Low-Volume V-Shaped Action Persists

 | Nov 29, 2011 | 2:00 PM EST
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The Dow and S&P are green, breadth is fairly strong and sellers aren't gaining any traction. But the Nasdaq is underperforming and it's extremely slow trading. The most challenging aspect of this market, recently, has been that there is so little energy, even when we do have positive action.

What really makes trading challenging is that we so often have a tendency to run higher, not only on very light volume, but on declining volume. When we drift higher it squeezes the bears, but it also frustrates the bulls, who struggle to put money to work but can't find the setups they like. 

There isn't any strong momentum for the momentum players and few good charts for the technical bulls, so buying becomes more an act of faith rather than a systematic strategy. I am leaning bullish, yet I really struggle to find places where I can put money to work.

The market's tendency to move higher on a poor technical foundation has probably been the characteristic of the market that has changed the most in the last couple years. I've written about v-shaped moves constantly and what is really amazing is how often they are lacking in any real volume.

I continue to believe that we have a psychological setup for some upside and the slowness of the trading actual plays into that. It is this sort of very slow and dull action that always catches everyone by surprise, because they never have a chance to position for it.

The big risk in this market continues to be Europe, but if nothing major hits we can easily see this slow drift to the upside continue for a while. Most of us would much prefer a good, old-fashioned bull market where the buying interest was clear. But this low-volume v-shaped action is what we are forced to deal with and we need to respect it.

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