From this corner’s view, this market is on the verge of falling hard, but people are not seeing it. With the market is so close to all-time highs, most are fixated on it making new highs, rather than paying attention to valuation or macroeconomic conditions, both of which present serious risks.Markets can move up in the face of risks, in fact they often do. But the way in which they move up is also often an important tell. And right now, I think market is trying to tell us something. .
What I’ve mean ?! Look at those points below . .
The market increases early and stays higher on very light volume.
Declines are short lived, and buyers seem to come back on every possible dip.
Good news is great , bad news is ignored, and neutral news is considered good.
In the last hour of the day, regardless of news, selling pressure hits and volume levels spike.
Do you see something familiar in those chart’s above of the U.S three major industrial’s.. ?
This action can be seen clearly in the market ETF’s:
SPDR S&P 500 ETF Trust SPY, (-0.77%)
SPDR Dow Jones Industrial Average ETF Trust DIA, (-0.76%)
iShares Russell 2000 ETF IWM, (-1.09%)
PowerShares QQQ Trust Series 1 QQQ, (-0.84%)
After anemic volume levels for the better part of the trading sessions over the past two days, volume levels increased by about 50% in the S&P 500 in the last hour. In fact, on Tuesday, volume levels spiked by 37% in the last 30 minutes alone, and on the heels of these volume spikes, the markets have fallen relatively hard late. That is a bearish flag. Traditional theory tells us that smaller investors take action at the open, and institutional investors take action at the close. Clearly this is not set in stone, but it is true that we often attribute late-day action to institutional activity, whether that be buying or selling. Many fund managers watch for this activity. The low-volume rallies also tell us that institutional investors are not, for the most part, buying along with smaller investors early in the day. Instead, they seem to be simply not selling, and by not selling, they are allowing the smaller investor to bid the market up; if there are no sellers, a small amount of buying could push the market higher, and that’s what’s happening lately . . Institutional investors are carrying more margin debt as a percentage of cash on hand than ever before, putting the cash/margin ratio at an all-time low. That hampers institutional ability to buy, but if they don’t sell, the smaller guy can bid this up. That’s what is happening here.
Seeing this happen near all-time highs in the face of the macroeconomic and valuation risks makes it even more sensible to control risk.