Thursday’s swift and decisive rise happened on declining volume (overall volume fell -12%), so big institutions were not participating in the rally. I know, you’re probably thinking, “but doesn’t volume precede price?” (which is good because that means you’re finally getting the point), but it depends on what kind of volume and when.
Tuesday and Wednesday packed a lot of volume, but both were distribution days on the big board, in effect creating a vacuum for today’s bulls to fill up the void. So that must mean that this new leg up is fueled by false hopes and is ready to come crashing down, right? Well, the gas has been running out since our last across-the-board accumulation day (on 5/15, right before the “Comey memo”), so the bulls need to rack one up pretty soon to keep things afloat in the near to mid-term.
Since our General Investment Strategy went to “buy” mode last week, SPY has gone up almost 3 points. That position would likely shift to “sell” if the employment numbers fail to bring on the volume, which in turn could bring on a “sell the news” event. I know, you’re thinking, “but that’s too obvious.” When bullish fever runs high sometimes the most difficult thing to see is the most obvious one. -MD
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