One Year Anniversary of the Rally
by Jerome "Mel" Hickerson, MarketsPath.com
As we pass the one year anniversary of the rally beginning, let’s look at volume and range patterns and see if the market is telling us anything.
First week of March 2009:
Average per day volume: 7,592,844,000, Weekly range: 8.61%
Daily range: 27.48 points
First week of March 2010:
Average per day volume: 4,002,330,000, Weekly range: 3.08%
Daily range: 9.34 points
Weeks compared:
Average per day volume: 52.7% of 2009
Weekly range: 35.77% of 2009
Daily range: 34% of 2009
That week in March 2009 was at the bottom: Daily range averaged 27.48 points each day; we’ve had two days of such range (10/30 and 02/04) in the last six months.
Let’s look at volume – I’ll discount the 33 times that volume was greater than 100% of the yearly average that occurred between January 1st, 2009 and March 7th, 2009 (although that 33 times is an amazing stat) on the premise that things changed when the rally began. So we’ll just look at since March 7th.
In the last year, daily volume has exceeded 100% exactly 100 times. 55 times were before the end of May and 22 more times were during the summer “doldrums.” So that leaves only 23 times since September 1st.
Let’s drill down and focus on those 23 occurrences of greater than 100% in the last six months. Nine times were up days, averaging 7.64 points each. 14 times were down days, averaging -16.51 points each.
In the last six months, heavy (or even normal) volume has resulted in a down day 61% of the time and resulted in 216% loss versus gain, for a net loss of 162.36 points (and this while the SPX has gained almost 150 points).
Focusing in on just 2010 brings us to looking at only three days of normal volume: 01/21 (-21.56), 01/22 (-24.72), and 02/05 (+3.08). February 5th was the reversal day that tagged the 1044 area and bounced hard in the final hour.
So what can we learn from the numbers? Confirmation of what we knew: Low volume levitation resulting from few buyers but even fewer sellers; a lack of conviction suggesting buyers don’t want in at these levels but sellers are reluctant to miss the next leg up.
What it really says to me is that being long here is particularly risky; sooner or later a catalyst hits that causes range expansion and volume and evidence tells us it won’t be to the upside.
Another way to look at things: It has taken 20 sessions since February 5th to recover the losses that took 12 sessions beginning on January 21st. (I counted February 5th in both the up and down segments.)
One more look at volume, this time not counting February 5th in either count: During the down move, average volume was 5,222,990,873; during the up move, average volume was: 4,166,410,526. Volume has averaged 79.8% as much on the up move as it did on the down move.
One further thing to examine with the volume: We’ve heard this run up compared to last July, so let’s examine the same volume numbers from the June correction to the July ramp.
The late June/early July correction took 20 sessions, 06/12 through 07/10. During the down move, average volume was 4,787,723,500; during the up move, average volume: 4,869,967,143. Volume averaged 102% as much on the up move.
To recover the 20 session loss took seven sessions, from July 13th through July 21st. And volume continued to grow, not shrink, while average daily range was more than 50% higher than it is currently.
Conclusions:
Comparing the current ramp to July appears to be statistically an erroneous comparison. July’s recovery from correction took 1/3rd as long as the pullback and recovered on heavier volume. Our recent recovery from correction took twice as long as the pullback and did so on lighter the volume.
Draw your own conclusions from the numbers; this trader is betting on the bears.
Have a good Sunday evening everyone and good luck this week.
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"Mel"
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