Light Volume Trading

I have mentioned several times over the last time about side-way trading and more conservative approach would assume waiting when upper or lower line of this corridor is broken. So, we have upper line of the 2.5% corridor broken (see my previous "DJI" post on December 20, 2009). However, not many indexes have run over this level and I would not run into conclusion that now only Bullish market is in front of us. We may see that the Nasdaq 100 index run strongly up. We may see that theS&P 500 index advanced above upper line. On the other hand the DJI index, NYSE Composite index and some other indexes are still in their side-way corridor. This is not a very nice picture when some of the indexes are rallying up while other indexes are stuck in side-way action and I think it tells that the current move up is not something that is supported by a whole market.

When a rally on some indexes is not supported by up-move in whole economy there are good odds that this move may halt soon. It usually happens when the market is ready for a correction, yet, it does not moves down because group of positive market sectors (positive indexes) holds other indexes on the same level (in the side-way corridor). If this is the only thing that hold the market from the correction down, then this rally on the Nasdaq 100 could become exhausted very soon and then what?

From the prospective of technical indicators, at this moment, the sentiment is positive and suggests possibility of further up-move. However, this is a holiday season, we have light volume and historically this period of year is marked by slow and positive trend. I would not expect to see any strong movement next week, yet, in January 2010, I think, we could be surprised...