DO chart with unfilled volume gap (at 51.89) , moving averages & fibs.

One indicator I look at intra-day to day trade is TRIN! Like stealing candy from a baby! .. especially with TRIN taking a nose dive with market rising .. a sure tell of the market rise to continue for a few minutes and up to ten minutes..

Watch the Declining Volume for hints of what the market will do …

Market technicians look at a lot of data, and sometimes seldom watched data like the Declining Volume on the New York Stock Exchange can become very important.

This morning, we will focus on only one type of formation on the DVOL and how it relates to a market bounces.

The market is very seldom in a state of true balance, and it is the degree of imbalance that often sets up buying opportunities for investors.

Take the NYSE’s Down Volume for instance (symbol: DVOL).   In today’s chart, we inverted our data so it would track with the NYA Index’s direction.

However, if you look at labels 1 to 3, you can immediately see three instances where the NYA Index did NOTtrack with the DVOL’s trending.

In each of those three instances,  the NYA Index went down, while the inverted DVOL went UP or Sideways.  In other words, the opposite behavior of the Down Volume was trying to tell you something.

If the market was going down while the Down Volume was becoming less, then you would have to think that the amount of selling was starting to decrease and dry up.

That pretty much describes a positive divergence condition that was going on between the DVOL and the NYA Index at labels 1 through 3.

Comments: The best divergences often occur when the NYA Index has gone so low, that it falls below its lower Bollinger Band.   That is an out of balance condition that needs to go back towards normality by re-entering the Bollinger band area.

When such a condition occurs, with a positive divergence coming from the inverted Down Volume, then an oversold condition is ready for a bounce.  That is what we had a label 3 this week as seen on today’s chart, posted everyday on www.StockTiming.com’s Advanced Update.  There was not a lot of divergence occurring at label 3 in terms of “length of time”, or the “rise on the slope”, so it is very likely that this divergence will not have the impact that label 2′s divergence had on the market.

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Not a surprise considering the news out of Europe this morning, and so it goes that bond prices in Italy and Belgium have gone up more than 1% and as such driving down their yields.  France, Spain, and Ireland saw increases in bond prices as well but not as dramatic.

By the way here is what bond yields recently have looked like worldwide.  Truly an amazing picture!

Government Bond yields:  10 Year Notes

The TED spread measures the gap between the interest rate at which the U.S. Treasury funds itself (3-month T-bills) and the interest rate at which banks lend to each other (3-month LIBOR: London Interbank Offered Rate).

The TED spread is an indicator of perceived credit risk in the general economy. This is because T-bills are considered risk-free while LIBOR reflects the credit risk of lending to commercial banks. When the TED spread increases, that is a sign that lenders believe the risk of default on interbank loans (also known as counterparty) is increasing. Interbank lenders therefore demand a higher rate of interest, or accept lower returns on safe investments such as T-bills. When the risk of bank defaults is considered to be decreasing, the TED spread decreases.