Today I was browsing thru my stockcharts.com folder called "Market Top 2007". These were the 80 or so charts I created back in 2007 and 2008 as the market tanked. I came across this one that continues to look like a great indicator.
This is a chart of the moving averages of the total volume of the markets (colored lines). The S&P is also on the chart in black. You can see the last time I updated the chart by the vertical black dashed line. Notice that before this line the market pretty much topped when the colored lines bottomed (where I have the horizontal dashed line). This is where volume is the lightests. You can see a noticeable downtrend in the volume since then. But, you can also see that the colored lines continue to bottom at market tops, at least for a short while.
Excluding the holiday time frame of 2009, the April top is where this indicator was the lowest (at about 1,000). We hit that point again during the August decline and are meandering that way again these past few weeks.
Buyer Beware!!! Low volumes have not been associated with bottoms these past few years and in fact the opposite has occurred in a kind of capitulation event of very high volumes at shorter term bottoms.
I continue to love this chart!
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