Side-Way Market

We had another week of side-way trading. The DJI and S&P 500 indexes have been in the side-way mode since October 13, 2010. The coming week could be interesting. We will have several interesting events - FOMC rates meting and end of election. Respectfully we may see an increase in volatility and maybe the end of side-way action.

So far, many technical indicators suggest strongly overbought levels and it would be logical to see some correctional move. Yet on the other hand, at the end of trading session on Friday October 29, 2010 we had strong bearish volume surge on many indexes (clearly seen on hourly index charts). We had some similar volume surge on October 19, 2010 followed by 2% up-move. We already may see index futures traded 0.5% above the Friday's close level and most likely we may see positive opening tomorrow at the morning. Still, if this happens, I would not be very optimistic. mainly because of the strongly overbought levels.

Nasdaq 100 again

As I mentioned yesterday, the indexes were down at the opening. However the Nasdaq 100 pushed them up (the same as yesterday and the day before yesterday), back to the neutral territory again. Money flow on the index charts, so far, remains to be the same as yesterday at close (see mine yesterday's "Nasdaq 100" post). The only difference is that the 1-min charts have neutral money flow and on 5-min chart money flow is moving down and could become negative. I would continue to monitor 5-min chart to see whether it become bearish - so far it is bullish.

Nasdaq 100

We had another day of side-way trading when the Nasdaq 100 index was pushing up while the rest of the market was trying to dive down. The difference between yesterday's and today's trading is that today we had stronger bullish volume on the Nasdaq 100. It is already seventh positive trading session in a row on the Nasdaq 100. The other main indexes (DJI, S&P 500 and Russell 2000) are almost three weeks in side-way action. I would risk to say that today's volume on the Nasdaq 100 could trigger a decline.

So far the Money Flow
 - on 1-min chart is negative (bearish) on the Nasdaq 100, DJI and S&P 500
 - on 5-min chart is positive (bullish) on the Nasdaq 100 and S&P 500 and neutral on DJI
 - on 15-min chart is positive on the Nasdaq 100 and S&P 500 and neutral on DJI
 - on 30-min chart is negative on the Nasdaq 100, DJI and S&P 500
 - on 1-hour chart is negative (bearish) on the S&P 500 and DJI and neutral on the Nasdaq 100

From the money flow (volume) prospective I would say that there is a possibility to sea decline tomorrow at the market open (because of negative money flow on 1-min chart). If this happens then I would monitor money flow on 5-min and 15-min charts. If the money flow on these charts become negative (bearish) then I would expect stronger decline (on 30-min and 1-hour charts money flow is already negative).

Inraday Charts

Yahoo Finance main news: "Stocks rise after earnings, drop in jobless claims" - it looks like the market ignores today's positive news. If this continues it will be another confirmation of correction down.

Right now, I'm on 1-min and 5-min charts. The indexes continue to be volatile and these charts reflects their rends. 15-min and 30-min charts are a little bit slow in reaction on intraday changes. They still have positive money flow,yet, I would continue to monitor them to see changes in the flow. If they become negative, that could mean that we may see stronger move down today

Nasdaq 100

The indexes followed the dollar and opened lower today, however the Nasdaq 100 index pushes up. Interesting fact is that the number of declining stocks in the Nasdaq 100 index is bigger than the number of the advancing stocks, however, the volume associated with these advancing stocks is higher than the volume associated with declining stocks. It looks like these stocks are holding the Nasdaq 100 index from a drop. The question is for how long...

Weak Market

Today was one of the day when the S&P 500 did not reflect the opposite trend of US Dollar - US Dollar Index went up, yet, the S&P 500 index remained flat. There could be two explanation of such behavior: a) the patter is broken and S&P 500 and US Dollar trend will not be correlated, or b) the S&P 500 index will catch it later by stronger movement down.

In my Sunday's "US Dollar and S&P 500" I mentioned that if October 21st high is broken than it could mean that bulls are taking over. This high was broken on the S&P 500, DJI and Nasdaq 100. However, the break out was very weak and the indexes retraced back down. I would not like to be in a long on such weak trend. There are too many negative signals on the leading indicators for me to be Bullish. It could be premature to play short, yet I would not bet on any bullish signals right now. I would rather stay in cash.

