The Price/Volume Divergence in the S&P 500 continues to be incredible

By Scott Pluschau www.scottpluschau.blogspot.com Posted: 08 Jul 2013 06:30 AM PDT Since May 17th 2013, the Emini S&P 500 futures have had only two days with bullish price action from open to close that was accompanied by above average and increasing volume from the prior day.  This can be seen on the lower sub-graph of the Daily chart below in the green bars which represent bullish volume on the Day. Historically speaking a healthy bull market should see expanding volume on breakouts and rallies, and diminishing volume on pullbacks to trendline support, moving averages, or key reference areas.  In the case of the S&P 500 futures it is the complete opposite with heavy volume on bearish price action, and lighter volume on the bullish price action.  This is a pattern of "Distribution". In the meantime, the S&P 500 has broken out to the upside in the overnight today off trendline resistance on the Daily chart, but the day session where the volume will begin to pick up has yet to begin as I post this chart.  The Bulls look like they want to target the 52 week highs but I have no interest in going long here, in fact I am looking for a failure to follow through to the upside as being the more important signal.  I favor "History" in terms of probabilities, rather than "this time its different" when it comes to chart analysis and developing a "bias" or which way to lean with the trade plan. (Click on chart to expand) Join me on Linked In, Twitter, and or Stocktwits @ ScottPluschau

This most important chart pattern in the world to keep an eye on Posted: 08 Jul 2013 05:49 AM PDT The US Dollar Index appears to be out of control with wild speculation, and this is exemplified by the trendlines on the Daily chart.  This pattern is known as either "Expanding" or "Inverted" Triangles, and as a "Broadening Top" pattern.  I will refer to it as an Expanding Triangle.  What it has is diverging trendlines rather than converging trendlines that would be seen in a typical "Symmetrical" Triangle pattern.  The expanding triangle resembles a "Megaphone" on the chart.     What this pattern on the Daily chart in the Dollar Index is similar to is the "Head and Shoulders" Bearish Reversal or topping pattern.  How so?  They are both "five point" reversal patterns, but in the case of the expanding triangle, there is a raised "right shoulder" and the "neckline" is downward sloping. I find this can be a pattern of "Accumulation" or "Distribution", there is no way to know beforehand, although there are reasons to be biased or lean one way or the other when the Index approaches "Key Reference Areas", and at that point the price action using Japanese Candlestick Analysis, Volume, Open Interest, and the COT reports can be looked at closely in order to look for an even greater edge in terms of probabilities and risk management when making a move.  Knowing where a trade idea is wrong is the single most important consideration before making an entry. In the meantime, historically speaking the expanding triangle has bearish implications, and I have read that many stocks in 1929 had similar patterns.  The perception in this type of pattern is a market entering a dangerous phase. What impact or ramificatons will the Dollar Index have on Commodities, Treasury's, Currencies, and Equites, are "to be determined", but I wouldn't ignore the signals that are coming from the Dollar Index futures Daily chart going forward. Back in early 2012 I found the Gold Miners (GDX) resembled this type of pattern, and it has not been a pretty sight for them since. (Click on chart to expand) Join me on Linked In, Twitter, or Stocktwits @ ScottPluschau Source: http://scottpluschau.blogspot.ca/2013/07/the-pricevolume-divergence-in-s-500.html