High-volume trading characterizes a healthy bull market.
Yet, the market's rise in the past few months has mostly included low volume.
"...total exchange volume has been in a steady downtrend since last October...stock-exchange volume...has dropped to its lowest level in at least four years. It is a weak foundation for a stock rally."
The past several weeks in particular have seen the percentage of up volume declining in the New York Stock Exchange. Moreover, the NYSE advance/decline ratio has been going downhill.
There's more...
Even as prices rallied, the percentage of S&P 500 stocks below their 10-week moving average indicates the advance has been weaker than many investors may realize. Take a look at the chart below:
The most recent Financial Forecast published January 6; even then it alerted subscribers that the rally lacked strength:
"Investors’ narrow focus on a handful of the largest blue-chip shares relative to the broader market is a tell-tale sign of the waning upside momentum of the advance."
Financial Forecast, January 2012
Yet, dear reader, market optimism has soared. The latest Financial Forecast also said, "A Standard & Poor's 'average of expectations from investment strategists, economists and other big thinkers' calls for a S&P 500 gain of 'more than 10%.'"
Our analysis indicates otherwise. In fact, the latest Elliott Wave Theorist shows you when the market may take a major turn.