One of the beautiful theories that I've learned and I want to share is the Dow theory Non-Confirmation . Using specific pairs of indexes and reading them in comparison , as a technician that uses momentum oscillators I like to see disproportions and divergences and if we apply what we know to this study we'll find that the Dow Theory Non-Confirmation is all about this logic , we see in this pair of RUSSEL 2000 and S&P 500 that a non confirmation happened just before the crash and happened after it , it's a divergence between tops and bottoms . While the S&P 500 succeeded to create a new high the RUSSELL 2000 shows us a Lower high and an exhaustion this could be a great signal for those who like to short the market or for buyers to keep an eye on their positions . For the second one that happened just after the crash you'd see that the market continued his trend to create historical highs but it was also an opportunity for Investors and Traders ! . What differentiates them ? .
Here a technician can make good of his knowledge and create a complete setup , for me using just classic resistance and support approach we see clearly that while in the first non confirmation case we got a Support broken at RUSSELL 2000 exactly the same time market has just broken an UPtrendline in S&P500 which is a bearish Confirmation for the figure and a complete setup , Other technicians can find other premature signals that's the beauty of technical analysis .
So what about the second non-confirmation setup ? we have exactly the inverse situation we got market that find support on an old high of the RUSSELL 2000 and the S&P500 also on his uptrendline , it was a complete setup to Go long .
I suppose that I didn't give something new for some experienced Traders but it could be useful for other , for me I see Beauty .
Here a technician can make good of his knowledge and create a complete setup , for me using just classic resistance and support approach we see clearly that while in the first non confirmation case we got a Support broken at RUSSELL 2000 exactly the same time market has just broken an UPtrendline in S&P500 which is a bearish Confirmation for the figure and a complete setup , Other technicians can find other premature signals that's the beauty of technical analysis .
So what about the second non-confirmation setup ? we have exactly the inverse situation we got market that find support on an old high of the RUSSELL 2000 and the S&P500 also on his uptrendline , it was a complete setup to Go long .
I suppose that I didn't give something new for some experienced Traders but it could be useful for other , for me I see Beauty .