There is a bearish divergence setting up for the S&P500 whereby the advance is only happening with fewer than 70% of the component stocks in the Index above their own 200 day moving average.
In the past when these divergences set up, it implied that profit taking was just around the corner. Given that the market just had a decent round of "profit taking", I think there is a different way to look at this divergence and structure, but it will be more clear as time goes on. For now, we can see that fewer and fewer stocks are driving the gains in the market. This could very well be the results of the weakness in Oil Stocks. The market doesn't go up all together, but in stages.
The normal event to expect in the coming 12 months would be a correction where a sustained period of 1-3 months holds below the 50% level in the "%of Stocks > 200 Day Avg"
For now, keep an eye on everything and stay tuned to TradingView.
Tim 10/31/2014 1:45PM EST
Comments
Alisho
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looks like the a lot of oil stocks are developing a bottom atm..
TRADER1877
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Hi Tim, I am really interested in how you constructed your Buy and Sell zones:
-Are they based on support and resistance levels or where you believe Institutional traders will Buy and Sell.
- Also how are you choosing the levels and drawing the depth and length of each zone above?
Any Help on How I can learn this would be greatly appreciated
timwest
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Hello @TRADER1877, The zones are my estimations, but they are based on the "most frequent prices" and the price action around those most frequent prices. So, the red zone is the area we have been below lately, and the green zone is the area we have been above (obviously). You can see the price cluster there in both red and green boxes and how those zone represent a lot of market "activity" or bars. Does that help?