Low Volume Lends a Helping Hand

August 29, 2006 · Print This Article

Market performance has been somewhat suprising over the past few days. Gains have been limited, which is usually the case in an overbought market. Today’s late-day rally brought the S&P back to the top of the two week trading range and also moved the Russell 2000 (IWM) and Nasdaq 100 (QQQQ) into an overbought state. The only major indice that is not in an overbought postion is the Dow Jones (DIA).

I am still leaning towards the short-side of things for reasons that I have mentioned repeatedly over the past few trading days. Let me summarize: with the S&P sitting right below the top of the recent tight trading range (strong resistance) and in an overbought with the gap from 8/16 yet to be closed I still siding with th bears over the short-term.

The rest of the week should be rather slow as more of Wall Street look to leave early for the long holiday weekend. This is the one reason not to lean to heavily to one side this week. With volume this low it does not takemuch for buyers/sellers to sway the market. This is the one thing that scares me about being too aggressive on the short-side. If volume was at normal rate I would certainly be taking a short position here, but with lower volume expected over the coming days I want to to fairly nimble, watching short-term trades closely.

RSI Wilder (5) for August 29, 2006