The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Divergence Analysis

indices. We can see a significantly strong and consistent correlation between the

two data series. But at points A and B, we observe larger than average divergences

in correlation between the two indices.

Figure 9.97 brings up a very important point. When two markets are nor-

mally positively correlated, we look at divergence as a deviation from the norm.

However when markets are normally negatively correlated, we instead look at

Figure 9.95 Intermarket Divergence.

Courtesy of Stockcharts.com

Figure 9.96 Intermarket Correlation and Divergence.

Courtesy of Stockcharts.com