Market Stage
(12/29/2009)
From Monday's Market Outlook: 'At the moment, 60-day charts still suggest a flat market, but we see increasing odds for a correction.' Today's market was flat with shallow declines seen on the major indexes.
60-day charts with a 20-period SBV are showing declining SBV oscillator readings on the Nasdaq 100, but values are flat on the S&P 500 and on the Dow. The following SBV values were recorded at the end of today's session: Plus 19% on the Nasdaq 100; plus 10% on the S&P 500; plus 10% on the Dow. The fact that SBV oscillator readings are declining on the Nasdaq 100 is bearish. Furthermore, the accumulation of bullish volumeon this chart is quite substantial and could serve to push the indexes lower. On the other hand, flat SBV oscillator readings on the Dow and on the S&P 500, in conjunction with low (holiday-related) trading volume suggests we might see sideways trading action for the remainder of the week.
On 1.5-year charts with a 10-period SBV, we are now seeing declining SBV oscillator readings. While this is a bearish sign, the pullback in SBV values is currently only very modest and too small to be considered a strong signal. Should we continue to see sideways trading action for the rest of the week, it is however likely those SBV oscillator readings will push lower on this chart setting; this would then indicate higher odds for a possible correction.
Market Status
(12/29/2009)
Market Performance:
| Last | Change | Volume | A/D Ratio | |||
| S&P 500 | 1,126.17 |
| 1,816,186 | 0.63 | ||
| NASDAQ 100 | 1,872.02 |
| 369,417 | 0.60 | ||
| DJI | 10,545.64 |
| 389,763 | 0.93 |
After six consecutive up-closes on the major indexes, the market took a modest breather today. The NASDAQ 100 closed down 0.33%, the S&P 500 lost 0.14%, and the Dow relinquished 0.01%. Currently, the NASDAQ 100 index is showing a weekly gain of 2.36%, the S&P 500 has added 1.09%, and the Dow is up 1.26% for the week.
On the S&P 500, today's volume output was 1,816 million shares - 51% below the index's average daily volume production over the past three months.
NASDAQ 100 - 12/29/2009. 1-day Intraday, Modulated Volume.
Volume Analysis:
9:30 - 12:20: In another low-volume post-holiday session, the bears interrupted a six-session winning streak on the Nasdaq 100 index. Early in the day, the bulls failed to push through yesterday's high and thus to achieve yet another new high for the year. The index topped out after only a few minutes of trading, putting the bears in charge. The ensuing decline lasted until the early afternoon, with the index registering its lowest level of the session around 12:20. During the decline, the index generated a preponderance of bearish volume (which appears in red on the SBV oscillator pane). The production of bearish volume was strongest between approximately 10:40 and 11:35, as well as around 12:20. The session's largest bearish volume surge peaked at 12:25, roughly at the same time that the index put in its session low. The appearance of this bearish volume spike was a signal that bearish momentum was waning and that we might soon see an upside reversal on the index.
12:20 - 16:00: As discussed above, the session's largest bearish volume surge signaled that the bulls might soon be back in charge, as the bears' momentum was now spent. In the early afternoon, we in fact saw an upswing on the index which carried the market higher until roughly 15:30. During this choppy upswing, the index output predominantly bullish volume (as evidenced by the mostly green areas seen on the SBV oscillator pane during that time). A number of bullish volume spikes peaked during this phase, notably around 12:50 and 13:50; a broad-based buildup of bullish volume also developed late in the day. By 15:50, the total amount of selling volume accumulated during the index's afternoon recovery rally was sufficiently large to exhaust the bullish run. Over the course of the remaining 30 minutes, the market tumbled, re-approaching its session low by the close, thus ending the session on a bearish note. A 5-day chart reveals today's low-volume session and indicates that there was no clear volume bias.
Short Term (lasts a few hours to a few days): Yesterday, we suggested a chance for modestly higher index levels but likely 'only on an intraday basis' and warned that there was a 'growing risk this rally will soon peter out'. Today, the market pushed higher initially but soon turned bearish, with the major indexes then closing with slight losses.
Tomorrow is the year's last full session (trading on December 31 will be abbreviated). Given the lack of clear volume signals (see our Volume Analysis section above) and the dwindling overall volume output on the major indexes, we do not think the market will make any significant moves (up or down) at this time. Our short-term outlook is for flat trading. If there were however to be any significant moves, we see a higher risk for some downside.
Analyst's Daily Tip:
Charts: Using different views and settings
To put the magnitude of a volume surge into perspective, it is essential to look at more than one chart and use multiple time frames. For instance, while a volume surge may look imposing and seem critical on 1-day or 5-day chart, that same surge may not loom as large on a 30-day chart, and it might even seem insignificant on a 60-day chart. Volume surges that are noteworthy on short-term charts must always be placed in the context of the higher time periods, so that misinterpretations of their potential impacts on mid- or long-term trends can be avoided. For instance, a prominent surge appearing on a 5-minute chart could well affect an index in the short term, but it may not necessarily have much of an impact on the prevailing mid-term or long-term trend.
Volume surges
Volume surges are evaluated according to their magnitude and duration. It is vital to appraise each particular volume surge before attempting to predict how it might impact future market direction. We categorize volume surges as short-, mid-, or long-term. We also classify intraday surges.
Short-Term Volume Surges: These are volume surges that potentially affect market trends over the short-term (i.e., anywhere from one to several days).
Mid-Term Volume Surges: These are volume surges that potentially affect the market over the mid-term (i.e., from several weeks to several months).
Long-Term Volume Surges: These are volume surges that have the potential to affect market direction over the long-term (i.e., for up to several years).
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