. Let’s take a ...

June 2 Similar Trend Day Trading Update and Stock Scan
Mon, Jun 2, 2:11 PM ET, by Corey Rosenbloom

What levels are key in today’s session and which stocks are trend day trading candidates? ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

A Quick April 3 Peek Under the Hood of the Rally | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.