Thursday, May 20, 2010

"Market Correction: Volume Has Been Ear-Splitting" (SPX; QQQQ)

We had the early warning with the May 4th "Equities: Anybody Else Watching the Distribution? ($SPX; SPY)".

That was followed by further explication in "IBD DOWNGRADES MARKET OUTLOOK" on May 5.

On the morning of the 'flash crash', May 6, we had an interview with Investors Business Daily's managing editor in "Equities: "Market In Correction. Now What? "'.
This volume stuff is important and anyone risking their money in the market had better understand it, or hire someone who does.

From MarketBeat:

Jim Bianco, president of Bianco Research in Chicago, just reminded us of a particularly disturbing detail of the market’s recent slide: It’s happened on rising volume. In fact, the more we look at the numbers, the more striking the volume rise appears, reflecting the depth of investors’ fear right now.

From the start of the year through April 23, when the S&P 500 set a 52-week closing high, the average daily composite trading in New York Stock Exchange-listed companies was about 5 billion shares. But in the full trading sessions since April 23, that figure has risen by more than a third to 6.8 billion shares, coinciding with a plunge that could leave the S&P and other averages with 10% corrections by the end of Thursday’s session.

Bianco says the level of participation in the recent selling, combined with the market’s sharp run from its lows preceding the recent slide, suggest to him that the recent decline could prove to be quite a durable trend, perhaps one that even marks an end to the bull market. He points out that from its March 2009 lows to its April 23 high, the S&P recouped about 61% of its losses during the bear market — a percentage that has marked a key turning point in recoveries from previous market crashes....MORE

Quick synopsis: If you have three or four days in a couple week period where the down days have noticeably higher volume than the up days, make sure your parachute is packed.