A few years ago, a question was posed to Elliott Wave International's president Robert Prechter:
"Under the Wave Principle, what is the most important thing to watch other than price?"
Prechter answered via his monthly Elliott Wave Theorist: "Volume."
High trading volume is a chief characteristic of a healthy trend, bullish or bearish. The DJIA has rallied for over a year now off its March 2009 low, but volume has consistently been lacking. We've shared our thoughts on this fact many times with our subscribers:
"Many market watchers said that the low volume in December was merely seasonal and not bearish. But volume in January has been no higher than it was from December 1 to December 22, and it is still lower than October's, which was lower than September's, and so on."
-- Bob Prechter, Elliott Wave Theorist, January 2010.
Even lately, low volume has persisted. Here's what is notable, though: The market's down days have generally been on higher volume than the up days. This could mean investors are gradually leaving the market. Our Monday-Wednesday-Friday Short Term Update has been monitoring volume closely:
March 31 Short Term Update: "Today was the first down close since March 24 and it occurred on increased volume."
April 5: "A contraction in the number of NYSE issues closing up versus down over the past two weeks as well as the total daily NYSE volume that was up versus down shows [that] internally, the market was 'correcting'."
April 6: "The S&P closed up, but breadth was noticeably weaker today versus yesterday, as was the NYSE up/down volume ratio."
On Monday, April 12, the Dow climbed over 30 points intraday before closing with a modest gain of just under 9 points and actually falling into negative territory for a time. While this did mark the first time the Dow closed above 11,000 in many moons, volume remained near the muted levels of April 9. Here's the April 12 Short Term Update's comment (online now):
"NYSE volume remains anemic, with just 964 million shares traded today. April has now consisted of 7 trading sessions of which 5 occurred with NYSE volume of less than 1 billion shares traded, which is a bit 'zany' in that the first two weeks of April sport a positive seasonal bias."
Is this rally "tired"? How much longer can traders "push the boulder up the hill" before it completely stalls for lack of pushing (volume) and rolls downhill? We pay close attention to volume changes and tell you what they mean when compared with other important indicators. Click here for a guaranteed risk-free look at our revealing analysis.