Volume remains below average a sticky point as it signals a lack of confidence from big institutional investors. Perhaps large outflows of equity funds are to blame, but there are a variety of factors none of which matters to us. Volume will matter and at some point will catch up to this market, but the day’s action was quite nice. For once we didn’t have a wild end of day move nor did we see massive losses or gains disappear in a matter of minutes. One thing is for sure, if we do breakout to either side volume will be a big tell if the move will last.
In our chat room today we talked about the divergence in NYSE short interest versus the current sentiment indexes. AAII is tracking bullishness at 40% while the II survey shows bulls above 50%! How can the NYSE short interest ratio be at 16.22%? Makes us wonder, logically it doesn’t fit well, but the market will surely give us the signal and finally answer this mystery! I wouldn’t try to figure it out either, rationalizing one side or the other will only eventually have you miss a big move. For now, it does appear the market is looking to breakout. It is on us to be prepared.
Short interest is high and the NASDAQ is sitting in a precarious position. The 200 day moving average (dma) continues to be a thorn in the side of the NASDAQ’s back. It has been unable to pierce the moving average since the first of November. The lack of thrust and ability to consolidate above the moving average is somewhat troublesome. It can be fixed in an instance if the volume surges and prices follows-through to the upside. It is anyone’s guess and our bottom line is we need to be prepared for whatever the market will throw at us. Don’t guess, it’s a fools game.