Index Non Confirmations

D

ddog

I have noticed many times that the NQ or ES will make a new intraday high or low and the other index will not confirm it leading to market reversals. The most recent was this afternoon at about 12:15 PST. The ES made a new intraday low and the NQ didn't, leading to a nice rally into the close. The opposite occurred about an hour after the open with the NQ making a new intraday high and the ES not and the market moved to new intraday lows.

For those who trade these divergences I would like to know what other indexes you look to for non confirmations (INDU, RUT, etc.) and have you found the cash indexes to be more reliable signals than the futures since they are more open to manipulation. Also at what point do you enter your trade?
 
looks to me like NQ and ES both made new intraday lows at the general time you mentioned, nothing is usually exact but in general they both made lows within a short time of eachother.
ES made a quick extra spurt down to touch its support at its 2nd lower stop support as well as the Dow at its 2nd lower stop support. SOX also tested its intraday low which I think is what your talking about. Good trading.
 
Quote from ddog:

I have noticed many times that the NQ or ES will make a new intraday high or low and the other index will not confirm it leading to market reversals. The most recent was this afternoon at about 12:15 PST. The ES made a new intraday low and the NQ didn't, leading to a nice rally into the close. The opposite occurred about an hour after the open with the NQ making a new intraday high and the ES not and the market moved to new intraday lows.

For those who trade these divergences I would like to know what other indexes you look to for non confirmations (INDU, RUT, etc.) and have you found the cash indexes to be more reliable signals than the futures since they are more open to manipulation. Also at what point do you enter your trade?
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Hey DDOG,

You are describing Dow Theory confirmation/ non confirmation. I use it everyday in my trading. And it works. Any time during the day any market is making a new high or low (any one of the 3 nasdaq, S&P or dow) I immediately go to charts of the other 2 for confirmation to tell me whether or not to aggresively trade a breakout or breakdown. I use 5 minute charts intraday for this.

There is a nice divergence in the daily charts on the 3 indexes from the first week of december - dow and s&p made new highs, nasdaq didn't and it dragged the other 2 down, worst case scenario even if you didn't short, you had a heads up to NOT buy the breakout.

There is a good introductory work of this on stockcharts.com in the education section. Chris Terry has a good quick article on this subject also posted on hardrightedge.com.

Hope this helps,

DTP
 
Quote from market_man76:

looks to me like NQ and ES both made new intraday lows at the general time you mentioned, nothing is usually exact but in general they both made lows within a short time of eachother.
ES made a quick extra spurt down to touch its support at its 2nd lower stop support as well as the Dow at its 2nd lower stop support. SOX also tested its intraday low which I think is what your talking about. Good trading.
More...

Well, either your charts are off or mine are. Anyway the attached chart shows the divergences I mentioned.
 
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