Light volume in stocks: What you need to know

Merry Christmas and happy holidays to all. You may not know this, but I was a fan of Futures magazine long before I was ever a contributor. Years ago, before I ever knew what the number 61 really meant; all I thought about was some guy named Maris who hit 61 in 1961. It was about that time I read about some interesting financial instruments in a cutting-edge magazine called Futures. We’ve all come a long way since then, and another year has passed. Ginger, Dan and the rest of the gang do a great job of getting you cutting-edge content on a regular basis. I consider it a privilege to contribute in some small way.

But because it's Christmas week, we also have to realize we can see some lighter volume. Consider also we are in the heart of the Mercury retrograde period and mix it with light volume and we could see some hair raising price swings in the next 2 weeks. For the most part I leave the financial astronomy to others but it was Merriman who has done years of exhaustive research concerning Mercury and let’s just say it’s an occupational hazard to those of involved with trading and following markets on a day to day basis. The problem is 9 out of 10 people have no idea.

That being said, the time window season is over. I can’t remember a period where we had so many windows in an 8 week period like the one just completed. What’s the bottom line? The markets are still higher. We covered this condition last week. With the new marginal high in the NASDAQ and NDX, we have invalidated the latest window; the 161 day marker off the April high. Since we are already higher than the April pivot that one had less significance to begin with.

But if you noticed the NASDAQ put in an almost perfect doji on Friday. The open was 2643.35 and the close was 2642.97. The difference was 38 cents, not even enough to buy a newspaper. So one would think this is it. The readings here are mixed. On the NASDAQ, the doji comes with no readings but it does come 450 trading days off the March 2009 bottom. The NDX does come with readings as we are averaging 2.301 points per day on a trading day basis back to November 08 and 1.597 on a calendar day basis. That doesn’t mean we have a top, it means a change of direction is very likely. Going over my Saturday charts my readings on the Aussie Dollar suggest a high but the rest of my indicators there don’t suggest a long term top. The same is true on my Greenback indicators. I see further upside for the US Dollar but I’m looking at this as more of a truncated C wave in a bear market rally. The logical conclusion is corrective activity to the equity market.

While we are on the subject of equities, did you see the activity in the biotech arena last week? Our subscribers have been privy to one of the better plays since its turn around December 1, that’s AMGN. But the overall index, the BTK has been in a long consolidation and exploded higher last week. It basically did its thing in 2 days but biotech is the heart of the stock market. It is the reason people get involved. The casual investor/trader gets involved in biotech because they are hoping their $5 stock is going to discover the cure for cancer and get rich. So when people are speculating in biotech stocks the market is good. When you mix the euphoria of biotech rolling with the Christmas season, you see the results. We have a market that won’t quit.

But I can’t ignore the doji. As far as I’m concerned they are coming at a time when Copper is challenging some very long term resistance levels. Are we to say it’s wedged in near a high with no place to go? It’s quite possible. When an important commodity like Copper challenges generational highs it might take weeks or even months to resolve. I’ve shown you this chart before, its time to take inventory of it again. The median channels have several important validations, most important is the top in 2008 and the quarter line which ended up validating at the bottom of the commodity crash.

What does this have to do with the stock market? I think its going to be really hard for Copper to break through right here. If Copper can’t get through it might mean that the whole commodity reflation trade business is going to take a break in the first quarter of the new year. That could mean a rougher road for stocks. That doesn’t necessarily mean a reversal but it could mean equities take a breather after a long advance. We’ve seen so many bits of evidence that show underlying strength for me to come here and tell you I think the readings I’m getting mean the rally is over. For goodness sakes, even if it turns here, you can’t put too much stock in what happens over the volume challenged holiday period. But as we’ve seen in holiday seasons past, we could tread water until the New Year and then absorb the hit. Overall, I’m neutral on the stock market right here. I can’t get too bearish due to all of the underlying strength and I can’t get too bullish due to what I’m seeing on the Copper chart. If somehow going forward Copper manages to break through, the cat is out of the bag. Its going to mean the inflation bug is only going to intensify. But traditionally, breakthroughs such as these only materialize after tests and retests.

I’d take the doji in technology seriously, especially because biotech is now extended. I’d look for wild swings over the next 2 weeks and a trading range kind of market going forward. I’m looking to see how Copper responds to resistance. That’s the key.

I am scheduled to do the Futures panel discussion with Dan Collins on Presidents Day at the New York Traders Expo. We are going to talk about Gann price and time squaring. I have a Gann article coming up in the February issue of the magazine so we are highlighting and discussing it in New York. We are going to talk pattern recognition and show you how to get a definite edge on your competition. By using Gann price and time squaring one can get advance warning of moves before most people see them.

Click chart to enlarge

Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.

Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.

About the Author
Jeff Greenblatt

Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.

Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.

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