Stock Indices Breakout. Internals Support The Breakout

Yesterday’s Briefing discussed the intermarket divergences and the internal deterioration the Indices were experiencing over the last three days of trading. I also discussed using the extremes of the three days for trade location. That worked well today. In fact, on the breakout to the downside, market breadth and volume were definitely confirming the move.

The Indices did reach a point of being oversold going into the close. This suggests the possibility of some type of pause to work off the oversold condition. On the other hand, they closed near the lows of the day, suggesting there may be more downside at the open. If there is, watch market breadth carefully. If it is stronger than today, it suggests the market is strengthening internally and the possibility of a rotation up is increasing.

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