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Market Internals 2014-01-23
Monthly update on market internals.
The current snapshot of S&P 500 3-Day Advance Issues, Tick16 Short Term + Long Term as of 2014 Jan 23 close.
Review
Short term bullish bias played out with S&P closing at year high by Dec 21, 2013.
3-Day Advance Issues breaking neutral zone decisively on 1st trading day of 2014 gave us a pullback to play with.
13th – 14th S&P spike low diverge against 3-Day Advance Issues higher low, gave us a another short term long and boom we have a new high for the year since.
Reading
1. Long Term Tick16 (yellow line) moving around neutral zone is neutral.
2. Short Term Tick16 (red line) moving around neutral zone is neutral.
3. 3-Day Advance Issues has a swing level divergence top over 3 weeks window. Bearish.
Inference
a. #1 and #2 combined into a strong compression breakout setup but no directional bias
b. #3 short term bearish until 3-Day Advance Issues reaching oversold level again
Long Term Outlook
Tick16 compression happened before historically quite a few times. There were no directional correlation with the setup but price movements intraday would often produce volatility greater than the daily level close to close changes on previous occurrences. It is a signature of market indecision.
Long term direction depends on a strong move in Tick16 out of the range which can last for months.
For now, focus on one to two day swings is more profitable.
Notes
I am working on a complete section in the website devoted to breadth analysis.
Once the new section goes beta, I will retire this monthly write up. I think the breadth reading I am providing now is not frequent enough to help everyone to understand the power of market breadth timing. By providing more information and explanation on market breadth based analysis techniques I know the new section will be useful for many traders.
Goal of the new section is to provide daily reports and charts of the custom breadth data on both US indices and forex markets. Once the daily updates are in place, it will be much easier to track the changes and utilize the information.
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