Contrary to what many are taught, low volume on a big selloff is bad news. As is high volume on a small rally, like we had on May 31. Many don't interpret volume correctly. You want to have a lot of volume on a big down day because it means there is panic and weak hands getting flushed out. When you don't have high volume on a big down day, it just means the weak hands are just hanging on waiting to sell later.
Yesterday, we had low volume for such a big down day. We went down over 2% on lighter volume than the previous day when we went up 1%. It is almost unprecedented in this rally from 2 years ago when all the big down days were on big volume and big rallies were on light volume.
It is a bad sign for the bulls for the short term. It means the weak hands didn't capitulate despite the big down day. I am looking for more weakness ahead and despite all the bad news bears out there, are they acting on it? The volume yesterday says most of them weren't.
Nasdaq Volume data 2011
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3 comments:
did you make the 5% in JOyg? I did. I gave you that one for free.
This is to EZ.
I would hardly call Tuesday's volume light.
You made my point for me. Tuesday's volume was heavy on a moderate up day, that is different than the norm we've experienced the past 2 years. The volume was lighter on the big down day on Wednesday. And volume was even lower today with the market hitting lower lows intraday. Volume in the past 2 days is disappointingly low. It means not many are selling and many are just sitting on their hands. Not a good sign for a lasting reversal.
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