Monday, July 12, 2010

Stocks Rally On Declining Volume


Today was a quiet day in the market as can be seen by the lack of volume. Volume has been declining ever since we bottomed on July 1st which may prove to be somewhat bearish. Usually you want to see a rally accompanied by expanding or heavy volume to confirm an upmove.

Right now the S&P is approaching the .618 retracement level where it wouldn't surprise me to see some selling enter the market. That's my technical take on the market but what it really comes down to is earnings. Many stocks will be reporting earnings over the next few weeks which is really going to be the catalyst behind the next move in the market.

4 comments:

Mike Truong said...

Kevin,

We hit the 38.2 of the April top but I think ultimately we will retrace at least 50 to 61.8 to 1112 to 1137. Personally I have a trace all the way to 1176 which coincide with the reflexive rebound after the the May crash.

Mike

Anonymous said...

If you look at the chart, my interpretation is totally different from Kevin.

If you look at the volume when S&P 500 was trending up, the volume was low. This implied that there was no histerical buying going on. This is a good sign as a trending market with excessive volume shows extreme bullishness which very often leads to major correction.

In the case of the recent sell off, it took place despite low volume exhibited during the accumulation phase of the uptrend.

This is a very healthy sign as the correction occurred with high volume, a level which easily exceeded that of the uptrend cumulatively. This also means that we are having less and less bears in the market and itself is a good sign for accumulation here.

Personally, i am waiting for a pullback over the next 2-3 days before i start to accumulate again.

My stop will be the low of last week.

Anonymous said...

Kevin,
Did today's action change your outlook?
My sentiment readings indicate lots of room for a strong rebound. I'm considering going long.
Jack

Anonymous said...

you discussed the importance of ATR (average true range)before am a bit confused what to follow is it ATR or the stop loss lets say 15 points away from entry point, or the ATR even if its shows more than 200 point in a daily chart?

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