Technicals: A Check On May 16th S&P 500 Index Breadth Divergences (SPY, INDEXSP:.INX)

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May 16, 2012 11:04am NYSE:SPY

Corey Rosenbloom: As we start Wednesday morning with a bullish gap, let’s take a quick step inside the market for a “Breadth Check-up” on the S&P 500.

Here’s the intraday chart structure:

What we’re seeing is the S&P 500 Index on the 5-min frame with two Market Internals that show Breadth:

  • $ADD:  NYSE Breadth (Advancing Issues minus Declining Issues)
  • $VOLD:  Volume Difference of Advancing Issues and Declining Issues

Before we discuss the current structure, let’s review the most recent negative divergence that developed on May 10th into the 1,365 resistance area.

Breadth and VOLD peaked with price on May 10th, yet price pushed the next session back to 1,365 but this time we saw a visual decline – negative divergence – in both Breadth and VOLD.

This mid-morning situation (divergence) was the intraday peak ahead of the current decline to the 1,330 level.

Similarly, Breadth and VOLD pushed to new lows on May 14th (Monday) with price near the 1,340 index level.

Yesterday (May 15th) resulted in a price push UNDER the support level… but both Breadth and VOLD failed to register new internal lows, locking in a Positive Divergence.

Now, Wednesday’s session opens with a bullish gap and initial upward impulse which has resulted in a push-up in Breadth as well.

In sum, Breadth and VOLD – Market Internals – suggests at least initial price strength/bullishness as a result of their positive divergences.

We’ll look to price today and tomorrow for confirmation/follow-through with this potential bullish signal with respect to the key 1,340 index level.

Related: S&P 500 Index (INDEXSP:.INX), SPDR S&P 500 ETF (NYSEARCA:SPY).

Written By Corey Rosenbloom, CMT From Afraid To Trade

My name is Corey Rosenbloom, CMT (Chartered Market Technician)  trader, educator, analyst, and I am excited to share with you my  experiences studying and trading the markets and to hear from you  regarding your experiences, challenges, and frustrations, and successes.  My goal is to create a community dedicated to reaching out to those who  have been burned by the market or are anxious about risking their money to make money in the stock, options, or futures markets. Together, we can share strategies and learn how to overcome crippling fears that keep  us from achieving our highest potential.

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