These 6 Volume Rules Help You Determine The Direction Of The Market

Stock index futures opened Thursday’s session lower again mainly due to a continued shift in sentiment after a few reports of negative guidance from the Retail sector. The futures spent the first hour chopping higher to fill the gap, further buoyed by July Leading Indicators not showing any hint of inflation. Attention deficit disorder pretty much set in, which is pretty typical with this week’s options expiry. Also, I’m sure the inability of the equity markets to make any real ground on the heels of weaker crude oil kept some market participants at bay. Breadth, which started out weak and tried to rally, spent the last few hours participating in the choppy theme.

The September SP 500 futures finished Thursday’s session at the flat line again, while the Dow futures showed a little bit better resilience again with a gain of +6 points. Looking at the daily charts, the ES and YM both posted dojis again, with the ES settling below its 50-day MA. On an intraday basis, 60-min channels continue to define the daily ranges. For you daily 3-Line Break followers, the ES remains short with a new Break Price of 1229.75, while the YM remains short with a Break Price of 10627.

Friday is free of economic reports and will also probably be free of any real bias. It’s also options expiry, so it will probably be a good day to start the weekend early.

Listen to What Volume Tells You!

There are 6 simple rules to learn in order to interpret price and volume movements:

1. Increasing volume on increasing price signals an acceleration in buying pressure and price advance.

2. Increasing volume on decreasing price signals an acceleration in selling pressure and price decrease.

3. Decreasing volume on increasing price indicates an easing in buying pressure and a leveling in price or price reversal.

4. Decreasing volume on decreasing price indicates an easing in selling pressure and a leveling in price or price reversal.

5. Higher than normal volume at price highs indicates selling into strength and a price ceiling.

6. Higher than normal volume at price lows indicates buying on weakness and price support.

Daily Pivot Points for 8-19-05

Weekly Pivot Points for Week of 8-15-05

Please feel free to email me with any questions you might have, and have a great trading week!

Chris Curran

Chris Curran started his trading career at the age of 22 with a national brokerage firm. He combines fundamentals and technicals to get the big picture on the market. Chris has been trading for 15 years, starting full time in 1997, and has never had a losing year as a full-time trader.