• 747 days Will The ECB Continue To Hike Rates?
  • 748 days Forbes: Aramco Remains Largest Company In The Middle East
  • 749 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,149 days Could Crypto Overtake Traditional Investment?
  • 1,154 days Americans Still Quitting Jobs At Record Pace
  • 1,156 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,159 days Is The Dollar Too Strong?
  • 1,159 days Big Tech Disappoints Investors on Earnings Calls
  • 1,160 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,162 days China Is Quietly Trying To Distance Itself From Russia
  • 1,162 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,166 days Crypto Investors Won Big In 2021
  • 1,166 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,167 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,169 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,170 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,173 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,174 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,174 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,176 days Are NFTs About To Take Over Gaming?
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Divergences ARE Important

Learn to look at Divergences ... they ARE important.

Today will be "Tip Day" where we discuss another importanttechnical skill to acquire.

Today's topic is about Positive Divergences. Professional traders incorporate such divergences in their trading strategies, but newer traders often overlook Divergences or just haven't developed the eye for spotting them yet.

In any case, they are important because the larger the divergence, the greater the likelihood that the divergence will impact the market's direction.

For example, take a look at today's SPY chart that goes back to 2008. While observing this chart, pay particular attention to labels 1, 2, and 3. You can see that each had a Positive Divergence, and in each case the market reversed direction for some period of time.

While we have not done the proper research on this time-relationship yet, but there does seem to be a correlation between the amount of Divergence and how long the ensuing reversal lasts in time.

Labels 1 and 2 had small positive divergences, and their upside runs lasted one to one-and-a-half months. Label 3 showed a hugepositive divergence and it triggered the new Bull market.

Now, we are at label 4. This is not a huge positive divergence, but none-the-less, we do have a positive divergence to pay attentionto.

The smaller divergence may mean a smaller period of time for it to act out ... but, for now at this early stage, the question is whetherthere is enough of a divergence to act out or not?

[Note: The C-RSI is our zero based Relative Strength Index.]

C-RSI Relative Strength

 

Back to homepage

Leave a comment

Leave a comment