Here’s What Volume Is Telling Me
Most
of the major averages and leading stocks are undergoing a correction
that most likely began in mid-October.
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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.
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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.
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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.
timt@tradingmarkets.com