Summer Doldrums Are Over - When Will Market Volume Return?

Labor day is over and the same should be true for the summer doldrums.  The big boys should work their way back into this market this week and definitely next.  Volume should expand over the weak levels that we have been witnessing off the bottom in July.  The markets have become very volatile and it would be a great time for the bigger players to capitalize off of this rally and jam this market down fast to load up for the final bottom that should be put in within the next 4 to 6 weeks. 

The last few weeks have been like watching paint dry.  The choppiness has taken the market nowhere.  No leadership has been taken by any large amount of money and this needs to happen before we see a sustainable rally. 

Let's take a look at the Dow Jones, which we have been tracking pretty closely for the last few months. 

There are a few things going on here:

1. We have noted on the chart below how the Dow Jones continues to fail at the 38.2% retracement level from the July bottom.  In fact, it has failed at that level seven times, if you include the false breakout that occurred above that level for a day. 
2. A potential head and shoulders top is forming on the DOW for the shorter term, as noted on the chart in Blue.  A break below that yellow neckline could indicate a move back down to the lows.
3. Volume has been extremely light over the past few weeks.  Let's keep a close eye on trading activity over the next few weeks.  I still see a small possibility for a quick knee-jerk move up to the 12,000 area.

 

The next chart we want to review is of the Banking sector.  Many of the large cap bank stocks still look very weak but there is strength in the smaller cap stocks within the BKX banking index.  Again, notice how this sector failed through a double top at the 61.8% retracement level.  So far, the BKX has been consolidating within a 12 point range over the past 6 weeks.  We need to see a break in either direction before we can make any further conclusions about this sector; however, I believe a break DOWN will be the most likely scenario.  A banking sector failure looms here going into the weakest seasonal period of the year.

Let's look for clues over the next two weeks.  Until then, I continue to remain on the sidelines waiting for a good entry into this market.  I believe we will see a low volume move down that will feel like the world is falling apart. 

Stock position: None.

Comments

[jjason:]

The market will get better when oil prices are lower and when all the bankrupt builder's inventory is sold. Maybe in two or three years.

Help bring down energy prices...GO TO :

www.stopoilspeculation.../

and sign the petition.

And KICK THE REPUBLICANS OUT OF OFFICE.

OBAMA / BIDEN 08

2008 Sep 02 05:57 AM

[A J SESSA:]

this market will bottom in 2010 and will top once again in 2015 as it has been in the past there is a 10 year cycle the top this time was 2005 mark the date and prepare to buy by the middle of 2009 tony sessa ABR

2008 Sep 02 08:05 AM

[investor88:]

Agree with the article and readers' comments that it is too early to go long. Bear market may have a year or so to go, this bearish view is subject to quarterly re-assessment.

2008 Sep 02 08:11 AM

[aztrader:]

The volume will return when we know that the government will no longer interfere with the market. A lot of the short sellers are staying out of the market because they don't know when the next "stick save" comes from the Fed or Treasury.
The volume will stay thin until we feel more comfortable that the "free" market is back!

2008 Sep 02 02:34 PM

[George Gorski:]

After a day like today, the good times may never return.

2008 Sep 02 08:31 PM