Why You Should Watch Volume
Volume. Volume is the lifeblood of moves in the market.
I would suggest that every major move in the market in the past started with a
huge influx of volume. Of course, that number is always vs. the average daily
number. If you do not watch volume in stocks, sectors and the market…well, get
out of the market.
Volume has been very light over the past few days. That worries me. A lack of
volume as the market tries to move higher is a glaring example of a market that
has no conviction…a market where buyers are taking a vacation, but maybe
sellers have also.
Watch volume closely. Strong market moves must have conviction. Strong market
moves must have strong hands. I don’t know how the market can get any legs
without it.
Nevertheless, let’s take a gander at a few charts. Take a look at the IJR, IWM,
MDY, SPY, QQQ, DIA, SMH. These are all proxies for “the market” in one way or
another. They are now trying to break out above their first “higher low” after a
month-long drubbing. A break above last week’s high leads to another leg up. If
they don’t…they don’t. Keep in mind, even if they do break above first
resistance, much bigger resistance lies just ahead…and all this action is
still taking place below all major moving averages. With the tape still a mess,
I am not jumping on the long side just yet…and if the markets break down from
this little handle they are in, I expect the selling to pick up…and yes,
things can get nasty.
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Lastly,
based on the action I am seeing, I am upgrading the OIL COMPLEX sector. Many
stocks are now coming up their right side…and yes, volume picked up. Also,
leading names like
(
APA |
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PowerRating),
(
PPP |
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PowerRating) and
(
POG |
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PowerRating) have broken out or poised
to do so. At the least, I would not be short anything in this area.      Â
