The Technical Analysis Professor Shows Us How to Use Internals

Earlier this afternoon, I posted a standard “Mid-Day Check of Market Internals” which suggested that market internals were giving an edge to the upside (for higher prices yet to come).  Let’s take a look at the end of day internals to see how the Breadth and Volume Internals – along with the TICK – tracked price all day in the SPY.

ATT 9.15.09

Here we see the standard SPY (S&P 500 ETF) chart overlaid with the NYSE TICK.  Beneath that is “Breadth” (Net NYSE Advancers in Green with Decliners in Red) and then in the lowest panel, we have the Up Volume (Green) compared with Down Volume (Red).

How did Internals measure up during today’s staggered up trend day?

The TICK stayed concentrated in the upper range (above zero) which created a positive distribution of TICK readings – which was inherently bullish (higher TICK highs than lower TICK lows) which served as a confirmation of higher prices.

Also, new intraday TICK highs – like a momentum oscillator – hinted that higher prices were yet to come (bullish “signs of strength”).

Breadth was positive in the morning, faded negative just after the open, then broke away (first highlight bar) just before 10:00am CST on the initial rally off the morning test of the lows.

As I mentioned in the afternoon post, Breadth was unabashed bullish, with the number of Advancers outpacing the number of Decliners – this tendency held up all day long which served as more confirmation of higher prices.

Finally, the UP/DOWN volume indicator was mixed to choppy until it cleanly broke apart just after noon CST (during the “Afternoon Breakout” Period).  This is intended to tell us whether volume is flowing into advancing/up issues or declining/down issues – it is read as a differential just like breadth.

Price structure itself confirmed an upward move – with higher highs and lower lows forming, and price remaining above the 20 and 50 period EMAs, and those EMAs being in the most ‘bullish orientation’ possible.

Market Internals and “Structure” help establish and confirm “biases” (not the bad kind) in terms of what to expect for the next period ahead.  We want to know if price moves (in this case, up) were being confirmed or not confirmed by market internals… or if the internals showed a mixed picture.

Take a moment to study additional insights from today’s trading day for help when this structure repeats in the future.

Corey Rosenbloom, CMT
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