There are 4 combinations of price volume relationships
- Price Closes Up and Volume is Up (This is the most bullish relationship in any market)
- Price Closes UP and Volume is Down (This is the most Bearish in any market)
- Price Closes Down and Volume is Up (This can be bullish or bearish-a capitulation day is and example of how this can be bullish or after a downturn a high volume day on a star or doji can be bullish. In a Bull market generally speaking this is an ominous relationship)
- Price Closes Down and Volume is Down (This is almost a meaningless relationship and the most common in a Bear market)
What we look for are Dominant Price/Volume Relationships and a pattern developing. For example, today, of all stocks 2914 stocks Closed Up with Volume Down. Eve though today the major averages had decent gains, the day is not exactly as it seems. The second place position was Close Up and Volume Up-1486 stocks. So nearly twice as many had a bearish close than bullish. This is at the third day in a row we have seen this relationship.
Of the Dow 30 16 stocks Closed Up with Volume Down-more than half-that is dominant and bearish. The second place was 13 that Closed Down with Volume Down (normal for a bear market). In contrast ONLY 1 of the Dow 30 Closed up with Volume Up.
Almost half of the NASDAQ 100, 49 stocks Closed up with Volume Down, second place was Close Down with Volume Down 24 stocks and only 21 Closed up with Volume Up.
Of the S&P 500 256 Closed Up with Volume Down and only 70 Closed high on higher volume.
It is a short week, but this relationship, the most bearish has been dominant for some time. Think in terms of emotion, that is what Technical Analysis is showing us, emotions on a chart. While buyers are still pushing the market higher, they have lost their conviction. The VIX hit am intraday low not seen in almost 15 months, complacency is everywhere. While Window dressing and year end specialty trading like tax selling, etc is dominating much of the market’s behavior, come the new year, I think all of the evidence of bearishness with a rising dollar will finally take it’s toll on the market.
I use StockFinder to color my chart candles with dominant Price Volume relationships so I can see at a glance what it has been historically. You might keep a note pad of them or do as I have done with StockFinder.