Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

How Volume Determines Short Term Price Action


It's the skew of volume -- not total volume -- that matters.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

For several months, I've heard complaints about volume in the media. I usually look at On Balance Volume (OBV) to decipher the relative Up versus Down volume and OBV has kept pace with the market advance. In my opinion, it's not the total volume but the skew of volume that determines short-term price action. Mark Twain inadvertently explained this concept best when he quipped, "It's not the size of the dog in the fight; it's the size of the fight in the dog."

For the intermediate term, the Advance Decline lines are still in sync with the market advance. As I've been sharing for weeks (4/7 note on change and 3/30 mkt thoughts; subscription required), this (in conjunction with several other indicators) denotes that currently, the intermediate health of the market remains robust.

See a Chart AD below:

Click to enlarge

Also, looking at Dow Transports proved to be quite helpful (note on 4/8; subscription required), as this average is trading at its 52-week high today. We've noticed several long set-ups lately (First Solar (FSLR) and Goldman Sachs (GS); subscription required).

However, in the very short-term, yesterday's reaction to Intel (INTC) might have captured some panic-buying as evident in many short-term sentiment readings. The best thing the market can do after this workout is rest and work off these sentiment extremes using "time." The other alternative is to take a beating in price.

Even so, at this juncture, given the intermediate-term internal strength, I'd expect this initial decline to be short-lived and bought into. Key technical areas I would keep in mind are SP 500 20-day MA and January highs.

See a Chart SP below:

Click to enlarge
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos