Saturday, June 24, 2017

Some Volume Divergence

Often in the past, at appropriate times, we have showed charts of the Dow Jones Industrial Average and / or the S&P500 Index, and compared them to the Chaikin Money Flow or to On Balance Volume.

Today, we will do the same, below, for the Dow.

Dow Jones Industrial Average Daily versus On-Balance Volume

The purpose of this chart is two-fold. First, the brown dotted line at the top of the price chart shows higher price highs in the Dow. Meanwhile, the brown dotted line in the bottom indicator panel shows how on-balance volume has not kept up with the price rise and diverges from it. There is also a recent break of the higher highs and higher lows pattern on this indicator.

A similar pattern exists on the S&P500 Index. And the Chaikin Money Flow (or CMF) indicator also currently diverges for both indexes. Apparently, this rise in price is not being well-supported by volume.

Second, the Fibonacci ruler shows - that on the Dow at least - a (b) wave in this location would be cresting very near the 1.382 exterior retracement of it's (a) wave. The weekly Dow candle pattern is that of a "spinning top", but a weekly lower close candle would be required to confirm it, and that is not in evidence yet.

For these reasons (that the Dow may have topped, and it and other indexes may yet swing upward next week), I currently have only a neutral opinion of the market, and am only counting waves until it appears that a 'top is in'. Remember, if we are making the (b) wave of a flat at this level, then the (b) wave itself was a flat wave because of the slightly lower low in April.

Nothing in this update is to be taken as trading or investment advice. Your decisions are your own.

Have an excellent weekend!


  1. TJ, what price does ED invalidate where v is longer than iii? I have no access to charts today?