I don't know why the DIA/DOW is taking it on the chin more so than the other averages and I mean with regard to intraday 3C charts, but it certainly is. A few of the averages have some intraday positive divergences or are at least are in an area where one can be put together, the DIA, not so much.
One of the reasons I use ETFs of the index over the index itself (other than for logistical reasons) is that the ETF must try to match the underlying asset, but since the volume isn't part of that, only price is, we can often see what traders are feeling at the ETF level first, that's because the volume that is associated with the ETF is nothing like the underlying asset, or at least there's nothing that says it has to be, only the % gain or loss is trying to be recreated by ETF managers. To make a long story short, the average's volume can be effected (especially on the Dow) by a few stocks moving on big news, the ETF's volume though is a more pure reflection of actual supply/demand and sentiment toward that average as a whole and sentiment is what moves the market or you could say, Fear and Greed move the market.
The other reason is that ETF managers will often use large caps like Dow or SPX components to balance their ETFs, so some of the action in the actual average is not at all a function of real supply and demand, but is a function of hundreds, possibly thousands of ETFs and ETn managers trying to balance their managed instruments to reflect the underlying, the ETF itself doesn't have that problem.
First the Dow-30 and Dow 20, Industrials vs Transports which is old time Dow Theory when Industry and Rails where the dominant businesses in the US. I don't think this is as effective as the Dow-30 is not a pure industrial anymore, in fact many components aren't industrial at all and the US is more a services economy, but there are those that still follow this theory and trade it everyday so if you believe it, you can manifest it.
The Transports in red slipped before the Dow, they had been flying this year, they still haven't recovered from that slip and it's almost as if the Dow is reaching down to regain the correlation which Dow-Theory proposes.
Last week I half-jokingly said that FDX and the Russell 3000 were a much better/modernized version of Dow Theory as the US has turned to services, the R3K is a large index with a lot of different companies and Fed-Ex caters to many of these service oriented companies, whether it be shipping small goods or parcels, business documents, etc. I say half jokingly because 1 stock isn't enough to get a real feel for an industry, but in any case, the time FED-EX and the transports slipped is about the same, if this is even a fractionally better model for modern Dow Theory, the implications for the US economy aren't good and ultimately the Stock Market is a leading indicator for expectations of the economic activity 6 to 12 months out as a discounting mechanism, of course QE has distorted that along with other things, but at this point I think QE has peaked in it's ability to move the market and as the F_E_D is realizing, is starting to become more or a liability than an asset with further purchases that MUST be unwound at some point and in the past the unwind and rise in rates has not been good to the market. I think some of Bernie's comments last week specifically alluded to a bubble and I think everyone knew which bubble he meant-stocks.
I wanted to show the Dow intraday, but I went a bit further, intraday we have accumulation to the left, this is intraday accumulation, it is small, it is meant to move the market higher or market makers, specialists and other participants see something in the order flow that suggests the market will move higher and they position by buying to ride that move. However the DIA didn't do much with that accumulation intraday, keep an eye on the area where there's a yellow arrow, it's a flat area meaning it's hugging its VWAP, this is where market makers/specialists will try to fill orders and this is why flat areas are where we most often see positive and negative divergences.
This morning's open was negative right off the bat, distribution of the gap on the open and leading negative.
2 min chart shows all the same, distribution in the flat area, distribution on the open and a leading negative divergence.
Remember that flat area I asked you to keep in your head, here we have intraday positives to the left, these are small accumulation areas and are meant to move intraday price, they aren't anything that effects the longer term trend, although the trend of these charts on a long time frame can be useful. To the left you see how a relative positive divergence is formed, we look at two relative points (price and 3C) at the second point price is lower and 3C is the same), if 3C is the same as the first point with lower price or if 3C is actually higher at the second point than the first, we have a relative positive divergence which is the most common, but weaker than a leading divergence. In to the move up from the intraday accumulation we get a flat zone, price can't move up because it's seeing more supply than demand and 3C shows this with a negative divergence, again another on today's gap opening, it seems everything that can be sold in to higher prices is being sold in the DIA. The current divergence is leading negative.
5 min is where we get in to more serious flows, and away from intraday only and again the same flat area sees the same negative divergence which is the strongest kind, leading.
This morning didn't provide any relief either, as is already obvious, the open or higher prices and demand for stock by retail traders were sold in to by the pros.
Here's where I went further than I intended, the 10 min chart with the accumulation that was the basis of Trend #1, the expected strong move to the upside, I said back then it will likely be stronger than we can imagine at this time, I didn't think it would be this long however, but I guess they saw the new Dow highs as an opportunity to try to get retail to keep coming in to the market (which they have been exiting as of late) and they used that opportunity to sell in to the demand, there's a VERY clear negative leading divergence right at the area in which the Dow went for the new high, this is about as clear of a divergence as you get and the 10 min chart means heavy money flow.
On a 30 min chart we again see the accumulation that created the forecast of the Trend #1 move higher, distribution in to that move and then a not so big accumulation area for the Dow new highs, this would have maybe given me pause if there was large accumulation, but there isn't, it's enough to get the job done, not enough to sell in to over 6 months.
This hourly chart will be the heaviest flow of money in underlying trade, I wanted to show you that same flat area and how the negative leading divergence shows up on a 60 min chart in that area, this really looks like trouble if there's a divergence on a 60 min chart in to such a flat area, this tells me that institutional players are wiling to dump at VWAP and not wait or expect the chance to be able o dump in to higher prices and demand. In a way, this is a sort of panic to "Sell first, sell best", however short selling is read by 3C as selling as well, so this can be short selling, both transactions come across the tape as sales.
This is the rot and it's bad, this is a miracle market right now or dead market walking.
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