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The Morning Cup of Jo


Volume - What volume?

Being out of pocket for the last couple of days made me wonder just how much I missed until I started reviewing the action. Then it all became clear; I wasn't the only investor out of pocket.

Following the reaction low set last Wednesday, the volume has been nothing short of anemic. The markets have put in two of the lowest volume days all year. Actually, another very important point is since the SPX broke its IT Trend, the NYSE has only had 4-days in which the volume has exceeded its 50-DMA and ALL of those have been distribution. Now the SPX is retesting the bottom side of the 50-DMA and the IT trend (Floors & Ceilings). Take a look.

WONDA Copyright 2004 William O'Neil + Co., Inc. All right reserved.

The Nasdaq isn't giving such a pretty picture either. It's also retesting the bottom side of the 50-DMA and its ST Downtrend. Looking at the volume, since its break of the IT Trend, you'll notice 5-days in which the volume has exceeded the 50-DMA. All of those have been distribution as well.

WONDA Copyright 2004 William O'Neil + Co. Inc., All rights reserved

So where does that leave us?

Yesterday, I swear I heard one of the teletubbies do an Internet poll asking people if they believe Wednesday of last week was the bottom of this correction. However, I didn't stay tuned to see the results - too bad. (Anything to sell advertisement.)

Last week I wrote a 'Jo' that talked about "The 4 B's and a D," when looking for a healthy bottom. Currently we have seen B1 & B2. (Break and Bounce) The present volume, on the upside, is giving reason to believe the probabilities favor, at minimum, a retest of last week's lows. Furthermore, there has been no evidence of momentum divergence.

However, the markets are at another key inflection point. If the probabilities are wrong and the markets do decide to breakout from here, the first key to a changing trend would be the Nasdaq breaking upwards of its ST downtrend and the 50-DMA. (2025)

I hope this helps!

Until next time...


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No positions in stocks mentioned.

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