Stock Indexes and Volume Patterns

August 4, 2011

Mish's Daily

By Mish Schneider

SPY So as not to repeat the obvious, want to talk about volume patterns. Yesterday the hammer candle was not supported by the "double the average daily volume" rule of thumb. Today, the volume did indeed double. Now we need confirmation before we holler bottom, but it is safe to say that a bounce is likely since blow out volume often accompanies a top or bottom in price. All depends now on the opening levels and of course the jobs report.

QQQ Ditto concerning volume. Of the three indexes-only one whose ultrashort has not crossed the 50 weekly moving average.

IWM Not double the volume today-big but not enough.

Eminis In 2008 things got real nasty when it broke 1156. At that time, the price was below the 200 weekly and the moving averages were in a death cross. Now, still above the 200 weekly but below the 50 weekly which made a golden cross back in March but without a positive slope on the 200 DMA. Right now, a rally to 1248 would look like a sell opportunity, but at these levels the downside is not where real money can be made.

ETFs:

GLD Fear did not subside but the 160.90, S1 broke anyway. Wrote about volume pattern negative yesterday. Hope you took profits. Bearish engulfing pattern and big volume. Now, under 159 very suspicious action. Only a move above 163 would reverse the warning.

SLV If there is a case to study volume patterns and blow off rallies-here it is. Don't say I didn't warn you.

OIH Never held any of the support areas I was looking for so no position. This, like so many of the ETFs, has a lot of work to do to show anything close to a bottom. But with that said, would be hesitant to short now for anything other than a scalp with low risk.

TLT** Had double the volume and a possible blow off rally. If TLT fails S1 and then today's low that would certainly be a good confirmation.

UUP** Over 21.41 have tight risk to under today's low 21.30

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