Worth checking:
 - DJU (Dow Jones Utilities) index is already in correction
 - DJT Bullish volume surge on October 23, 2010 extremely strong;
 - Starting from October 14, 2010, the US Dollar shows the possibility of recovery;
 - Yes, the S&P 500, Nasdaq and DJI are trading close to their highs, however, the trading is very weak;
 - Despite the fact that S&P 500, Nasdaq 100 and DJI are close to the top, advance decline volume and issues ratios for these indexes are trending down.
 - Huge volume surges in period from October 13 until October 20, 2010 have to be played out somehow on the supply/demand balance...

P.S. Advance decline and volume indicators for US indexes could be found onwww.MarketVolume.com

US Dollar Again

The S&P 500 continue to follow US dollar. The US dollar was down the indexes opened down. Now, US Dollar index rising and indexes are in decline. The indexes' volume continue to be low (in comparison to what we saw last week).

So far the indicators continue to be "lazy", mainly because of low volatility. To monitor market I simply increased indicators' bar period settings on 1-min charts.

So far, I would say the odds are better to see indexes further down.

Indexes Up

Index E-mini futures and index tracking ETFs are up. Most likely the indexes will open up as well. Friday's drop in volatility known in technical analysis like "Market Squeeze" which is usually noted before strong swings like we going to have today at the market opening.

We already may see on ETFs that Nasdaq 100 (QQQQ and NQ) will be a little bit behind. I would not bet on this swing and would not try to play bullish signals that could be followed by that swing. Because of the side-way trading, many technical indicators, especially on lower time-frame charts are undefined and not clear - I would wait or at least half of hour after opening.

US Dollar ans S&P 500

As I mentioned a week ago in my "Strong Volume" post on October 16, 2010 "if market is predisposed to reverse its trend it does not mean it will happen tomorrow. It could happen tomorrow, yet, we still may see a week or even two weeks of side-way trading." - since October 13, 2010 the S&P 500, DJI, Russell 2000 and other indexes could be considered in the side-way action. The Nasdaq 100 index could be considered moving side-way since October 18, 2010.

As I commented over the past week, this side-way trading was supported by very strong increase in volume and was very volatile. It is not a common thing to see such huge trading volume at the top. As a rule, at the resistance levels volume surges are smaller and more prolonged in time, while at support levels volume surges are very strong. I have scrolled index charts over the past 10 years and I was not able to find any occurrence of such strong increase in daily volume on the S&P 500 and DJI history. Some similar, but smaller increase in volume was noted in period from April 14 until April 19, 2010 when the indexes were traded at the same high levels. My neighbor would say "There's some serious sh... is going on that market"

The critical point on mine view is that on last trading day of the week (Friday, October 22, 2010) volume was down to its normal level. The volatility was down as well. I would even say that volatility was very low, "like a silence before storm".  I have already mentioned on Friday (see "Low Trading Volume" post) that such decrease in volume and volatility could imply that the period of movements in investments positions of "Big Guys" could be over; which could mean that the next week could show who won (Bulls or Bears) and whether the market (S&P 500, DJI and Nasdaq 100 indexes) will be trending up or down. Conservative traders who does want to spend a lot of time on technical analysis could simply wait when either October 19th low or October 21st high is broken and then make a trading decision.

On the other hand I will not be surprised to see the market at the same level next week. The Election Day is coming and I do not think that some political leaders would like to see any type of crash or strong move down right now. In 2008 the stock market crashed too deep down. I was always under impression that the market was over-pushed down artificially by some "Big Players". This is why we had in 2009 very strong recovery in short period of time. In 2008 the stock market played on the hand of some party and it looks like now it is helping the same guys. But this is another story, I'm not a politician and I do not play conspiracy games - it may drag away from "cold-blooded' and unemotional analysis. Just in some cases, some weird market swings could be very difficult to explain from the prospective of technical analysis.

Coming back to the technical indicators I would say that

 - The daily charts remain to be bullish, yet I see strong overbought signals, especially on the volume based technical indicators. The volatility on daily charts is going up, which is usually  happened before Bear markets.

