Although the market has started to behave better, there is still one missing element: VOLUME. Typcially, volume confirms price, and when markets sell-off or rally on light volume, the moves are less trustworthy than a high volume action.
In the U.S. equity markets, volume has not kept pace with price, suggesting that recent strength may be more likely a technical rebound than a new bull run.
Our friend Mike Panzner looks at the recent volume trends in four markets:
Four of a Kind?
click for larger charts
Courtesy of Michael Panzner, Colins Stewart Securities
Here’s a look at the recent index gains, and the differences in July and August 5 day movign average of volumes.
(August v July)
|DJIA (7/18)||+4.9%||-31.3%||202.4 mil vs. 294.6 mil|
|S&P500 (7/18)||+4.7%||-21.7%||1.19B vs. 1.52B|
|Nasdaq (7/18)||+5.2%||-17.2%||1.11B vs. 1.34B|
|Russell 2000 (7/21)||+5.3%||-27.5%||461 mil vs. 635.8 mil|
NOTE: The value for volume is the difference between the 5-day moving average on the initial date and the 5-day moving average yesterday, through 8/16/06.