Volume Peaks Often Mean the Selling Is Done. Is This Time Different?
Volume holds clues for what's to come. Let's look at the indicators.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
So, it was a growth day. No surprise. We will probably see more days like that in our near future. Until we see everyone loving on tech again. By then, we’ll probably see the 493 pullbacks shaping up to be more interesting again. That’s the Either/Or Market.
How do we know it wasn’t a broad day in the market? Breadth for one. Net breadth on the NYSE gained back about half of what it lost on Tuesday. A week ago, it would have been breadth rebounding and the index movers on the sidelines watching.
We also know because a mere 66% of the volume was on the upside. Not a great showing for a day, the S&P gained nearly one percent. But that’s what we typically get when it’s these growth/tech names that rally.
We see it in the Summation Indexes. The McClellan Summation Index for the NYSE, which has been steadily up as breadth has expanded these last few months, is now heading down. Nasdaq’s Summation Index, where I use volume instead of the advance/decline line, is trying to curl up. We looked at this last week when it first stopped going down. Now it will need a net differential of -3.2 billion shares (up minus down) to halt the rise. It did have a false start in January, but Nasdaq’s stocks hadn’t broken yet, whereas now they have, so it’s in the chart already.
Speaking of volume, something quite curious has occurred with NYSE volume. Let me first note that I like to monitor the 20-day moving average of volume because when the market sells off hard, volume tends to rise, which is how we know there has been a clean out. You have seen me note the volume on the QQQs. In the last few weeks, I have noted the high volume in the IGV software ETF.
I use a 20-DMA because one day does not make a market, but also because it smooths out the quarter-end markup days, the quarterly expiration days, the rebalancings, etc. Take a look and see that the 20-DMA of NYSE volume is the highest it has been in five years. And we have barely sold off!
Is that the volume in all those growth names? But they tend to live on the Nasdaq. Or do they? Off the top of my head, I can think of CRM, IBM, NOW, and even the IGV trade on the NYSE. But then there are the financials, which mostly trade on the NYSE as well. KKR, OWL, BX, etc., that trade on the NYSE.
I haven’t logged in that much downside volume (relative to upside) in the last month, but that is quite a surge in volume over the last month. I can’t figure out: were people getting in or were they were getting out? Maybe both. Maybe it was peak Either/Or. Whatever it was, peaks in volume have tended to mean a lot of selling has been done. We’ll see if that’s the case this time.
