Here’s What Volume Is Telling Me

  • December 9, 2003
  • Tim Truebenbach

Most
of the major averages and leading stocks are undergoing a correction
that most likely began in mid-October.

image src=”https://tradingmarkets.com/media/2003/Tim/tt120903-01.gif” />

image src=”https://tradingmarkets.com/media/2003/Tim/tt120903-04.gif” />

Leading stocks have been
taking hits left and right. Sandisk

(
SNDK |
Quote |
Chart |
News |
PowerRating) was a market leader since April, but has felt the weight of its
gains over the last few days.

image src=”https://tradingmarkets.com/media/2003/Tim/tt120903-02.gif” />

Yahoo!

(
YHOO |
Quote |
Chart |
News |
PowerRating)
has held its 50-day moving average up to this point, but in a sweeping correction,
that may not hold for long.

image src=”https://tradingmarkets.com/media/2003/Tim/tt120903-03.gif” />

The Nasdaq and many technology
and consumer related issues have led the market’s rally. The index is
still up over 40% for the year and will most likely continue higher after this
correction is over. I have seen a lot of evidence that higher stocks prices
will prevail over the intermediate and long-term. The economy is continually
improving amidst a low-interest-rate environment. The indices have not been
falling on heavy volume which indicates orderly exits by large institutional
investors. Many leading stocks have been falling on below-average volume and
we are seeing more and more IPOs come to market. Initial public offerings are
the companies that can provide continued leadership to a prolonged rally in
the future.

In the short-term, it is
very important to follow the market and leading stocks’ price-and-volume
action. If volume gets consistently heavier as prices decline, that may be a
sign that the landscape is changing. Currently, that has not occurred as the
Nasdaq, for example, has only seen two higher-volume declines in the last nine
trading days.

This is definitely not a
time to be on margin, and probably not even fully invested. When we start to
see accumulation again, it will be time to move capital back into the market.

Tim Truebenbach

timt@tradingmarkets.com