The Dow-Jones has now improved for three consecutive sessions. Some are concluding that with the strong economy (based on GDP report, and to a lesser extent the employment report) the market's minor correction has now ended.
A look at the Dow-Jones chart below raises several questions. Yes, there are several positives:
(1) A bullish divergence based on the RSI (I used SharpCharts2 Beta to superimpose the RSI on $INDU); and
(2) The relative strength of the Dow-Jones compared to the S&P500 has just turned up.
BUT, this move is not being supported by rising volume. The green bars (volume on higher close days) corresponding to the recent higher closes are declining. In fact, there has only been one green bar that was larger than the red bars (volume on down days) in the last several weeks. This is typically a bearish indicator, reflective of lack of enthusiasm by those bullish about the market. If the bulls are tepid, it might not be very difficult for the bears to come in and turn things in the other direction.
Those doing their forecast paper on $INDU should keep tracking this in the next few weeks to see if the volume signal is indeed "for real."
No comments:
Post a Comment