Friday, July 18, 2008

Solid Gains On Big Volume Provide A Quantifiable Edge

What was most striking about today’s action was the volume. Frequently you see high volume occur on a washout day like Tuesday or even a rebound day like Wednesday. According to my data provider, while Thursday's trading didn’t see the range that the previous two had, it did register the highest NYSE volume since March.

High volume on an up day is typically seen as a sign of institutional accumulation. It is generally thought to be a good thing. I put today’s action to the test:


Very impressive results. Winners swamp losers both when looking at the percentage of wins and the size. Also notice the healthy profit factors in the last column. (Profit factor = Gross Gains / Gross Losses.)

Historically, high volume days under the 200-day moving average where the market is up strongly like today seem to have provided a nice upside edge over the next 1-20 trading sessions.

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3 comments:

Marc said...

Rob,

So I think it will be quite interesting to see the action tomorrow. We have the "signs" that you've eloquently pointed out. We have a pretty negative after hours reaction to some of the big names. We have options expiration. Plus a number of other developments like the "emergency" short sale limit and falling oil prices.

Yes, yes, it shall be interesting.

My thinking is that we'll see a drop and maybe a stab downward a percent or two then a resumption of the current reversal higher that the last couple of days have wrought.

Cheers,
Marc

Daniel said...

Rob,

Another reminder here, in addn to the one I EMailed..

You had indicated, in tracking the McClellan Osc. system trade in SPY..

>> "I will make a note of it when the Oscillator closes above zero, which would signal an exit to the system trade."

According to the McClellan site, the Osc. jumped from -84 to +22 as a result of today's action.

Even if you are employing a different source of Osc. data, it has to be close to zero, or above.

You should alert us as early as possible tomorrow, to fulfill your promise.

It will be our choice whether to honor that 'rule' prompt-- or ignore it, in light of other guiding indicators...

Daniel

Rob Hanna said...

Daniel,

Thanks for the reminder. Yes, Thursday the TC2000 version of the McClellan Oscillator moved into positive territory for the 1st time in over a month. This would have finally signalled a close to the "system" that I mentioned in the McClellan Oscillator post last month. I'll try and note this in a seperate post tomorrow if I have some time.

Marc,

Thanks for the post. Tomorrow should be interesting. This whole year has been...

Rob