Don't Underestimate Volume or the Close

Remember this about volume, for advancing price to be healthy, you need advancing volume. Falling prices do not need volume confirmation, but if volume does rise, it indicates panic selling. If this occurs during a stage 3 top, it is important in showing investors fear. If it occurs after a prolonged downtrend/bear market, then it can mean the end of the bear market is near.

Here is the tech rally from 1990-2000. Note that the majority of the trend we saw a steady advance in price and volume, a confirmed healthy trend. The sudden jump in prices and volume in 2000 was extreme volatility that warns of a top, like I showed you earlier today with the channel .

Here's a closer look at the importance of volume, even in swings of price. The volume indicator is the blue line and when we see a green box we have a healthy trend, when we see a red box volume fades into rising prices and we get a swing correction in prices noted by the red arrows. Keep in mind, this is still a large bull market in the tech bubble.

Now we are looking at our current top-the volume indicator is purple. Again, at each red box is a reversal, but preceding that reversal is an uptrend in prices on fading volume. Each white arrow shows the fading volume, each red arrow shows the trend in price after. Note that every advance that has turned down was a rally with diminishing volume. The volume tends to rise on the price declines, indicating investor fear.

This is the same chart, without all the annotations so you may see it for yourself. Look at our current advance and the volume indicator.

There are very few exceptions if any on these charts. Fading volume into rising prices is a time-b-mb  (don't want my site flagged).

So with everything else we know, keep this in mind.

Important Stock's Close

Looking at the close of many of these stocks, it clearly looks like a reversal was underway, the break of the trendline (in a few you'll notice the kiss goodbye I mentioned today) and the volume all show these to be pretty serious.

I am going to post more this weekend, and one thing I will work on ins the market weighting indicator. I saw in the Dow alone, the stocks they had to keep up to close the Dow higher, they did, even if they struggled. I do believe there is manipulation going on here, but with the volume dropping off like it is, it will be harder and harder to find retail Joes in sufficient quantity to keep this alive. Technically speaking, the market-SPY, could not close above the resistance from yesterday so the attempt was failed. If smart money is distributing, they will not start buying when buyers dry up as they are, it's counter productive to their goals.

Lets see what i can come up with on the indicator front. If anyone can find a current NASDAQ 100 weighting of the average, that would be very helpful.

Keep an eye out for more posts this weekend, but the ideas I'm giving you to trade, will make money apparently, so long as they are not key weighted stocks in the index, as others seem to want to fall apart.

Have a great weekend.