The smart money knew the news already IMO…look at the hidden buying Thursday afternoon and again Friday. I’ll refer back to my UVOL/DVOL post…10:1 with flat price action (in relation to that ratio). And there was no other reason for that much volume in the middle of the daily charts range (especially Fridays action).

Think about the 10:1 ratio for a minute. For every 1 buy there was 10 sells? Why did the market not tank 1,000’s of points? This is divergence of massive proportions and why I posted that chart. If you see internals doing crazy things but the price action isn’t following there is something going on. ALWAYS be aware of your internals and surrounding market landscape! To track the animals that are “smart money” you have to look for their footprints in the sand.

http://tradersbase.com/mcs-musings/more-uvoldvol-at-work/index.html

Burn this chart in your mind…this is a flashing warning sign.

Good luck

OK…I realize today was a big down day…but given 7 to .5 ratio of DVOL there had to be hidden buying of some sort in there. That many sellers would have had more impact than we had today IMO. Instead the dow has flattened out and traded relatively sideways.

Plus watch the TRIN…it’s very hyper extended and at these levels there is a good chance for a big push down which should in turn boost the dow.

JMHO.

I am starting to love the UVOL setup here. I also run ADVN/DECN, TRIN for the extremes and VIX for an inverse look at the markets. Price action still rules, but these give a good glimpse into the health of the markets IMO.

So we can see here nothing but price action is always 100% correct, otherwise we’d all be rich. But if you look at UVOL/DVOL expansion or contraction in relation to each other you can often get clues on which is the right side of a trade. If you have a bigger chart I’m sure the moves on the indices are even more clear in relation to this. I had to have things somewhat scrunched up to get it to post and capture right.

Notice Thursday. I just saw something I didn’t catch before.
Wicked divergence, basically hidden selling. So you have UVOL smashing DVOL all day but most the day was consolidation. And it ended with a surge of UVOL but very light price action. So there ya go, there’s another use for this that I’ll add to my bag o’ tricks.

Enjoy,
MC

WOW. How above that 12:1 closing strength of the DVOL?

After lunch there was some price action chop but all in all this should have helped you stay focused on trending short trades and scalping long trades if you even had the nerves to attempt a long.

This is the 2nd time I’ve shown this setup and would love to hear from any of you that may have found it useful or any other thoughts.
Please sign up and drop us a line in the forum. TradersBASE Forum

Have a great weekend!

—Added Late Saturday Night—
Some have said, “I don’t see chop on this indicator”. That’s precisely why I’m saying it’s helpful. With some indicators it’s about what you don’t see.

If you were watching say the SPY (see below)…you had a period of chop from 2:15 till about 3pm Friday. Hell you had a range break upwards so some got sucked into going long there no doubt. If you were looking at this indicator, you would have been pretty assured that the trend was still down and should have kept out of the long range break.

Chan provided us with a link on this setup in the chat some time ago. It came up again today and I wanted to touch on one possible use for this comparison tool.

I also wanted to touch on this, if you were in chat today you should have caught some of this action. Cire, Chan and myself were very active in the forums live chat and had great results with 3 sets of eyes on the market working together. This is teamwork at its best, and I view TB members as a team. Please don’t hesitate to join the team, it’s free and you can then work with us on deciphering the market each day.