Market Internals Basics: The Hidden Signals Behind Price Action
Market internals are the stats behind the scenes—breadth, volume, volatility, and sector strength. Price can fake you out, but internals don’t. They reveal whether a move is real or running on fumes. If you want to stop getting trapped in weak trends and false breakouts, learn to read the internals.
What Market Internals Really Are
Market internals measure the health of the overall market, not just the chart you’re staring at. They include:
- Advance/Decline (A/D) – how many stocks are up vs down
- Up/Down Volume – volume flowing into winners vs losers
- Sector strength/weakness
- Volatility readings (like VIX)
- Tick index – immediate buying/selling pressure
Internals show the truth behind the move. For example, ES might be pushing up, but if A/D and volume are falling, the move is weak and likely to stall.
Advance/Decline: The Market’s Pulse
The A/D line shows the percentage of stocks participating in the move. Strong trends have broad participation—hundreds of stocks moving in the same direction. Weak trends have narrow participation—just a handful of large caps dragging the index.
Quick rules:
- A/D +800 or higher → strong bullish participation
- A/D -800 or lower → strong bearish pressure
- A/D near zero → chop and indecision
If you’re trading ES or NQ blindly without checking participation, you’re asking to get reversed. Want context? See the market structure basics article—internals make structure clearer.
Volume Internals: The Fuel Behind the Move
Volume answers the real question: is the market actually behind this move?
- Rising price + rising volume → strong trend
- Rising price + falling volume → weak rally, likely to fade
- Falling price + rising volume → strong sell momentum
- Falling price + falling volume → weak drop, often bounces
Volume is the difference between a legit breakout and a trap.
The Tick Index: Instant Sentiment
The Tick index measures how many stocks are trading on upticks vs downticks. It gives you the psychological “pulse” of the market.
Quick interpretation:
- +800 or more → aggressive buy pressure
- -800 or worse → aggressive sell pressure
- Wild swings → emotional market
Tick spikes often align with regime changes—combine this with the market regime basics article to understand environment shifts.
Volatility Internals: The Mood of the Market
VIX and related volatility measures tell you how nervous the market is. High volatility means wider spreads, more slippage, and higher risk. Low volatility means slow, clean moves.
This ties directly into market volatility basics — volatility determines execution quality.
How to Use Internals in Your Trading
You don’t need to overcomplicate it. Here’s the playbook:
- Is A/D confirming the trend?
- Is volume flowing into the move?
- Is Tick aligned or fighting price?
- Is volatility normal or elevated?
If internals contradict price, the move is weak. If internals align with price, the move is real and worth trading.
Market Internals Are the Truth Behind the Chart
Price lies. Internals don’t. If you want to stop getting trapped in fake moves, make internals part of your pre-trade checklist. They tell you the strength, conviction, and mood behind price action so you can trade with the real flow—not against it.