 - The hourly charts have mixed signals - some indicators and some indexes are bullish and other indicators and indexes are bearish. The common thing between all indexes on hourly charts is that all of them have overbought signals.

- 30- and 15-min charts could be considered slightly positive: you may see some positive Money Flow, however at the same time you may see negative divergence in the Money Flow.

 - Smaller time-frame, after Friday's quiet trading, is very neutral, yet, I would say that some indicators have tendency to become negative.

Note: by referring to volume and advance/decline based technical indicators I refer to MarketVolume charts. See NYSE, Nasdaq 100, S&P 500, DJI, Russell 2000...

It is worth mentioning that US Dollar index has generated number of oversold signals and many technical indicators on this index indicate bullish sentiment. If the US Dollar reverses and moves up it could be as trigger for the stock market to go down. At the current moment I focus some on mine attention on dollar simply because over the last three month the S&P 500 index trend is chronically opposite to the US Dollar index trend. It's like some invisible hand is trying to direct the stock market by using US Dollar.

Chart #1: The US Dollar and S&P 500 index daily chart with elements of technical analysis applied to the US Dollar index

Low Trading Volume

It looks like we are going to have today quiet trading on low volume. The Nasdaq 100 index is trying to push modestly higher , while the S&P 500 and DJI are pushing market in opposite direction. Respectfully, money flow is slightly different on these indexes. I would not expectant significant movement by the end of this trading session.

The fact that the volume down could mean that main movements in investments positions of "Big Guys" is over.

S&P 500

I'll try to be short today. A few things:

- Hourly, 30-min and 15-min S&P 500, DJI and NASDAQ 100 charts have negative money flow - this is a bearish sign;

- 5-min chart has positive money flow which suggests that we may see some positive trading tomorrow. If this is the case, I would monitor 15- and 30-min charts for changes in the money flow on them;

- Volatility is growing and this is bearish sign;

- Trading volume is still high, yet we already may see decreasing tendency;

- Over the lat couple of months the S&P 500 index's trend is exactly opposite to the US Dollar index's trend and today's session was not an exception. There is a good increase in volume on US dollar index and I would say that this may indicate a possibility of Dollar going up. If this happens we may see the S&P 500 index decline.

It is already seven trading session as the S&P 500 is in side-way volatile action. Upper and lower lines of this side-way corridor are already defined. Conservative traders may simply wait when one of these lines is broken as a confirmation of either trend.

optionsXpress

At this moment optionsXpress displays SPY up by 13.43 points or +12.78%. According to my data the SPY was traded yesterday at 16:00 at $117.86. Now it is trading at $118.41 which is only 0.55 points or 0.47% advance - and this is correct and it could be verified on Yahoo finance. It looks like optionsXpress have bad data after all... The question is rising whether you may trust data and charts provided by a broker...

6 Sessions of Wild Trading

As I mentioned today, the advance on the indexes (S&P 500, DJI and Nasdaq 100) halted and slightly reversed as indexes came close to their highs seen on October 18, 2010.

A few points to consider:

- it is already sixth trading session in a row as S&P 500 and DJI indexes have wild swings on high volume at the current resistance level;

- today's advance was accompanied by high volume and it could be assumed that negative money flow accumulated yesterday has been compensated by today's positive money flow accumulation;

- volatility is increasing - this would favor bearish trading;

- yesterday's extremely low advance/decline readings on NYSE and S&P 500 are still may affect he trend and push indexes higher;

- QQQQ, SPY and other ETFs advanced slightly after the market closed.

So far technical indicators on 5-min and 15-min charts are slightly bearish. 30-min and hourly chart have mixed signals and I would consider them neutral. I we see a decline tomorrow after the market opens (as suggested by smaller time-frame chart) I would keep an eye on 30-min charts for bearish signals.

Inraday Charts

The indexes (Nasdaq 100, S&P 500 and DJI) have come to their highs seen on October 18, 2010. We already started to see some resistance to the up-move. Money flow on 1-min chart is already negative and on the 5-min chart money flow is moving towards negative area. The morning trading went on quite strong bullish volume (see hourly volume charts for S&P 500, Nasdaq 100 and DJI) - this is another force that may stop the today's advance. The money flow on the 15- and 30-min chart remain to be positive. I would continue to monitor these charts to see if any changes in the indexes' sentiment occur.

