Important Volume Principles
What
Tuesday’s Action Tells You
The major indices had a pause day, with the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) closing up less than 2 points, or +0.2%, as did the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating),
while the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) and
(
QQQ |
Quote |
Chart |
News |
PowerRating)s each declined -0.2%. In fact,
on a closing basis, the QQQs traded in a Slim Jim between 35.35 and 35.21 all
day until coming out the top on the 2:55 p.m. ET bar, trading to 35.45, then
reversing and coming out the bottom of the range on the 3:50 p.m. bar, closing
back at the .618 retracement level again. It was not the kind of market action
that keeps daytraders happy, especially following the previous day and the windfall
in many of those focus list stocks.
NYSE volume was average once again at 1.33 billion
shares, but there was obviously no selling pressure of note, as the volume ratio
was a positive 70, as was breadth at +1199. The five-day RSI for the SPX was
64. The four-day MA of the volume ratio was edging into the short-term high
zone at 61, as is breadth with a four-day MA of +676. Keep in mind the primary
and intermediate trends are clearly up, so overbought can get more overbought.
We are more interested in short-term oversold conditions in this primary uptrend
which is always the higher probability time to enter any position trade from
the long side. However, from a daytrading standpoint, we use the short-term
overbought zones to take the good intraday short setup on some reversal patterns,
like RSTs, 1,2,3s and volatility band trades.
| size=2> |
Wednesday
11/19 |
Thursday
11/20 |
Friday
11/21 |
Monday
11/24 |
Tuesday
11/25 |
| color=#0000ff>Index | |||||
| color=#0000ff>SPX | |||||
| color=#0000ff>High |
1043.95
|
1046.48
|
1037.57
|
1052.08
|
1058.05
|
| color=#0000ff>Low |
1034.15
|
1033.42
|
1031.20
|
1035.28
|
1049.31
|
| color=#0000ff>Close |
1042.44
|
1033.65
|
1035.28
|
1052.08
|
1053.89
|
| color=#0000ff>% |
+0.8
|
-0.8
|
+0.2
|
+1.6
|
+0.2
|
| color=#0000ff>Range |
9.8
|
13.1
|
6.4
|
16.8
|
8.7
|
| color=#0000ff>% Range |
85
|
2
|
64
|
100
|
53
|
| color=#0000ff>INDU |
9690
|
9615
|
9629
|
9748
|
9764
|
| color=#0000ff>% |
+0.7
|
-0.7
|
+0.9
|
+1.2
|
+0.2
|
| color=#0000ff>Nasdaq |
1900
|
1882
|
1894
|
1947
|
1943
|
| color=#0000ff>% |
+1.0
|
-0.9
|
+0.7
|
+2.8
|
-0.2
|
| color=#0000ff>QQQ |
34.21
|
33.88
|
34.25
|
35.19
|
35.12
|
| color=#0000ff>% |
+1.0
|
-1.0
|
+1.1
|
+2.8
|
-0.2
|
| color=#0000ff>NYSE | |||||
| color=#0000ff>T. VOL |
1.32
|
1.29
|
1.26
|
1.30
|
1.33
|
| color=#0000ff>U. VOL |
845
|
361
|
729
|
1.10 |
917
|
| color=#0000ff>D. VOL |
458
|
922
|
504
|
185
|
401
|
| color=#0000ff>VR |
65
|
28
|
59
|
86
|
70
|
| color=#0000ff>4 MA |
37
|
35
|
46
|
59
|
61
|
| color=#0000ff>5 RSI |
43
|
32
|
36
|
53
|
64
|
| color=#0000ff>ADV |
1938
|
1259
|
1925
|
2452
|
2234
|
| color=#0000ff>DEC |
1298
|
2005
|
1288
|
838
|
1035
|
| color=#0000ff>A-D |
+640
|
-746
|
+637
|
+1614
|
+1199
|
| color=#0000ff>4 MA |
-437
|
-489
|
-5
|
+536
|
+676
|
| color=#0000ff>SECTORS | |||||
| color=#0000ff>SMH |
+1.7
|
-2.3
|
+1.5
|
+3.5
|
+0.4
|
| color=#0000ff>BKX |
+0.7
|
-0.5
|
+0.8
|
+1.0
|
+0.3
|
| color=#0000ff>XBD |
-0.3
|
-1.1
|
+1.2
|
+1.3
|
+1.0
|
| color=#0000ff>RTH |
+0.7
|
0
|
+0.2
|
+2.4
|
+0.3
|
| color=#0000ff>CYC |
+0.4
|
-0.6
|
+0.1
|
+1.9
|
+1.0
|
| color=#0000ff>PPH |
+0.5
|
-2.1
|
-1.9
|
+1.5
|
-0.7
|
| color=#0000ff>OIH |
-0.8
|
-0.5
|
-1.4
|
+.09
|
+1.1
|
| color=#0000ff>BBH |
+1.2
|
-0.3
|
+0.1
|
+2.4
|
-0.9
|
| color=#0000ff>TLT |
-1.1
|
+1.0
|
+.06
|
-0.8
|
+0.6
|
| color=#0000ff>XAU |
+.05
|
-0.9
|
+0.2
|
-1.6
|
+1.8
|
Six of the major sectors closed green, led by the
CYC, XBD and OIH, all +1.0%. The BBHs fell off yesterday’s 2.4% gain and lost
-0.9%. In the smokestacks,
(
ITW |
Quote |
Chart |
News |
PowerRating) gave traders another big day up, +3.8%,
which follows the previous day’s +1.5%, all from that retracement to the rising
20-day EMA.
(
PX |
Quote |
Chart |
News |
PowerRating) followed a +1.6% day with a +4.8% day yesterday, but there
was no trade-through entry because of the gap open from a 68.84 Monday close
to a 70.30 open yesterday. Traders that held PX as a position trade Monday are
obviously happy campers.
When following the “Table,” each day, keep in
mind the following volume principles when you are checking your charts:
Volume will generally lead price. I consider
it a red flag when you get new highs in price that are not confirmed by volume
because it could signal a possible reversal and change in the immediate trend.
It indicates a weak rally which is suspect because it’s just rallying because
of lack of selling pressure, or else being marked up for various reasons.
This can only sustain itself until it reaches a level where the sellers return
for any number of reasons and that’s usually when you get an air pocket or
two to the downside. You should also understand that if you have rising prices
and declining volume, in addition to negative divergences in several of the
better momentum indicators, you must wait for a defined entry price pattern
before you decide to play any reversal of the trend in force. I will continue
to mention more on what I consider important volume principles in the ongoing
commentary over the next several weeks, so save them as we go.
For Today
The Wednesday before the Thanksgiving holiday is
always a grab bag, and liquidity gets thin as many professionals on both the
buy and sell side pack it in early to get a head start. Friday, because of the
low liquidity, can see prices pushed any way the Program Gang wants to because
the Generals won’t be around in size.
I am doing this Tuesday night for Wednesday, so I
don’t know whether yesterday’s late price drop in both the individual stocks and
the major indices carries over into weak futures. The next commentary will be on
Monday, but the table will be in my commentary slot on Friday morning.
Enjoy the Thanksgiving holiday and do something special for someone. You will
feel good about it, but more importantly, so will they.
Have a good trading day,
Kevin Haggerty
