Key turning points in the stock market are result of prices not confirming each others trends, watching the 3 indexes are represented by their Holders Stock, the SPY-SP500, DIA-DOW & QQQ-NASDAQ.

Watching price action is the purest indicator you could ask for, as traders, we get caught up in using the variety of indicators in our charting software like MACD, STOCHASTIC, RSI and the list goes on, if a trader where to eliminate these indicators & watch pure price only & look for confirmation & non confirmation of the 3 indexes, that trader would have an entire new world opened to them, seeing these patterns setup & unfold is like watching a rerun of a sports event, the thrill is there, the excitement is there, & to see when 2 indexes are rallying up & taking out new intraday highs as though there is going to be an explosion of buying and the trader is sitting patiently, not excited and is shorting the 3rd index because that trader notices something is not right, the 3rd index is not confirming the rally attempt to new highs.

Confirmation & Non Confirmation are extremely key to trading, on a trending environment UP, it seems as though the entire market is trading in sync, everybody is buying at one time & all day from the opening bell to the close. These types of days are simple confirmation days, all 3 indexes trending as one, get in at any point of the day & close out trade into last 5 minutes & you are for the most part going to make a profit.

Non Confirmation Days are typically non trending environments, The DIA & SPY will trend to new highs in the examples are shown below & give false hope to many buyers, where as the 3rd index, the QQQ has no intention to trade any higher than giving a half hearted attempt to correct back up from its last swing down.

This type of price action is considered non confirmation, & also considered a price divergence, a price divergence is when 2 or more indexes do not confirm the direction of each others trend.

The DIA (DOW)- As shown in the example below had a beautiful rally from 12:00 PM time frame & around the 2pm time frame took our its intraday highs & was breaking out of its range.

The SPY (SP500) also like the DIA above had a rally from the same time frame & it also took out its intraday highs. (Notice at the 12:00 bottom the price divergence on all 3 indexes? The DIA and SPY made a retest down only & the QQQ made new lows on the day by several bars, , that is an another form of non confirmation, price divergence )

The 3rd index QQQ (NASDAQ) gave a very weak attempt at a rally when the 2 other indexes where making new highs, this was a short signal, many times a trader will notice that the weaker index will have a bear flag pattern, or a rising channel. This divergence also comes at the upper part of a range on a much larger time frame daily chart that has been consolidating & when the markets are in a consolidation, non confirmation setups are more expressed & very clear at times as we have in the examples.

CIEN is just one stock of many that where emulating the NASDAQ Index-QQQ & where tradable just as the indexes or QQQ are tradable, notice the powerful move down as a result of the index (QQQ) & stocks such as CIEN did not confirm, soon as the DIA & SPY went &made new intraday highs, this was a spot to short the markets. As the person watching the rerun of the game & knowing the score before it happens, the trader that understands this pattern also understands the score at the end of the trading day.