Money Flow

15-min charts are turning bullish which increases the odds of indexes moving to the October 18th highs. So far, money low on the 5-min, 15-min and 30-min charts could be considered positive. Money flow on hourly chart is still could be considered between neutral and ngative.

The first hour of trading went on high volume and most likely second hour will be on strong volume as well. High volume and high volatility during an up-move suggest weak up-move and I do not expect to see strong up-move today. Yet, anything could happen.

US dollar index is down and it helps bulls.

NYSE Advance/Decline Readings

The indexes are going to open modestly higher, which should be logical after yesterday's strong selling. There are some bullish signals in the 1-min and 5-min index charts, yet, the 15-min, 30-min and hourly charts remain bearish. I would continue monitor 5-min chart in parallel to the 15-min charts to see if during the morning up-move indicators on 15-min chart turn into bullish - it would indicate a possibility of stronger bounce up.

A few interesting points that I would consider worth attention.

- Yesterday we had strongly oversold (extremely low) advance/decline issues and advance/decline volume readings on the NYSE Composite and S&P 500 indexes. As a rule after that we may see bounce up.

- Volatility on the longer-term frames is rising which is bearish sign.

- We had 2-day up-move in US Dollar index. Up-move in dollar favors bears.

Index Trading on High Volume

There are strong increase in volume on all indexes over the last 30 minutes. on intraday 1-min (1 bar = 1 min) chart the strong bearish volume (during the price decline) could be seen in period from 14:01 until 14:05 (3 minutes only). After that the price moved up and high volume associated with this move is basically bullish volume. It looks like during the drop the indexes and stock have hit levels that was set by many traders as to buy (whether to close long position, or open a long position). If the price continue to decline it would mean that there are no buyer to support this short-loved "buying explosion" and the power of bears is quite strong.

Finacial Sector

The same as yesterday, the financial sector (see S&P 500 Financial index) is trying to push the market up while the rest of the US indexes are negative. On October 14-15 the S&P 500 Financial index has generated strong bearish volume surges (strong panic selling) and as a result we have a bounce up in this sector.

Over the last couple of trading sessions we have big divergence between market sectors - some of the market sectors are strongly bearish while other are strongly bullish. Then those sectors that were bullish became strongly bearish and previously bearish sectors became strongly bullish. In the result we have volatile trading.

P.S. US Dollar is up (see US Dollar index) and this is not in the favor of Bulls.

QQQQ

As I mentioned in the morning, the Nasdaq 100 has been trying to push down while Financila sector was pushing market up (see S&P 500 Financial index which advanced more than 2% today).

The average trading volume was lower today on all indexes which suggest that period of greedy buying is coming to the end (number of buyer becomes exhausted) and we could be close to the reversal move down. The interesting thing is that QQQQ has already declined about 2% after the market close, so, there is a possibility we may see sharp opening down tomorrow. If this is the case it could be a beginning of a strong correction down.

Over the last one and a half month (during up-move) we have not seen any strong correction (2% short-lived moves down cannot be considered as strong correction). The indexes went too high too fast over that period of time and this is not good.

Tomorrow, I still would watch the US Dollar index in parallel to my volume charts. At the same time would keep close eye on the volatility on the daily charts. If the volatility goes up, it could be a confirmation of correction and it may suggest to switch to lower time-frames.

Volume Down

Going back to the 15- and 30-minutes charts. I would expect to see decrease in volume today.

As a response to the Thursday-Friday strong bearish trading on the S&P 500 financial and strong bullish trading on the Nasdaq 100 we have today Nasdaq 100 attempts to push lower while Financial sector pushes stock market up. Possibly, we may see such sentiment for a whole day.

It looks like US Dollar Index is going up since Friday. I would keep my eye on it as well. If the dollar will continue to go up, it could be one of the reasons for investors to pull money out of the stock market into currency market.

