Monday, September 28, 2009

Friday's Very Low Volume Provides An Upside Edge

One hint from Friday that suggests a bounce is likely is the fact that volume came in very low. It was the lowest volume in over 2 weeks. Below are some tests which demonstrate the potential importance of this.

First, let’s look at 3 day pullbacks that don’t occur on extremely low volume.
(click table to enlarge)

As you can see there is a slight upside edge. The % winners were between 57% and 60% and the average gains days 1-3 were between 0.1% and 0.275%.

Now let’s look at times were the volume was extremely low:
(click table to enlarge)

Here the upside edge is significantly stronger over the next few days. The % winners were between 68% and 76% and the average gains days 1-3 were between 0.59% and 0.94%. The reliability of a bounce occurring at some point in the 3 day period increased from 75% to 87%.

Volume can often provide some valuable clues. For more volume-related analysis, you can check out the volume label on the right hand side of the blog.


Z said...

also check out last week in sept since 90 bullish. best sri

ph4nt0m said...

Love your blog!
I have a question: What do you look at to say that volume was very low on Friday. Looking a major indexes (SPY, QQQQ, XLF, IWM) volume was above average albeit slightly lower than on Wednesday and Thursday.

Now today was a very low volume day by any measure :) Anyways, thanks for clarifying that