Tuesday 30 January 2007

Lack of Volume a Worry

The Emini closed up 7.50 points at 1,434.25 on Tuesday. We got the break upwards anticipated yesterday but there was not much conviction with only 0.8 million contracts traded. In addition, the largest volume traded was around 10:30am with an upward climax-like bar. The Emini then dipped and closed on the highs, but that action smacked on profit taking and a lack of buying demand subsequently.

Emini Volume Range Image

The chart above shows the Emini with a proprietary indicator (Secret #1) which measures volume traded and range. High levels are shown with red daily bars and low levels are shown with white daily bars. Typically, market tops show a lack of demand and white bars - for example in mid-November.

What was worrying today was the lack of demand in the middle of an advance. I know that the Fed meeting will have traders standing aside until market direction becomes clearer, but the lack of market conviction has me cautious and taking profits early.

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