Strong Volume on all Indexes

As I mentioned on Friday before the market opened and in a few hours after the opening Bell, the last day of October's options was very volatile at the beginning, yet the volatility dropped down by the end of the session. The interesting part of Friday's trading was strong advance in the Nasdaq 100 index (2.1% up) at the moment when the rest of the indexes was trying to push down: DJI dropped 0.29%, Russell 2000 declined 0.23% and S&P 500 modestly advanced by 0.20%. At the same time, the indexes from the financial sector strongly declined on Friday: S&P 500 financial dropped by 1.71%, Nasdaq Banking by 1%. Housing and precious metal indexes were strongly negative on Friday as well: Amex Gold, PHLX Gold/Silver and PHLX Housing decline more than 1 %.

Friday's trading session was very interesting from the prospective of volume technical analysis as well. It was the third trading session in a row of high trading activity on all indexes and on some indexes the volume surges were very strong. However, since we hade mixed trends on Friday, we have mixed volume readings on different indexes. On the Nasdaq 100 index we had strong bullish volume surges on the S&P Financial and DJI indexes we had strongly bearish volume surges (especially if we look at them from the lower timeframes). From the longer-term prospective I would consider all volume traded over the last three trading session as Bullish volume, simply , because it was at the top of the recent up-trend. The only under a question for me could be the S&P 500 Financial index which has been in strong decline for the last two trading session.

Overall, I would say that the volume we saw over that last three trading session must affect longer-term trend. The question is when. We have all the factors that precede the reversal down - we had strong up move without even short-term corrections; we had huge bullish volume accumulation during this up move which indicate strongly overbought condition; we had strong increase in volume which could be considered as greedy buying by retail traders, etc. Still, as consistently mentioned before, if market is predisposed to reverse its trend it does not mean it will happen tomorrow. It could happen tomorrow, yet, we still may see a week or even two weeks of side-way trading. To be sure in reversal I would monitor money flow direction on the daily charts (1 bar = 1 day).

The third interesting point is that on Friday we had up move on the US Dollar index which was supported by extremely strong volume. If we take a look at the US Dollar reversal in December 2009 we may see that when US Dollar started to move up this up-move was accompanied by huge volume surges. If we see that US Dollar will continue to recover it could be another point that would support correction on the US stock market - if you compare US Dollar index to S&P 500 index you will see that over the last half of year, in most cases, the US dollar trend is opposite to the S&P 500 trend.

P.S. I'm sorry I did not post any chart snapshoot today - will try to do it tomorrow if I have time.

High Volatility

Volatility is quite strong... Even 15-min chart is too slow to react on the price changes. So, basically I'm on 1- and 5-min bars. The volume continue to be very high. This is going to be the third day of high trading activity (high volume). I still would expect volatility go down by the end of the session with price in the range of the Wednesday's high and Thursday's low. Yet, I could be wrong and the only recommendation that I could give is to watch charts by themselves.

Options Expiration Day

Taking into account emini index futures and ETFs trading before the market opens, we may expect strong positive opening. This is the last day of October's options. I would be very cautious today as we may see wild swings, especially at the begging of the day.

I would go today with 15-min (1 bar = 15 minutes) chart today as it faster react on the price changes than 30-minutes chart.

High Volume - Big Guys Reshufeling Positions???

As I mentioned before the market opened, based on the Money Flow on the 15-min and 30-min charts we had negative trading today. Again, the same as I stated, since Money flow on the longer-time frame (on hourly charts stayed positive), the indexes recovered by the end of the session.

The strongest decline was noted today mostly in financial sectors (S&P 500 Financials, Nasdaq 100 Financials and Nasdaq 100 Banking).

We had yesterday very strong daily volume - some indexes beat their 2-3-4 month records on daily volume and that volume was during the price up-move (strong bullish volume activity). I've already mentioned that yesterday's volume could change supply/demand balance. However, today many indexes had even stronger volume and this volume was noted during the price decline (strong bearish volume activity). Such, daily volume on the S&P 500 Financial index was one of the highest daily volumes over past year. We already saw a reaction on that volume as a recovery by the end of the today's session. ETFs that track indexes continued to move higher even after the market closed - QQQQ (Nasdaq 100 tracking stock) has made about 1% up SPY and DIA (S&P 500 and DJI tracking stocks) have made about 0.2% up after the Bell. However, there is another interesting point. Trading volume on QQQQ during the first fifteen minutes after the Bell (in period from 16:00 until 16:15) was several times higher than the volume during any 15-minutes period during regular trading hours and this was Bullish volume surge.

