Like I said, I don't really like indicators. But here is an example of the WEX showing divergence.
Notice how we are making lower lows but the Effort to Fall is not as great. In Physics, when the momentum is slowing down, they say the momentum in the opposite direction is increasing. Here we can SEE that as the Effort to Fall decreases, the Effort to Rise increases.
In fact, we move to
VSA. The first large wide spread bar (in the rectangle) closes lower than the previous bar, closes near the middle of its range and has high volume. THERE IS PROFESSIONAL DEMAND (BUYING) IN THIS BAR. Note also that we close just above the lower purple,
Value Area low line. We would expect to see some support at this level.
The next bar does indeed move higher on lower volume. Then on the next bar we see a narrow range bar that closes near its highs on volume less than the previous two bars: No Demand. The Smart Money is not yet ready for higher prices. One more thing needs to be done.....
On the very next bar, we get a 'test'. The Professional Money is testing for sellers (supply) underneath the market. While the volume is a bit higher than we would like to see, the bar does indeed trade lower than the previous bar and close near its highs. Again, notice that the test bar trades down to just outside the
Value Area Low (lower purple line).
The last bar in the rectangle is an up bar (higher than previous bar's close) and confirms the 'test'.
While the indicator shows divergence at this level, the key to getting in tune with the market is reading price and volume. In truth, an indicator only trader may have gotten in sooner. But the
Volume
Spread
Analysis user
knows why he is getting in when he gets in: Supply and Demand imbalances brought about by Professional Money.