20 replies to this topic

[DonBart]

The excerpt below was posted by Jason Geopfert over at Sentimentrader.com back in early April this year, refuting the bearish argument then that low volume then was a sign that the rally would fail. Of course it didn't. Now the same tired arguments are being used again. Will history repeat? "Another tried-and-true tactic for those looking for excuses for a decline now is volume. In years prior, I've gone over why I don't find market-wide volume to be an effective indicator, but let's refresh our memories as to why this argument, too, is futile. Classical technical analysis suggests that in a healthy market, we should see declining volume as the market drops, and rising volume as prices rise. That's all fine and good in theory, but in practice it rarely works out that way. We don't need to take my word for it, though, so let's just go to the evidence instead and remove all opinion whatsoever. We'll take a look at each of the major lows since 2003, and see how price and volume acted around the lows. First, the big one...the March 2003 market low. There was a distinct pattern here. Volume rose as the market declined. Uh-oh. As prices lifted, volume decreased. Uh-oh again.Umm, this wasn't supposed to happen...prices continued to rise. Price and volume behaved completely counter to what the textbooks said should happen, yet prices continued to rise (and rise and rise and rise...). Now let's look at the next major market low, over a year later. August 2004 market low. Hmmm, same thing here. Declining prices and rising volume, then rising prices and declining volume (plunging volume, actually). And yet still-higher prices going forward. April 2005 market low. Same story here. June 2006 market low. Yet again, the same thing - volume rose while prices declined, then volume dropped off as buyers became more forceful. Prices then continued to rise and give bulls a fantastic fourth quarter. Now we're seeing the same thing again. We had a volume explosion in late February, now volume has been drifting off as prices lift. I could have been really repetitive, and shown the August 1998 market low. Or March 2001. Or September 2001. Or July 2002. Or October 2002... The fact of the matter is that modern markets exhibit increasing volume as uncertainty rises, which reaches a crescendo as prices bottom, then volume returns to normal as prices recover. There's nothing inherently bullish or bearish about it, it's just typical market behavior. There are reasons for concern here, there always are. But when we hear arguments one way or the other, instead of just swallowing them whole, we should take a step back and test what we can - it has saved us many times in the past, and will continue to in the future. The current pattern in volume is not one of those reasons for concern."

Edited by DonBart, 08 July 2007 - 01:16 AM.

[traderpaul]

Classical technical analysis suggests that in a healthy market, we should see declining volume as the market drops, and rising volume as prices rise. That's all fine and good in theory, but in practice it rarely works out that way.

Take a look at a 60 min chart.....Lately all this maket been going down on heavy volume and up on light volume....and prices going flat (daily) with massive volume....If you say that is bullish....More power to you.....

[HoseB]

Years ago, I had a some effective volume oscillators [custom]... but at some point they stopped working. I've since come to the conclusion that volume considerations for the market/indices are completely irrelevant, so I don't track it at all any more. I venture to say that a great deal of money is left on the table by technicians who look for "volume confirmation"... in my book, there is no such thing. I know, I know... this is TA heresy. But that's my story, and I'm sticking to it..

[mini-trader]

Volume spikes work great as top or bottom indicators (especially in small time frames) but high and low volume on daily or weekly charts seem too seasonal and don't seem to say much to me as far as tops and bottoms go.

[gorydog]

These are often rising wedges that can resolve either way, up or down. The falling volume is a sign of lack of conviction! Volume is not an indicator by itself, you have to look at the chart pattern it is part of. GD

[SemiBizz]

Don, if all you have is what "so-and-so" SAID on another site about volume and no actual technical experience, no charts, I suggest you continue your discussion on Yahoo boards. Better yet, stick around here for awhile and shut up and listen... or EVEN better yet... I'm a dynamic volume analysis expert. Go look over my posts for the last few months with the charts and look at my forecasts... Click on my name above and review my topics and posts... see if Volume analysis works or if it's a bunch of Hoooey. If you can produce a better set of forecasts, THEN STEP RIGHT UP..... I'm not saying that to toot my horn, I'm saying that to let you know you are treading in quicksand.... You're unsubstantiated opinions are preventing you from learning something that could make you a better trader.... [snipped by admin]

[DonBart]

I'm a dynamic volume analysis expert. Go look over my posts

Unfortunately the search option is not available to me so I can't check your previous market calls.

But since you claim to be an expert, I am curious what your particular expertise in volume analysis told you at the major market bottom in July 2006, from which the NDX has rallied 35% in just 1 year? Were you bullish or bearish then? Most of those who claim to be volume experts were incorrectly bearish then and expecting a low volume sucker rally that would fail when the volume came back after Labor Day. Of course they were dead wrong and doubted the rally the whole way up.

If you can tell me that you were aggressively bullish then based on your volume analysis then I will regard you as a true expert. Otherwise I will be skeptical of you claims.

Thanks,
Don

[SemiBizz]

Charts, forecasts Don.. .where are they? Stick your neck out Don... Don, you are technically challenged... I don't have to prove anything to you... Nor do I care to.

[OEXCHAOS]

Semi,

Ease up.

DonBart, Semi is an expert. I've learned from him and I've nailed some targets and some nice trades using the techniques I learned from him. He has nothing to prove to you. You can research it yourself here:

http://www.traders-t...ult_type=topics

I suggest everyone start over with a more civil attitude. Failure to do so will result in trouble.

We don't want that.

Mark

http://www.traders-t...?...c=56515&hl=

[DonBart]

Semi,

Ease up.

DonBart, Semi is an expert. I've learned from him and I've nailed some targets and some nice trades using the techniques I learned from him. He has nothing to prove to you. You can research it yourself here:

http://www.traders-t...ult_type=topics

I suggest everyone start over with a more civil attitude. Failure to do so will result in trouble.

We don't want that.

Mark

http://www.traders-t...?...c=56515&hl=

Well let's try and get to the bottom of this volume debate. Many here are claiming that due to low volume last week the rally is not for real and is destined to fail.

Per the evidence presented above from Jason Geopfert at Sentimentrader.com, that assertion holds no water.

Now I don't claim that there aren't other forms of volume analysis that might work well, and this SemiBizz fellow may actually be an "expert" in these other areas as you and he claim.

However, if he is claiming that his expertise is telling him that the low volume this week means the rally will fail, well then I think I might have the right to ask if he reached this same conclusion during the low volume rally off the July lows last year? Is that asking too much or out of bounds in some way?

If so that seems to send the message to me that we must never question the assertions of certain experts here so as not to offend, even if we have facts to the contrary of those assertions.

Isn't the whole point of a message board to present differing viewpoints in order to uncover the market "truth". But if presenting a differing opinion that is supported by facts and data is considered offensive and is prohibited then I think we all lose.

Don