Join        Login             Stock Quote

Market Internals Checkup Ahead Of The Fed Day

 December 12, 2012 11:11 AM

As we prepare to react to Wednesday's Fed Day Announcement and Chairman Bernanke press conference, let's take a look at Tuesday's breakout, the prior compression in Market Internals, and what levels are important going forward.

We'll start with the 30-min intraday chart of the S&P 500 with Breadth (Advancers minus Decliners) and VOLD (Volume Difference of Breadth).

The big thing to note here is the visual compression – a triangle pattern – in both Breadth-based internals.

In general, compression phases in market internals tends to precede an immediate breakout and price expansion phase.  We'll be looking for any continued upside price action before and of course after the news-making announcements Wednesday.

[Related -Automating Ourselves To Unemployment]

Price gapped and held above the 1,420 short-term high and traveled all the way to the 1,430 prior resistance high before selling off into the close.

With this, we saw a visual upside break (confirmation) in Breadth but no visual breakthrough in VOLD (Volume Difference).

We generally have higher confidence in a successful price breakout if it is confirmed by a spike-up in internals (and volume).

Finally, observe the 30-min price-based trendline as the defining line of short-term support.  Buyers do no want to see the index under this important trendline (it could trigger short-sale intraday opportunities).

[Related -Fed: Waiting For June… Or Godot?]

We can see the picture and a clearer trendline on a lower frame intraday chart (5-min):

With the 5-min chart, we also add the TICK and see a similar compression though not as clear as the triangle in Breadth.

I also am highlighting the strong readings in VOLD which suggest broader based volume flow (bullish).

Strength in VOLD appeared as early as the December 5th price low which shows an important lesson in price and internal divergences.

I drew a shorter term trendline which connects Tuesday's low and this allows us to set up trade and position planning.

A breakdown under 1,425 would be a bearish trigger for a potential play toward 1,420.  Any continuation of selling pressure that breaks under 1,420 would be expected to bring in additional selling and could lock in a Bull Trap from those who bought in Tuesday's breakout.

However, the chart-based index resistance into 1,430 – Tuesday's high – will be the upside focal point to trigger a continuation of the short-term uptrend, especially if traders quickly react bullishly to the Federal Reserve events Wednesday.

Keep internals in mind along with these key short-term levels as the trading day unfolds on Wednesday.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.