Stock Market Technical Analysis Blog
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Before I address the chart above, I will follow up on Friday night's blog where I focused on a divergence between the SPY and S&P 500 charts showing that the more rapidly falling SPY was threatening to pull the S&P 500 Index down with it. This morning that scenario played out strongly with a gap down at the open.
Addressing the chart above now, which is the two month chart of 120 bars of the SPY, I want to focus on another divergence that has been building. On balance volume can be loosely interpreted as a measure of "real buying" and if the market is not being manipulated the relationship between the on balance volume's peaks and valleys should at least roughly correspond with the peaks and valleys with the price bars above it which was the case the first five weeks on the above chart of the SPY.
On September 7th the price and the OBV graph both are visually low in their respective sections of the chart. From September 7th through 15th we see a massive run up in the SPY and a massive run up in the OBV. Once they both peaked, about September 14th is where the market manipulation began. Over the past week and a half we have seen the 250 million shares of net buying that was registered from the 7th to the 14th get completely sold back down and actually to a lower level now than on the 7th. Basically every net share bought has been sold as shown in the lower half of the chart which is the measure of the on balance volume but looking at the top half of the chart, the SPY price bars, we see that the price bars have only come about a third of the way back down because of the propping that has been going on the past week which I have mentioned in previous blog posts. To see where the SPY should really be today, if it had traded true, it would now be slightly below $140 instead of $145.74 in the same fashion as the OBV is now slightly lower than it was on Sept 7th.
This divergence measures $6 on the SPY, a staggering amount rarely seen. As with all divergences one or the other will race to realign with the other. They don't stay misaligned very long without an often sudden correction.
What has basically happened on the past week and a half is that market participants have been seeing the obvious propping going on and this has caused a lot of selling based upon a fear that this might be all the Fed can do with the QE3 push.
These two will likely reconcile soon with either a drop in the SPY or a huge amount of panic buying by participants to get back into the SPY if they see that the Fed breaks the SPY out of its week and a half slow downtrend.
The AAPL cluster and two big picture clusters are updated below.
Alan
On September 7th the price and the OBV graph both are visually low in their respective sections of the chart. From September 7th through 15th we see a massive run up in the SPY and a massive run up in the OBV. Once they both peaked, about September 14th is where the market manipulation began. Over the past week and a half we have seen the 250 million shares of net buying that was registered from the 7th to the 14th get completely sold back down and actually to a lower level now than on the 7th. Basically every net share bought has been sold as shown in the lower half of the chart which is the measure of the on balance volume but looking at the top half of the chart, the SPY price bars, we see that the price bars have only come about a third of the way back down because of the propping that has been going on the past week which I have mentioned in previous blog posts. To see where the SPY should really be today, if it had traded true, it would now be slightly below $140 instead of $145.74 in the same fashion as the OBV is now slightly lower than it was on Sept 7th.
This divergence measures $6 on the SPY, a staggering amount rarely seen. As with all divergences one or the other will race to realign with the other. They don't stay misaligned very long without an often sudden correction.
What has basically happened on the past week and a half is that market participants have been seeing the obvious propping going on and this has caused a lot of selling based upon a fear that this might be all the Fed can do with the QE3 push.
These two will likely reconcile soon with either a drop in the SPY or a huge amount of panic buying by participants to get back into the SPY if they see that the Fed breaks the SPY out of its week and a half slow downtrend.
The AAPL cluster and two big picture clusters are updated below.
Alan
Click on image to enlarge
Click on image to enlarge
Click on image to enlarge
