The Reason Negative Divergences Can Be Powerless...

By: Marty Chenard | Fri, Dec 10, 2010
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For years, analyst and market traders have been carefully watching for negative divergences as a clue to when a trend reversal was going to occur.

In fact, many professional traders have sold positions and gone short in the past, based on negative divergences. From a technical analysis viewpoint, they expected that "when negative divergences started appearing, that break-downs in the binding-structure of a rally were also going to start occurring".

But now, many of these same traders are getting hurt because the "negative divergences are not kicking in".

So what is going on? Are negative divergences now meaningless and powerless, or is there some other force that will negate the power of a negative divergence?

The answer is yes, there is another force that will override the power of a negative divergence. As many know, there have been a plethora of negative divergences show up in the past few weeks. In spite of that, they did not trigger a reversal in the market.

So why is that? It is because the levels and trending of "inflowing Liquidity" override the power of any negative divergences. It is because negative divergences will NOT "trigger" with expanding levels of inflowing liquidity.

It isn't until Liquidity levels pull back in the face of lingering negative divergences that a market pull back finally occurs.When inflowing Liquidity is in Expansion territory and at a high rate of expansion, the market continues to move up in spite of any negative divergences. That is the message today ...

NYA Chart

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
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Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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