Will The Real Market Please Stand (Go) Up? This Week’s Market Volume.
On Wednesday, the Fed gave markets a glimmer of hope to the tune of 25 less basis points, propelling the indices up over +3%. Overall volume was up +17% and the session logged a volume accumulation day across the board. This was the 3rd day since mid-April of big institutional buying on heavy volume and a clear shift in sentiment from Q1 this year.
That would have been a happy ending to the story, but as we know, prices took a sharp turn south on Thursday and continued to settle back at the lows on Friday. Interestingly though, out of the past 2 days, only Friday made it into the distribution category while Thursday’s precipitous drop actually happened on lower volume. But how can the market keep dropping when smart money and big volume are stepping in? Which was the real market this week?
I’ve heard the term “predatory tape” used to decribe it and that seems pretty spot on. Market makers know very well about support levels in and around the SPY 410 area, and they won’t rest until all the stops have been cleared. The real question that remains, though, is can the market actually still go lower from here? Well, considering distribution is still coming in, further drops can’t be ruled out. The MM’s can also see the huge “head and shoulders” market top that everyone sees and they’re betting that the obvious chart pattern will play out as a self-fulfilling prophecy… or at least that’s what they want you to believe.
If that twisted logic seems like a bit of a conundrum to you, well, welcome to Wall Street.
Another glimmer of hope for the bulls is that TVO, our volume oscillator, right now is showing a zero value, and has moved quite rapidly up from -4.6 just a few weeks ago. If we can move and stay above zero for at least a week or so, I’d say the downtrend may finally break. Another distribution day or two, however, and we’ll be staring that self-fulfilling prophecy straight in the face. – MD
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