Wednesday, May 6, 2009

Industrial and Financial Sectors

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Just a short post. Today's daily volume on the S&P 500 index is the biggest volume over the last 2 months. Taking into account that this volume surge has been noted during the price advance I would assume that we may possibly see the shift in the supply/demand balance. Similar situation could be seen on the Dow Jones Industrial index. The Nasdaq 100 index does not have such high volume surge, however, this index has been moving flat for the last three trading sessions. Comparing different market sectors I may say that the highest trading activity could be read in the industrial sector ( DJI, Nasdaq Industrials, Nasdaq Capital Markets). I can see high volume in the financial sectors as well - Nasdaq Banking and Nasdaq 100 Financial - yet not as big as in the industrial. Other stock market sectors (DJI,DJU, Nasdaq Internet, Nasdaq Computer) have relatively smaller volume surges or do not have increase volume activity at all.

I do not know why we can see increased trading in the industrials and financial sectors. It could be because the investors are waiting to see Chrysler bankruptcy and how it will affect automotive market, or those investors who bought in February decided to pocket a profit or it could be something else. I know one thing - such big volume means that big number of investors (or small number of investors with big money) started to relocate their investments and that may lead to the change in the supply/demand balance and as a result to a change in the stock market sentiment.

I would personally watched very closely stock market over the next couple of sessions to see how the market will react on this volume. I am not telling that the market will drop tomorrow, it could continue to move up, however I would prefer to stay in cash for now. Maybe I'm wrong and maybe I'm loosing opportunity to make some profit, yet, I consider there are moments when it could be useful to stop and monitor for a while in order to see the development of events - in current situation development of reaction on this high volume.

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