Even if it could seems that market could to move higher tomorrow, I would not be very optimistic. Yes, maybe we may see positive opening, yet I would not bet after it. Taking into account indicators on the hourly chart I would expect to see indexes in the range between yesterday's high and today's low. Keep in mind that tomorrow is options expiration and it may put some additional volatility.

Money Flow

Yesterday I have mentioned about monitoring money flow on the 15- and 30-minutes charts (1 bar = 15 minutes and 1 bar = 30 minutes). Already around 3 pm yesterday you could see changes in the flow. On 5-min index charts money flow is already negative. It is still positive on the 30-min index charts, yet it moves towards negative area. Furthermore, I would expect continuation of the yesterday's decline we had at the market close.

Right now, I would not try to guess whether this decline could be strong. For this, I would recommend monitoring 60-min index charts (1 bar = 1 hour). So far, the money flow on that chart is positive which suggests that the trend on this frame is still positive and that even if we see a decline, the indexes still have prover to come back to their highs.

Another important on my opinion point is the strong bullish volume we had yesterday on all indexes. This volume surge may lead to the shift in the supply/demand and at least to halt the current advance.

P.S. You may check money flow for S&P 500, DJI, Nasdaq 100, Russell 200 and other indexes on the MarketVolume's charts (MV Charts)

Money Flow

The indexes did not reversed. They continued its up move and they continued it on high volume. The money flow continued to be positive. Now when the volume surges became stronger I would watch for the change in the money flow on the 15-min and 30-min charts (1 bar = 15 minutes and 1 bar = 30 minutes).

FOMC Minutes folled by Volatile Trading

It was quite strong volume increase after the minutes of the FOMC meeting. Quiet trading at the morning has became a little bit volatile after 14:00 EST - swing up, down and up again. As a rule strong volume during the price rise (as we saw today afternoon) may push indexes down. Already on the lower time frame charts (1 bar = 1 minute, 1 bar = 5 min and 1 bar = 10 min) I may see some weak signals that would suggest a possibility of decline. However, by referring the higher time-frames 15-min charts (1 bar = 15 min), 30-min charts and especially hourly charts (1 bar = 1 hour) I may see that the positive sentiment is still strong. Based on this, I may expect to see some decline tomorrow at the morning. However, at this point it is difficult to say, in case it goes down whether it may grown into something stronger which would go beyond the morning trading .

High Volume

Small Advance and very huge volume after FOMC minutes. I would be cautious about possibility of reversal swing down.

Volume and Advance/Decline Charts

As my yesterday's post followup - volume and advance decline index chart presented in that post could be found on the MarketVolume's website (http://www.marketvolume.com). At this moment MarketVolume is the only source of intraday advance/decline and volume charts for US indexes and exchanges.

Low Volatility, Low Volume

The stock market is quiet. The average trading volume is quite low. There are no economic news today. Te only economic event for tomorrow is "Minutes of FOMC Meeting".

This is options expiration week (October's options will expire on this Friday) and usually options week is accompanied by volatile trading. The odds are good that we may see similarly quiet trading by the end of the session.

However, keep in mind that moments of very low volatility are also known in technical analysis as "Market Squeezes" and usually are characterized as "Silence before storm" and are noted before strong moves.

S&P 500 Chart

Another mixed week. The S&P 500 and DJI indexes moved higher while the Nasdaq 100 moved in side-way trend in which this index has been since September 24, 2010 (right now only a few points higher). The S&P 500 an DJI indexes were mostly traded side-way (since September 24 as well) with exception of the strong rally on October 5, 2010. Currently, the Nasdaq 100 index moves at its high levels seen in April 2010. The S&P 500 and DJI indexes are still 2-3% below their April's highs.

Below I have posted daily chart (1 bar = 1 hour) of the S&P 500 index with plotted Nasdaq 100 index (orange line).

Chart #1: The S&P 500 daily chart with elements of technical analysis

The technical analysis on the chart above is applied to the S&P 500 index. The DJI daily chart would give quite similar picture. The Nasdaq 100 daily chart would be slightly different , with a little bit more bearish sentiment.

