By Liz DeMera

Keeping a close eye on this ratio chart, thus far it has made a lower high recently even as the S&P has made a higher high in price.
0120bankratio

I’ve attached this spreadsheet to show that we had 427 NYSE New Highs on 01/02/13, on Friday 01/18/13, we had only 335 New Highs, thus a negative divergence.
0120spreadhilownyse
The question you have to ask yourself in the chart below is did this peak out? Since this is a 10 day MA High minus Lows indicator and we’ve dropped off the 427 from 01/02/13 can it make a higher high now?
0120highminuslow

On a 30 day MA basis this advancing volume % chart has too made a lower high relative to the SPX climbing higher.

012030volume
This summation bar chart has a cushion of -1805 advancers to keep its slow crawl higher on the nyse summation line.

0120summation

As I stare at this chart I’m seeing a lower high from early February 2012 peak, yet we’ve recently made higher highs in price in the SPX, Russel, Transports, and Industrials.

0120nyseit
A series of lower highs on this chart shows momentum is waning while the the .spx, .rut, .djt and .dji are at new price highs. When you look at the 10 day Ma or 30 day Ma its there. For me this a red flag, as the 10 day ma should not be sitting at +453 it should be up in the +900 area.
0120oversold

Lastly, I would like to conclude with the following question. Do you want to buy stocks with the .vix at 12.50, when the herd all wants it? For myself the answer is no. I wait until all the above charts are washed out and no one wants it. The risk reward is gone for me at this point in the cycle, with so many of the above internals either peaking out or showing negative divergences.
The following post was written by @lizdemera , who uses market internals and technical analysis to determine future stock market direction. Feel free to connect with her via twitter as she shares her insights there.


2 Responses to “Waning Momentum Causes Negative Divergences”

  1. Gary Porter Says:

    B4 we hooked up I bot 4 April 13/20 VIX Bull Spread for $3.10. Part of my portfolio will always have some options. Maybe I can figure out how to morph some of ur ideas into option trades. May not be feasible because it appears your strategy is in general the safer turtle strategy while options require more of a hare race. love your comments & critiques “Professor”???? Wish me luck with the VIX. Gary

  2. jeff pierce Says:

    hook up with @chartlearning on twitter as he likes to use options with tradewithZEN strategies. for all other option related questions chris ebert is the contributor on zentrader who is an expert. his email is optionscientist@zentrader.ca or you can ask him a question on any one of his posts.

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