Wednesday, October 14, 2009

Watching The Volume

I will be watching from the sidelines this morning. In fact I won't be watching at all until after my 11:15am appointment, but that's ok. When I get back in I want to see the volume run rate at noon. When (I do think it's when and not if) the Qs make a new rally high today I want to see whether the volume run rate is projecting higher or lower volume than the 9/23 top. For the Qs it would take about 72 mil at noon to equal the 9/23 volume. Then, does the market hold the new high or reverse and turn lower on higher or lower volume?

A new high with a reversal on significantly higher or lower volume and close below the 9/23 high would be a potential short signal, but we must be aware of the fact that this could just be wave a of 5. Also, INTC has clear resistance at 22 at its upper channel line, so this could be it for INTC for a while.

I will consider legging into some short positions. As you know I am already 1/2 short the SMH by the SSG, a bit prematurely, but I will be looking to build some short index positions in anticipation for a correction to the 200demas for the indexes in November. No need to get heavily short this market though, and I am maintaining my core long positions.

7 comments:

dave said...

Art Cashin has often mentioned the volume run rate, but i've never figured out how to track it online. Is there a link or a Stockcharts symbol ?

Thanks

Btw, the NH's have been very impressive the past week.

dave said...

think we close well off of the highs today, but still close UP thus frustrating bull & bears, but it will be a buy

dave said...

Oct pullback re-energized the mkt. Think we're probably in 3 of 3.

dave said...

...and the reason is it feels like a tipping point like a seesaw. Almost every technician was looking for a top & we blew right thru it.

dave said...

lots of skepticism about today including http://www.cnbc.com/id/33311133 & also involving the NYSE's Dow 10,000 hats...superficial reason IMO

However, i welcome the skepticism anyway from the sophisicated set about us boobs who are incapable of ignoring Dow 10000.

Nothing is as capable of hearing the train whistle in the tunnel than cycles-based technical analysis. Wooooo woo. Is cycles inversion a form of perversion ?

R. Craig Pritchard said...

With regard to volume run rate, I came up with my own back of the envelope numbers many years ago by tracking the hourly volume numbers in IBD or WSJ. I don't know if they even publish them any more, but I have found the following estimates to be quite accurate:

Today's Volume =

6 x 10am volume
5 x 10:30am volume
3 x 11am volume
2 x 12pm volume

I usually look at the 10 and 10:30 volume totals and multiply as above. I can then judge whether a breakout or follow-through is valid or not.

Of course, occasionally the last hour volume changes the picture if the big institutions step in, but these work really well.

Also, this applies to cash indexes only, not stocks or futures.

R. Craig Pritchard said...

Jesse Livermore wrote about the importance of round number decades ago. They do reflect a huge psychological force. I've noticed that stocks that break through 100 move to 150 and 200 fairly rapidly, etc.

As far as cycle inversions, they are an illusion caused by applying seasonal averages to natural cycles with varying periods, but it often works out that when the seasonal average "inverts" it is corresponding to a true bottom or top in the natural cycle. This esoteric fact is not at all widely understood. Cycles in financial markets are grossly misrepresented.

Mark my word, next year people will be calling for a 4 year cycle bottom, but we just had it.