A Real Rebound Needs Volume

Includes: DIA, QQQ, SPY
by: Market Blog

By David Berman

I noted last week that Mary Ann Bartels, head of U.S. technical analysis at Bank of America, was a little suspicious about the rebound in U.S. stocks, arguing that it didn’t look like a real stock-market bottom – even as the S&P 500 rebounds 11 per cent from its recent low. In a note to clients on Tuesday, Ms. Bartels is sticking to her cautious call, partly because of wimpy volumes.

“Last Tuesday’s low 1075 on the S&P 500 marked a lower volume test of the early August low near 1100 and this is an early sign that the U.S. equity market is trying to form a bottom,” she said. “This is encouraging, but the risk is that the market has not yet seen the explosion in volume that typically comes with a climactic capitulation. In addition, last Thursday’s and Monday’s 90 per cent up days" - when that percentage of stocks within the S&P 500 rose - "occurred on lackluster volume," she said.

“This suggests a lack of conviction from the bulls and likely points to short covering, which is not the recipe for a sustainable rally.”

Disclosure: None