Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Stock Market Rally on Low Volume is NOT Bearish

Stock-Markets / Stock Markets 2018 Apr 17, 2018 - 04:49 PM GMT

By: Troy_Bombardia

Stock-Markets

Conventional trading “wisdom” states that a rally that occurs on falling volume is bearish. Conventional “wisdom” states that sustainable rallies should occur on rising volume.

This simply isn’t true. As we said in Don’t use volume for trading,

Rising/falling volume isn’t a bullish sign or a bearish sign. It just is. Volume is mostly irrelevant. It doesn’t give you much of an edge in the markets.

The S&P 500 is rallying on falling volume right now.


Chart courtesy of StockCharts.com

Here are the historical 10%+ corrections since 1998. (The S&P has fallen 11.8% so far a of April 2018). Notice how there is no consistent correlation between the market’s volume and its post-correction rallies.

*We don’t have volume data before 1998.

  1. Some post-correction rallies occured on falling falling
  2. Some post-correction rallies occurred on flat volume.
  3. Some post-correction rallies occurred on rising volume.

This means that a post-correction rally with falling volume is NOT a bearish sign. It is not an “ominous sign” for the stock market. It’s an irrelevant sign.

Here are the bottom dates for those corrections:

  1. February 11, 2016
  2. June 4, 2012
  3. October 4, 2011
  4. July 1, 2010
  5. August 16, 2007
  6. February 28, 2000
  7. October 18, 1999
  8. October 8, 1998

Let’s look at the S&P 500’s volume during each of these times.

February 11, 2016

The S&P 500 ended its 15.2% “significant correction” on February 11, 2016. The subsequent post-correction rally occurred on falling volume. The stock market soared nonstop.

June 4, 2012

The S&P 500 ended its 10.9% “small correction” on June 4, 2012. The subsequent post-correction rally occurred on flat-falling volume. The stock market rallied in a choppy manner.

October 4, 2011

The S&P 500 ended its 21.5% “significant correction” on October 4, 2011. The subsequent post-correction rally occurred on falling volume. The stock market rallied in a very choppy manner with big waves.

July 1, 2010

The S&P 500 ended its 17.1% “significant correction” on July 1, 2010. The subsequent post-correction rally occurred on falling volume. The stock market rallied in a choppy manner.

August 16, 2007

The S&P 500 ended its 11.9% “small correction” on August 16, 2007. The subsequent post-correction rally occurred on falling volume. The stock market rallied in a choppy manner.

February 28, 2000

The S&P 500 ended its 10.3% “small correction” on February 28, 2000. The subsequent post-correction rally occurred on rising volume. The stock market soared to new highs very quickly.

October 18, 1999

The S&P 500 ended its 13.1% “small correction” on October 18, 1999. The subsequent post-correction rally occurred on flat volume. The stock market soared nonstop.

October 8, 1998

The S&P 500 ended its 22.4% “significant correction” on October 8, 1998. The subsequent post-correction rally occurred on falling volume. The stock market soared nonstop.

Conclusion

The stock market’s recent rally on falling volume is not a bearish sign for the stock market. It is an irrelevant sign for the stock market. It’s neither bullish nor bearish.

With that in mind, some short term downside risk is present. But this downside risk is limited because the medium and long term outlooks are very bullish. See this study and this study.

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2018 © Troy Bombardia - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in