Up or Down?

Schaeffer

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In an interview with Chris Wang from the Associated Press last week, I expressed my concerns with the market. With contrarians believing that the market rarely accommodates the majority, the main reason was simply that too many people were forecasting a year-end rally and with so many looking for it, it raises a red flag that it may not occur.

It could be that the market is just taking a breather before the rally continues, but there have been signs that the sentiment is shifting a little too abruptly. Mark Hulbert from Marketwatch.com noted in an article Tuesday that his Hulbert Stock Newsletter Sentiment Index jumped from -30.1 percent in mid-October to 39.2 percent on Monday. Such as drastic jump in a sentiment index gives me reason for concern.

One other item of note is the low volume this week. Granted the accompanying chart of NYSE volume shows the weekly volume up through this moment with part of today and all of tomorrow yet to be counted, but I would not look for volume to be very high tomorrow considering that the bond market is closed as are most banks for the Veteran's Day holiday. Given this piece of information, volume will more than likely be extremely low. The low volume could be good or it could be bad. Once the volume creeps back up, we should have a better idea whether this is a topping pattern or a consolidation before another leg up. An increase in volume with the market rallying would more than likely indicate that the rally has resumed. A drop below the lower line of the consolidation area with an increase in volume would be indicative of selling pressure and thus suggest that we are in for short-term pullback. ...