The S&P 500 set a new all-time high yesterday. But does this party have a large number of guests showing up?
On March 16th I analyzed the Up/Down Volume Ratio of the component stocks of the S&P 500. In my newsletter, and on a MarketTamer blog posting, I stated:
“One technique I use for filtering out the best trade candidates is to use the Up/Down Volume Ratio of stocks. Along with their proprietary Accumulation/Distribution rating, Investor's Business Daily frequently refers to a stock's Up/Down Volume Ratio as a gauge of institutional participation.
“Up/Down Volume Ratio is the ratio of total volume on up-closing days, divided by the total volume on down-closing days, over 50 trading sessions. A value > 1.0 usually indicates more buying than selling interest, and a value < 1.0 indicates greater selling. In practice, I use a value greater than or equal to 1.3 to indicate strong accumulation, and a value less than or equal to 0.8 to indicate distribution.
“From reading recent MarketWatch.com articles and many of the emails I've been receiving, one could easily come to the conclusion that there is little participation in recent market highs. So this weekend I took all of the stocks on the S&P 500 and ran the Up/Down Volume Ratio calculation on them.”
Here is the Up/Down Volume run updated through last night (5/14/2015):
We see that the number of stocks with U/D Volume Ratios <= 0.8, generally indicating distribution, rose around late August into September, early March, and now early May.
Compare this with the S&P 500 chart:
Note that during last August into early October the number of stocks with U/D ratios <= 0.8 rose, even though the S&P 500 generally stayed level. However, the index dropped sharply in mid-October. The increasing number of stocks with poor U/D ratios forecasted the S&P 500 drop.
In March, the increase in stocks with low ratios rose along with the S&P falling. But for the past few weeks, we're back to an increasing number of stocks showing distribution, however the index is currently remaining level.
Will more guests start showing up for this party, or are the Up/Down Volume Ratios indicating institutions are in general exiting from stocks and the S&P 500 may soon turn downwards?
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2015 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com.
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