Stocks Are Taking One Step Up And Two Steps Back (Down). Weekly Market Volume Outlook.
Big retailers such as Target and Walmart disappointed with earnings, and on Wednesday the S&P 500 had it’s worst drop since June 2020. Volume was quite heavy on the index and the down to up volume ratio on the the big board was over 13 to 1. The Nasdaq, on the other hand, came in with a similar volume ratio, but on declining volume, just barely keeping itself out of the distribution category.
It’s not unusual to have a good shakeout after an across-the-board accumulation day like we had on Tuesday. It’s also not surprising to have the shakeout come in on declining or mixed volume. What does have folks scratching their heads, though, is the extent of the drops we’ve had lately… One step up seems to be consistently followed by two steps back.
And while the powers at be are busy working out their differences, TVO our volume oscillator has been holding steady above zero in the healthy market zone for the past two weeks. Does this mean there’s some kind of unseen consolidation going on beneath the surface? Well, that will only fully reveal itself with time, but it is clear that regardless of the destination, the wheels are certainly in motion.
We’ve been taking trades on the long side with very short time frames and limited position sizes. Until TVO once again drops below zero, which is the direction it’s currently headed, we won’t look to commit to longer term swing positions with options. That’s not to say that now isn’t a good time to add some names to your long-term stock portfolio. Just keep in mind that as long as we keep logging distribution days, the market is likely to take two large steps back (or down) until it gets around to stepping back up again. – MD
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