All About Volume

Review of previous signal: The strong buy signal discussed in my previous post played out as expected with the market staging a rally on Wednesday to regain most of what it lost the tuesday.

Today the S&P finished at a new closing high but with volume that came in at the second lowest value of the year and around 36% less than the previous day. Looking back for instances where the market made a new high and finished down and 30% below the previous day in the past decade paints a short term bearish picture. We find 17 instances since 1970. In 15(88%) cases the S&P was trading lower within 3 cases. In 13(76%) instances it was trading lower the next day.