The story of the day was certainly the surge in stock prices clearly the bright spot. Day three of our current rally attempt does not necessarily need to see a volume increase from the day before, but it would have been an added bonus to see volume surge along with price. Positive economic data out of China certainly helped the morning session as traders bid stocks higher. Even a sell-off in the early afternoon slight sell-off was quickly met with buyers. This action continued up until the close with the market closing just off the highs of the day. An interesting day to say the least and with days four through seven approaching will this market be able to confirm a new uptrend.
The lack of accumulation is a bit concerning and a blemish on this market at the moment. Many leading stocks today showed flashes of great price action but lacked sufficient volume. Scanning through charts there are some decent patterns out there and possible leadership if this market ends up confirming this rally attempt. Anything can happen here, volume could suddenly surge tomorrow and offer up a chance to get long a newly confirmed rally.
Last week’s newly confirmed rally failed simply because there wasn’t enough buyers to absorb the supply in the market. Plain and simple, price is derived by supply and demand at its simplest form. Again, we are seeing the lack of demand for stock noted by volume but price has been able to hold firm. Meaning, there is enough demand at the moment to satisfy the supply of stock hitting the market. With day four of our new attempted rally, we’ll see if volume can surge (higher than the day prior) to confirm a new uptrend. Remember, volume just has to be higher to confirm, but if we get volume above average is a sign of a new uptrend that has staying power.
Last week things did not look good at all, even the follow-through day was weak with the NASDAQ confirming at the last second. A strong follow-through day shows price action steadily rising throughout the day with volume accompanying it. Volume running higher all day long shows there is strong demand for stock, not just at the end of the day. Most of the time you can attribute the surge in volume on a light volume day to shorts trying to cover at the last minute. If within the next four days (days four through seven) we see a powerful follow-through day it’ll be a sign a decent sized uptrend may be upon us.
June isn’t kind to newly formed up-trends, there have been plenty of examples since 2000. After the powerful run up in 2003 that ended in January of 2004 the market tried to rally in June only to see the month long rally end in failure. However, August is a much different story when it comes to follow-through days where BIG up-trends have begun in August. Sadly, June hasn’t seen a powerful rally just yet. Just because it hasn’t happened in the past it can’t happen right now, the odds of it happening aren’t as great as if it were August. The best thing to do is to remain patient and pick your spots carefully.
Enjoy the upcoming weekend, stay disciplined.
