Friday, December 10, 2010

SPY Consecutive 50-day Highs On Lower Volume

Declining volume at new highs can often lead to short-term difficulties.  Below is a study related to SPY and SPY volume that I've shown a few times in the Subscriber Letter.  It popped up in the Quantifinder again on Thursday.




This appears to suggest a mild downside edge.  The high probability of some kind of decline despite the fact that it always occurs in an intermediate-term uptrend makes the study compelling enough to me to take under consideration.

1 comment:

Daniel said...

Love that Quantifinder!!

Key term, "intermediate-term trend". By definition such spans always include in themselves short term trends; either of sudden acceleration in the same direction, or ones of counter movement. It is worthwhile imo to try to profit from these as well.

Here, with some OB oscillators signalling short term caution, and some sentiment readings in zones often marked "frothy", I think your caution flag for bulls is worth watching.

We are also in that zone, prior to the Quad Witching Friday ahead, where sudden price movements and other "shennanigans" of no long term significance can take place in a day, as part of the endless efforts to "game the system" by those who can.

That said, the clever jingles of Martin Zweig, pundit and portfolio manager, are always worth singing. The trend IS your friend, and intermediate always outranks short term.

Daniel