Tuesday, March 24, 2009

Is it healed now?

Yesterday was a huge day for the markets. The 18th was also huge. Considering all of that strength, and our hopes for an end to this recession, one would dare to consider that the market's woes have been cured.

Nobody hopes that more than me, however, as I study the data, I conclude it is not... Here's why.

Notice the chart of the broad market index above. We recently made a nice V which resulted in yesterday's close above the 20 day moving average -- very bullish. Yay!

Now, notice the volume indicator. The market has made several V's resulting in rallys. They all coincided with extreme levels of volume. The current rally did not.

My conclusion:
Nobody is sufficiently confident in the economic environment to invest large amounts of cash.
Therefore, I am not either.
If there are relatively few buyers, we can expect to see more chop and downside. Sniff.

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