October 1 Midday Check on Market Internals and Structure
Courtesy of Corey at Afraid to Trade
Let’s take a quick mid-day look at the SPY/market internals and current structure as we begin not only October 2009, but the final quarter of 2009.
Just looking at the price, EMA, and momentum structure, we’re clearly in a down-trend as evidenced by lower swing highs and lows, and the bearish EMA structure above price.
However, there’s hope for bulls – in the form of a positive momentum divergence along with a series of slightly higher lows in the TICK (bottom panel) – both of which are often associated with stronger than normal retracements or outright price reversals.
There’s also a potential 5-wave fractal move ending in these positive divergences at these lows. Watch for any bullish break above the 20 EMA situated currently at $104.00 (technically $103.98). That would set-up a potential test of the falling 50 EMA at $104.50 and argue that the lows of the session have formed… or at least that a retracement up would occur in the event that price made lows into the close.
What are the internals showing? No surprise – all bearish:
The top-left shows the $TRIN (volume measure of flow into advancing or declining stocks). The fact that the TRIN touched 3.00 today was very, very bearish. A ratio above 1.0 is bearish; a ratio beneath 1.0 is bullish.
Under the TRIN, we have the Up-Volume ($UVOL – green) plotted along side the Down-Volume ($DVOL) and we see that down-volume is roughly 10 times up volume – ouch.
To the top-right we see the Advancers ($ADV – Green) plotted with Decliners ($DECL – red). No surprise there – we have 2,452 NYSE stocks down on the day vs. 558 stocks up on the day.
Beneath that we see the simple subtraction of these, which gives us the “Difference” ($ADD) which is a negative 1,897. This means there’s a difference of almost 1,900 stocks down on the day vs up.
If we’re going to have any hope of a retracement or reversal up as hinted by momentum, we’re going to need to see internals strengthen.
Otherwise, the power of the trend and the negativity of the internals will continue to push price lower into a trend day.
The next hour or two will be critical in terms of seeing whether a “Rounded Reversal” or a “Trend Day Down” is favored. Watch the internals and how price behaves at a test of the 20 EMA (green) for clues.
Corey Rosenbloom, CMT
Afraid to Trade.com
