Today (26th May) US market did not move much.
At around 11 AM EST I had shared my thought on the Market Internals in a quick Superior Profit Traders Community post. Mentioning that as of that time, Market – though virtually unchanged from the day before – was showing some sign of Bearishness in the Intraday charts and few other places. I had also mentioned that later I will share my reasoning behind that observation in a blog.
Well, here is the blog.
Before I go into the the detail, I want to mention one key work. I had said there was a “hint” of Bearishness. Not a full display of it. A full display of Bearishness would mean Market falling down. It did not. It was mostly unchanged.
Market was mostly unchanged as seen from S&P500. How did I thought of Bearishness then? Would it not be appropriate to say that Market was neutral? That is how it would appear to other traders. But Superior Profit traders don’t only keep an eye on S&P500. That is outward health or weakness. They also tend to look at Market Internals from time to time. To see how strong the market really is under the hood.
First, let us look at the E Mini S&P 500 through CUE At A Glance Template (Weekly Backdrop View on the left and Daily Hop On View on the right) – this is as of 27th May early morning (around 1 AM).
As explained in the chart above, Market is going up – as seen by Hop On Daily Chart Traffic Light Candle color being green.
To a CUE Chart trader, Green is Bullish. So we are not going to say it is Bearish. And that would be correct interpretation. And it is also explained that “Bullishness” was not a roaring Bullishness owing to anemic Activity of last few days in the above chart.
Lets delve a bit deeper in market internals now to see what was really going on there.
I had posted a Broad Market Internal study in Superior Profit Blog a few days ago. That showed overall Market Internals showing weakness. You may find that blog here.
[Note that every week we tend to share this valuable Market Internal snapshot in Superior Profit Traders Community – USA Market category. You may access the Community here.]
That blog on Market Internal was analyzing Market health usiing Weekly chart. Today, I look into finer detail of today’s Market movement using Intraday chart of Market Internals.
The chart below shows NYSE Internals of today’s (26th May) – combining S&P500 E Mini with Tick Chart, Activity, NYSE Advance Decline and NYSE Up Down Volume – all key Market Internal indicators.
Here is what we can gather from this chart:
Point marked (1) : The Tick chart did not show any extreme move upward or downward for the whole day. It was moving sideways. Meaning neither Bulls were heavily buying many stocks at same time. Nor were Bears selling many stocks at same time in NYSE market.
Points marked (2): Market (here we plot @ES – which is E Mini S&P 500 Futures symbol) Opened somewhat higher with larger Activity bars.
Points marked (3): However, price soon came back to Last Day’s Close (magenta Pivot line) and then below that by 10:30 AM EST. While Activity was reducing (this is the time when I posted my comment on hint of Bearishness in Traders Community).
Point marked (4): After that, whole day Activity remained muted. As if it was a holiday session and big traders were taking a break. Or, as if, traders were waiting for some key event or announcement to happen (like Fed chair person Janet Yelen’s Harvard talk tomorrow 27th May at 1:15 PM EST?).
Point marked (5): Around 2 PM EST Market gave the appearance of a short rally – going back to Open (blue Pivot line). However, as we noted, Activity and Tick was not confirming Bull’s strength. Tick was actually showing a Divergence. More on this later.
Point marked (6): Soon after the 3:30 PM EST, S&P 500 came back right to Last Day’s Close.
Point marked (7): In terms of number of stocks in NYSE that were Advancing or Declining, we see that at Open more stocks were Advancing. A Bullish sign at Open. However, soon it turned negative around 11 AM EST (the time when I posted my comment on hint of Bearishness in Traders Community).
Point marked (8): And for remaining hours of the day, Advance Decline signal was neutral. Essentially wrapping around the zero line.
Point marked (9): In terms of Up Volume (Volume of all stocks moving up) and Down Volume (Volume of all NYSE stocks moving down), at Open, again, it was Bullish. But reversed to below zero line around 11 AM EST (the time when I posted my comment on hint of Bearishness in Traders Community). For remaining hours of the day, Up Down Volume remained below zero line – Bearish. Though not by much.
Probably you can now see why at around 11 AM EST I came to announce of the “hint” of Bearishness in the Market.
Lastly, let us look at sector/industry wise performance of market (using Dow Jones Index) for today (as of end of day of 26th May).
Clearly, by end of day on 26th May, more industries were in red than in green. A bearish sign. Though not full fledged Bearish – as several industries ended in green as well.
These are all is interesting study from Market Internals. Now, how do we use such Market Internal study in trading? Or can we use it at all?
Remember the Weekly Market Internal Blog mentioned above? Here is the link again for ready reference.
That analysis was using longer term Weekly chart. And Superior Profit traders may use information gleaned from such Weekly studies to assess if and when Market “may be” topping. And that information may be used by CUE Traders to look for potential Short in individual stocks – may be using trend following Go With Flow trade or trend reversing Headwind or Stretch Release trade. You may learn more about those easy tactics in Education Center and also in the many trade ideas posted in Traders Community.
What about the Intraday Real Time Market Internal chart that I shared above?
That is used by more active traders.
By E Mini Futures Day Traders for example. Indeed, the “Market” chart in this Real Time study is that of @ES – and seeing that in conjunction with the Tick Chart, Activity, Advance Decline and Up Down Volume helps an E Mini Day Trader to catch a continuation / breakout as well as reversal trade more confidently.
It may also be used by active Stock Day Traders. If one is thinking of Shorting a Stock as Day Trade, it certainly helps to see that E Mini S&P500 is also showing a Tick Divergence at same time. Yes. The chart shared above does show this very valuable Tick Divergence. One such area is marked by points (10). Where E Mini S&P500 was going up. Whereas Tick was going down. Such Tick Divergence may indicate a reversal point in @ES. As was in this case in the chart. Such Tick Divergence information could be used by E Mini S&P500 Day Traders. As much as it could be used by stock Day Traders. This is because often stocks tend to reverse when S&P500 E Mini reverses in Intraday chart.