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Volume Slides Again as the Market Closes at Highs

|Includes: DIA, QLD, QQQ, SPY, Direxion Technology Bull 3x Shares ETF (TECL), TECS, TZA

Continuing on the v-shaped rebound from last week’s panic sell the market was able to close on the highs of the day, but as volume slipped across the board. Institutions were noticeably absent from today’s move as volume fell nearly 20% on the NYSE and about 16% on the NASDAQ. The lack of volume is TOO noticeable and is raising questions about the health of this rebound. The market was able to shake off a disappointing Empire Manufacturing index reading well below expectations. For the third straight month the manufacturing index has shown a negative reading, one you would only see during a recession. Despite a disappointing reading the market was able to find enough to push to the high of the day erasing all the losses stemming from the S&P downgrade.

The temptation here is to get long and catch a market bottom. Do not worry here; you aren’t going to be missing a rip roaring rally here. Volume would be funneling into the market scooping up shares hand over fist. In addition, we’d have leaders setting up in bases and/or breaking out here. We have neither. Another red flag is the fact gold stocks are leading the market. We have mentioned this before here and when we see metal stocks leading it is a signal the market is or has put in a top. Gold is a perceived safe haven against a potential disaster and at the moment it is leading this market. There are too many red flags to be confident in a market rebound here.

This week we will be interesting as we will be dealing with an options expiry week. General consensus of an option expiry week tends to have higher volume and wild intra-day swings. All of this is noise to us and we’ll continue to focus on the price and volume action of the market and leading stocks. All signs from the market and leading stocks are pointing to lower stock prices ahead despite what you have seen over the past few trading sessions. Low volume, wedging rallies off of lows will result in lower prices.

Stay disciplined, now is a good time to review history and prior trades. Education is paramount and now is the time to the work in.