JTH

Price Pays
But are you paying yourself?

Technical indicators are a great tool, as is watching the news or reading the blogs. But I would like to point out that at times technical indicators fail, and all news casters will be wrong, as will be every blogger. I say this because I've noticed an increase in the griping about the low volume in the indexes. I agree, yes volume is low, but I care more about spikes in volume that marks tops, bottoms, and breakouts, than the general direction.

Case in point is this Monthly chart of the S&P 500. Volume started declining at the October 2007 peak, the weird thing is it's been declining ever since, including this latest bull run. The lack of volume does trouble me, but when you look at the Positive Volume Index (PVI) & The negative Volume Index (NVI) it helps to tell you what's going on.

You can think of the PVI as "follow the herd volume" because it measures increases in volume from the previous day. You can think of the NVI as the "smart volume" because it's declining volume quietly slipping out the back door while the dumb money is buying at the top.

Look at the PVI/NVI crossover. What I'm showing you on the chart is the PVI is us, or "the crowd" and what's happened is a whole boat-load of investors got shaken up and still aren't ready to commit their hard-lost savings. At the same time (and unusual) is it's the NVI that's been holding up these markets, quietly getting those great deals on Ford, AMD, and all the other great stocks fools like me bought at 2.00 and sold far far too early.

Simply put, investors just got out of a bad divorce, lost more than half of what they owned, and are in no hurry to get married to this market anytime soon.

Monthly: Our fearless leader the Transports break into the Fibonacci "green zone" trading just above the 61.8% level.

Monthly: I love tech and love to see our NASDAQ break into the Fibonacci "green zone" trading above the 61.8% level.

Monthly: They say "Small caps lead the way." Well that certainly has proven true this month as the S&P 600 small caps (think S-Fund) were the first to break into the Fibonacci "green zone" trading just above the 61.8% level.

Monthly: LARGE CAPS LAG!!! I'm skipping the S&P 500. Instead I'm going to break it up into two charts, showing you the S&P 100 Large caps & S&P 400 Mid caps. you should be able to see the huge difference and undersrtand why the S&P 500 has underperformed the other indexes. My theory with the Large caps lagging is that there is more "bang for your buck" value in the mid/small/micro caps.

Thanks for reading. For more on the PVI/NVI and how to use them in your trading, here is a decent read.

Take care... Jason