Long-term

By looking on volume indicators we may say that in the last 5 months we faced huge sell offs. We may see the huge volume surges in the DJU sector in the period from the middle of July to the middle of August 2007. The similar situation could be seen on the AMEX. As a result of these huge volume outputs these two indexes are already in the up-move.

On the other U.S. indexes we do not see such big volume surges, however instead of the one correction we see up to three deep corrections on smaller then on the DJU and AMEX volume surges but still on the huge volume. We see it in the periods from the middle of July to the middle of August 2007, from the middle of October until the end of November 2007 and from the end of December 2007 until now.

We may assume that huge amount of the volume surges (panic selling) in the last five month may lead a lot of money out of the stock market. I would think that sooner or later these funds would find a way into the market again by generating a new strong uptrend. I know that many investors think that what have seen over the last five month is a beginning of the long-term crash, but I think there is good chance that what we see is a huge correctional movement within the long-term uptrend.

It's difficult to say when we may see the start of the long-term up-move. We still may see more volatility with more volume surges. The positive thing is that it's unlikely for the market to run into the long-term down-trend on such huge volume surges and such big panic selling. It's very difficult for the market to ignore these huge sell offs.

The only sing from the volume prospective that could make me cautious about possibility of developing long-term downtrend is that over the last 5 months I monitor the situation when the small volume surges are required to turn the indexes into mid-term down move and big volume surges are required to turn them back into up-trend. It would be nice to see the opposite which would indicate the beginning of the healthy up-trend.

The best case scenario for a resumption of the up-trend is when we see that indexes start to ignore big volume surges during the price move up – it may indicate we are in the beginning of the strong up-trend.