Volume dropped significantly as institutional players stepped aside with the market closing up for the second straight day. The market experienced a bit of selling just after the release of the University of Michigan Confidence survey. A negative report as the survey showed confidence is at a multi-decade low as low as 1980. Despite how bad the confidence figure may have seemed the market was able to find buyers and push up into the noon hour. Traders were able to keep the market steady for much of the day closing off the lows of the session. Financial and Semi-Conductor stocks finished lower despite showing strength earlier in the day. Not a positive sign from the groups that had led the market lower. The market is wedging itself higher and is a sign of further weakening ahead despite this two day rally.
Volume is important and when we are evaluating price action. When making a decision volume can help clarify if a stock or an index is under accumulation. We have yet to see any type of accumulation after this week’s market plunge. The market simply took a steep dive lower and would eventually snap back. Market simply do not move in a straight line and these types of movements we have seen, while unprecedented aren’t all that surprising. Given the velocity of the decline a quick rebound isn’t out of the question, but a strong attempt at a rally back would have been nice. Unfortunately, the damage inflicted over the past few weeks has wiped any chance this market can rebound soon.
So many charts have V-shape moves and are a reflection of market turmoil. These types of patterns usually lend themselves to lower prices not higher ones. If a stock is under going a base building period you want to see tighter action with volume drying up on down days and accumulation building. The moves we are seeing, the V-shape ones come with heavy distribution and little to no accumulation. Are short sellers just getting out? Perhaps, what matters is we do not have a favorable situation for longs to have any chance of success. It is best to stand aside from the long side.
Get out and enjoy this upcoming weekend! No sense in wasting a good weekend.