By summarizing the indicators above I may say that the longer-term positive divergence on the SBV and advance/decline oscillator is a good sign from the longer-term prospective. However, there are several negative signals at the current moment:

 - the SBV is still at high positive levels and is moving sideway. Even bullish volume accumulation could be considered quite strong and would indicate oversold index's condition, the Money Flow is still positive on the S&P 500 and DJI (not on the Nasdaq 100). Until we have positive money flow there are always will be good odds of up-move

 - Advance/decline volume and issues ratios and McClellan Oscillator are moving sideway after being at high levels. This suggests that if in September we had traders buying advancing stocks then, right now, there are not as many traders focused on the positive stocks as before. The number of traders focused on the declining stocks is about the same as the number of traders that are trading rising stocks. This shift from trading positive stocks suggest that many traders switch into bearish mood and if this tendency continue we may see more traders in bearish mood.

- We have a signal on the MVO. This suggests an increase in bullish volume (bullish volume surge). As a rule such increase in volume during price advance may lead to the shift in supply demand balance (when power of buyers become existed) with further reversal down. However, if you scroll the history you will see that usually reversal occurs when MVO returns to zero.

- The biggest concern on my view is an increase in volatility. The volatility is up since its low readings in the middle of September 2010. This is not normal. I have not see a lot of periods in the history when indexes moved up on rising volatility. The volatility is not too big to be considered strongly bearish, however the fact that is up from its low readings suggests nervous and uncertain trading, which is usually seen during down-moves.

Overall, I would say the the indexes could be considered predisposed to move down and we already may see some bearish signals. Which is logical when the indexes are at their Aprils highs. After a month of positive trading we may expect quite strong reversal. However, until wee see some negative money flow it could be too risky to play on it. If correction down meant to bee strong then there is no need to play at the top. More conservative approach would be wait for conformational signals and ply confirmed trend.

Indexes

DJI and S&P 500 indexes just broke their September 17's high. Good sign to rally closer to the resistance seen in April 2010. The Nasdaq 100 is behind. As I previously mentioned, the Nasdaq 100 rally in September was much stronger in comparison to the September's up-move in S&P 500 and DJI sectors. Therefore when it comes to new highs the Nasdaq 100 stays behind of other indexes.

The market continue to be volatile. I will not be surprise to see another swing down, especially after such increase in volume during the last swing up.

Unsertain Sentiment on High Volatility

It was a quite volatile session today: opening at high, then swing down, then swing up, then decline, then recovery. At the end of the day the indexes are where they were yesterday. The indexes did not continued the up-rally we had on October 5th, yet at the same time the indexes do not rush into correction.

From one side it is difficult to believe that 2-3% correctional move down (mostly side-way trading) we saw at the end of September would release the market (indexes) from the overbought condition the indexes should be after September's bullish trading. From other side it is harder to break bullish sentiment into correction than bearish sentiment.

I think many technical analysis are betting on the S&P 500 and DJI hitting their highs seen in April 2010. Maybe it is were they are going, however, I do not like volatility. If you check daily charts, you will see that such up and down swings are very often noted before strong declines.

Bullish an bearish signals

The indexes are down despite the good "job reports" - it looks like the market (investors) starts to ignore good news and focus on bad news.

I do not believe in news analysis - there are always bad and good news and there are no cafeterias that would define the importance of the news. However, the same as in technical analysis you may see moments when bullish or bearish signals (news) are ignored and such moment could be considered as signals as well or at least as a moments to be on alert.

DJI down, Nasdaq up

Indexes are quite volatile today - jumping up and down.

In opposite to yesterday, the DJI is pushing down while Nasdaq holds the ground.

DJI Flat - Nasdaq Down

We had Nasdaq 100 down today, when it lost more than 50% of yesterday loss - this good for Bears. On the other hand the DJI index did hold the ground and stayed at yesterday close level - this is good for Bulls. The S&P 500 index was between them and it was ready to follow the strongest one.

