ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Friday, April 18, 2008

 

the most bullish price action in months


these charts tell the story.

the dow.

the nasdaq 100.

the nasdaq composite.

the s&p -- the only one of the four not to break the downsloping line dating back to the october highs. all, however, seem to have broken out over resistance that has persisted at the top of the range in place since the january 22/23 low.

there have been some concerns about volume particularly since the mid-march low point which may have established the final and successful retest -- bonddad's view is not uncommon. i attached this comment.

i don't think the lack of volume is a problem, and here's why.

i nervously kept out of the initial stages of the 2003 launch in large part because, for much of the huge rally from march 2003 to march 2004, i felt volume was unimpressive. looking back statistically, the 21-week average of volume in the s&p was below the 50-week virtually the entire time. both the 21-day and 50-day averages of index volume traded at or below the 200-day.

a similar pattern can be found following the breakout from the range which ended in july 2006.

and i think that comports well with reason -- rallies from deeply pessimistic lows will by nature be underparticipated in the early going as general skepticism remains very high.

just an anecdotal observation, but i have noted that this rationale appears at the beginning of virtually all large rallies. that's not to say that THIS must be a large rally, of course -- just that i don't think a shyness in volume in the early stages of a rally necessarily says much about its character in the intermediate run.


i will, however, be watching breadth characteristics on this rally closely. this is, after all, probably just a bear market rally which will fizzle well before new highs or anything of the kind are put in place. more updates on that later.

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gaius marius
Hi I enjoy reading your blog. I wonder whether you can make any view / remark on the threat of global central bankers on their existing policy instruments and function. I think the subprime/securitization situation simply a tip of what is much larger concern-international monetary system. Thanks EMT

 
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