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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: upanddown who wrote (83009)	4/15/2007 8:22:01 AM
From: Paul Kern	Read Replies (1) \| Respond to of 206254

DUG and DIG don't enough volume.

To: upanddown who wrote (83009)	4/15/2007 12:28:36 PM
From: Q8	Respond to of 206254

Likewise the broad market advance has been running on fumes... My mantra like the article is with no volume, you cannot sustain the upward momentum without a significant pullback. Those wanting to see the charts.. let me know. Highlight of the article: But from the start of the rally through this week's action, trading volume has been conspicuous by its absence. Without volume, the market will soon run out of fuel, and under such conditions we cannot expect it to run much longer Wednesday, April 11, 2007 GETTING TECHNICAL \| By MICHAEL KAHN Stock Market Is Running on Empty THE STOCK MARKET HAS PUT on a nice show with the Dow Jones Industrial Average rising some 5.5% off its March 14 intraday low. Along the way, it has ignored several technical barriers and even saw one major index, the New York Stock Exchange composite, set a new closing high. But from the start of the rally through this week's action, trading volume has been conspicuous by its absence. Without volume, the market will soon run out of fuel, and under such conditions we cannot expect it to run much longer (see Chart 1). Chart 1 What's the big deal with volume? Let's just say that high volume tells us that institutional players and the investing public are fully involved. Money continually comes into the market and demand remains firm -- just the combination needed to sustain a true rally. Low volume tells us that the rally has been sustained by bottom fishers and momentum players, the latter arising from an attitude that the rising trend will bail out ill-timed purchases. These people can and will turn tail at the first hint of trouble, as they did Wednesday morning. We've heard about momentum markets before, most notably in the bubble of the late 1990s. While we cannot compare today's market to what was happening then, there is one very notable condition that preceded both the initial peak in March 2000, and the second peak and last straw in September 2000 -- declining volume (see Chart 2). Chart 2 Again, I must stress that there is no way to equate the bursting of a bubble with what we are seeing in the broad market today. The point is that volume is indeed a good leading indicator for price action, and the old charting saw "volume precedes price" comes to mind now. Years ago, noted market technician Ralph Acampora, then of Prudential Securities, said, "In price there is knowledge," referring to the trends and patterns of a stock yielding all the information needed to make an investment decision. But Dennis Jarrett, then of Kidder Peabody, added the corollary, "In volume there is truth." I interpret that to mean that volume was the key component needed to validate a price move and any pattern, trend or breakout that occurred without it was not to be believed. Not all rallies end with declining volume. However, excluding the year-end holiday season, declining volume does tend to precede the ends of rallies with the March 2004 peak being an excellent example (see Chart 3). Chart 3 The Standard & Poor's 500 had been rallying well for nearly a year when prices hit resistance and volume peaked in January 2004. Over the next two months, prices clawed slightly higher but volume was clearly in decline. And when prices finally did break down, volume spiked higher to confirm that indeed a change in trend had occurred. This change occurred in a bull market, but the same warning behavior occurs in bear market rallies, too (see Chart 4). Chart 4 As the S&P rallied from its July 2002 low, volume remained below average and continued to decline to indicate that the public was not fully engaged in the move. The desire to own stocks at such depressed levels did not spread throughout the masses on Wall Street, and whatever was driving the rally -- likely bottom fishers -- just ran out of power. That volume did not spike up as the rally ended can be attributed to the fact that the major trend was still down. Bear markets do indeed act differently than bull markets. The declining volume condition today is not just limited to the NYSE as a whole. Major exchange-traded funds such as those covering the Dow, S&P 500, Nasdaq-100 and Russell 2000 all show the same volume declines, and this confirms that this condition is truly marketwide. Of course, volume can pick up at anytime and that would change this analysis. However, we can only analyze what is actually on the charts now and draw our conclusions from the evidence presented. With most major indexes well below their February peaks, which are respective resistance levels, and volume drying up at a steady pace, the conclusion has to be that the stock market is now running on empty. URL for this article: online.barrons.com Hyperlinks in this Article: online.barrons.com