This is a mixed situation. We have to keep in mind that in September the Nasdaq 100 up-move was much stronger than the DJI and S&P 500 up-trend. Respectfully, the Nasdaq 100 could be considered to be oversold stronger. Yet, as I previously mentioned, if an index is oversold and predisposed to move down it does not necessary imply that this index will go down - it is good to wait for some reversal confirmation.

Following Volume

The first scenario (see yesterday post)???: "High volume means big players ... selling at high (indexes are at their 5-month highs) to greedy buyers and to short players whose stop-losses were hit when indexes opened strongly up."

Or it's too early o judge???

New day - New data

New day - new data - new view on the market. In similar to September 30h way we had strong opening. Index futures traders have pushed the indexes up before the bell, yet, in opposite to September 30th way this time positive sentiment on futures market was supported by positive move on the stock market and indexes continued to move up.

As I mentioned above, new day brought new data that on my opinion attention should be paid to:

 - we had very strong volume during today's run up. The strongest increase was seen in the financial sectors (see Nasdaq Financial and S&P Financials). NYSE daily volume is the highest daily volume since July 16, 2010. Nice volume increase was seen in the S&P 500 and DJI sectors. However, the Nasdaq 100 index volume was not as high;

 - we had very extremely strong bullish advance/decline readings;

- we have further increase in volatility on daily charts;

- S&P 500 and DJI broke their high levels seen on September 30, yet the Nasdaq 100 index stayed below its high.

High volume means big players are in the game. The question is what they are doing - are they selling at high (indexes are at their 5-nmonth highs) to greedy buyers and to short players whose stop-losses were hit when indexes opened strongly up. Or they are buying at high because they have information that assures them that the market will go up without any correctional move down??? I do not think retail traders could be selling in such amounts. However, there could be other big players who decided to play short at high - in this case this is a battle between giants and we should see who wins when we see volume down.

Another Blog

Just run into another blog that like me uses MarketVolume's charts in analysis:

http://smartmoneyvolume.blogspot.com

Indexes started this morning by jumping up and down - volatility was always a good sign for bears.

Index Technical Analysis

As I mentioned a week ago in my "Increase in Volatility" post: "My expectation from the coming week are neutral. If we do not see strong decline on Monday, then I would expect to see side-way trading. Even if we see decline, I would expect the indexes to be above September 23's low in side-way action." - this is the exact scenario of what we saw over the last five trading sessions. The S&P 500 and DJI indexes are where they were last Friday (on September 24, 2010) and the Nasdaq 100 index slightly declined, yet, it is still above its low seen on September 23, 2010.

After a week of side-way trading, from technical analysis prospective, I would say, that many of technical indicators have generated bearish signals on Thursday September 30, 2010. However, side-way trading on Friday October 1, 2010 has pushed most of them back into neutral area.

Even most of technical indicators on the indexes hourly charts are in the neutral area, on the mid-term charts (1.5-year chart) we may see many bearish signals and bearish sentiment on these charts is quite strong. I consider that the market is strongly predisposed to have at least some correctional move down by the following reasons:

 - September was the positive month and there is no doubt for me that that market could be considered overbought (we had big positive volume/money accumulation over that period) which does not imply that the market will change its direction but which means the stock market is predisposed to change its direction;

 - After being down we see increase in volatility on the mid-term charts which means that the mid-term traders become nervous which means that when they may start dumping their stocks in order to fix their profit at the current highs - it may push indexes down;

 - Even on some shorter-term frames we may see positive signals, majority of technical indicators on mid-term charts are bearish and after a week of side-way action mid-term trader could become major players on the market;

 - On Thursday (on September 30) before the market opened, futures traders encouraged by good economic reports have pushed indexes strongly higher. However, after the bell (after the market opened), their positive sentiment was not supported by the rest of the market. In opposite, the indexes (Nasdaq 100, S&P 500,DJI, etc) have hit levels where stock traders started to sell and their selling pressure pushed the market stronger down. Such behavior of the stock traders, when they sell by ignoring positive news, I usually consider as a break down point when the market is on the edge to move down.

My bearish mood does not mean that the stock market must necessary go down. For many traders, the conservative trading strategy would be waiting when the indexes (S&P 500, Nasdaq 100 and DJI) break either their low seen on September 23rd or their high we saw on September 30th.