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 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.