A disappointing ADP employment figure did very little to hold back the market from finding support during the morning session. Once again volume was noticeable absent from the market, but it has yet to prove to be an issue for this market. We continue to see this market push higher and the S&P 500 hitting all-time highs. Volatility continues to remain tame and until we begin to see our volatility ratio push higher this market is likely to continue to move higher. This market is going to try to confuse the masses and this low volume jaunt to new highs is certainly doing a nice job. Go with the flow.
A big theme has been the high level complacency and low volume for the bears. The VIX remains low as traders are simply not expecting any volatility any time soon. Volume has been driven in large part by companies buying their own stock rather than institutional buyers. On the flip side of the coin you need an avalanche of sellers to push down the price of stock. Of course price will be our indication well in advance, but our stocks too will be a key indicator. Growth stocks were hit hard earlier this year with value coming into favor. If we begin to see the stocks who have led this market higher here breakdown in heavy volume it would be a bad sign for the market. Until we see leaders go down in flames, distribution, and volatility kick higher we are not going to change course.
It is quite clear institutional buyers have their fill of stock and aren’t making any waves. Friday’s job report may help out with volume, but it’s unlikely we’ll see it sustain itself. We are heading into the summer season where volume is notoriously light. It certainly doesn’t mean we see this market head into correction mode. Simply means do not go looking for volume to suddenly appear in support of this market. Stick with the Big Wave Trading and you’ll succeed in this market.
