Monday, March 28, 2011
Still No Volume, But is Today's Reversal in Stocks Significant?
Friday's upday was accompanied by even lighter volume than the previous light volume day. I think it was around 820 million NYSE shares Friday. But the bears have not taken advantage of the thin bearish momentum and the market continues higher. This is not the behavior I'd expect to see at a major trend change. And with the S&P gap filled I would have liked to see a reversal quite soon, but it's not happening. This is why I put the WXY combination count as top choice late last week. I can still eye the WXY combination correction with the market being in the X wave right now, but with the series of higher highs and higher lows well intact, there's no reason to get short here in my view. Although momentum is hallow, it's still up. Until that uptrend is broken, I'm on the sidelines. The market is in the middle of a prior congestion zone so it may staul a bit here. It's reaction off the congestion zone will be important. And whichever way the market moves when volume re-enters the market should define the trend for the next several days.
The euro looks like it might be starting an impulsive decline but it's too early to confirm it. Looking for short opportunities in the euro, and long the USD, seems like a wise choice here.
Today we had a nice stock reversal at the end of the trading day which was really nice to see since the S&P is trading at the heart of a congestion area I'd like to see hold as resistance, and shortly after filling a gap at 1320. You can see the internals above show a bearishly slanted market by the advancers vs decliners and up vs down volume despite the fact the market was in the positive most of the day. The biggest problem here though is volume. There was none today. The NYSE had only 783 million shares traded, even lower than Friday's number. So volume continues to decline every day. So I don't have much confidence in this late day reversal......yet.
Like I've said before, the key is to watch for volume to enter the market again. Whichever way the market moves on high volume (preferably over 1.1 billion NYSE shares at least) should define the trend for the coming days.
Learn Elliott Wave Principle
The daily S&P chart shows a nice reversal pattern in the candlesticks. But unfortunately since there was no volume to support for this formation, it makes it less reliable. It doesn't mean we should ignore the signs of today's reversal, we just need to be cautious if going short here. I personally am waiting for volume to return, or a clear 5 wave decline before I get short stocks.
Still Enough Time to "Conquer the Crash?"
The euro didn't do much today to report on. It looks like it may have formed a significant top and has completed the early stages of a large impulsive decline. I'll post a chart with a count when I have high confidence in its labeling. But I'd still favor the short side on short term trades here.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.