Dow and NASDAQ divergence today. The Emini closed up 1.25 points at 1,373.00 on Wednesday. Lots happening today: index divergence, Oops pattern and very high Emini volume. Is the evidence of a market turn mounting?
Oops Emini …
The Emini gapped up on the open 5.25 points above yesterday’s close and 2.5 points above yesterday’s high. The market quickly put in a high of 1,380.25 and then sold off strongly on very high volume before touching a low of 1,367.75 and eventually closing at 1,373.00. This is a classic Larry Williams Oops pattern, usually indicating that non-professionals have panicked at the open and allowed the professionals to take advantage and start selling.
The volume was particularly high at 1.45 million Emini contracts traded during the day. We haven’t seen this much volume since the low finally put in on 19 July. Today’s activity wasn’t all selling though, the market did close in the middle of today’s range. The range wasn’t particularly high either and so off the lows there was quite a lot of buying in order to stop the freefall and push the market back up.
And Dow NASDAQ divergence
Perhaps most notably though was the divergence between the Dow and NASDAQ today. As you may remember, yesterday the NASDAQ gapped down and never filled this gap. Today the NASDAQ closed sharply down and near the lows. By contrast, the Dow actually closed up and so we have a classic Dow NASDAQ divergence.
I have talked about this in earlier posts – the NASDAQ usually leads the broader market. At market bottoms we usually see the NASDAQ pushing higher, or at least being less bearish. At market highs the smart money flows out of growth or risky stocks into the blue chips, and so the Dow is more bullish than the NASDAQ. That is exactly what we saw today. The white dot on the chart above shows days like this; the red dots show the reverse, when the NASDAQ advances and the Dow falls. They don’t happen often, but when they do take note!
The Emini exhaustion signals start coming
Yesterday I mentioned that we still haven’t seen any Emini exhaustion signs but was sure we wouldn’t have to wait long. Well today we got two exhaustion signals:
- Larry Williams Oops pattern and
- Dow NASDAQ index divergence
The signs are starting to point to a downswing in the market with the trend indicators turning down and now some exhaustion signals. But I’d wait for a trend line break before entering the market.
Remember to use multiple non-correlated indicators and to take whatever swings the Emini market gives you. Do a Google search for Emini or index divergence to find more information.
