| Where's the beef? Remember that old commercial? I | | | | interest rate derivatives, etc etc. |
| have no clue why, but I think of that commercial | | | | But when they hit, they hit with a vengeance. It's |
| every time someone mentions that volumes are | | | | not uncommon for a big outfit like Merrill to buy a |
| once again not nearly as robust as we'd like to see in | | | | basket and drive the DOW up 60 points in literally 15 |
| a rising market. | | | | minutes. Was there an accompanying rise in volume? |
| Over the years, one of the most popular adages | | | | Yes, but NOT in direct relation to the size of the |
| about trading stocks was that you'd like to see the | | | | point move and that is very very important folks. |
| volume "confirm" the movement. Well that's all fine | | | | Program trades don't allow time for other investors |
| and dandy, but you often run the risk of sitting | | | | to analyze what's going on. They must either buy or |
| around watching stock move higher and higher on no | | | | wait a bit and see what's going on. It's that wait and |
| volume, and then kicking yourself for not getting | | | | see hesitancy that often spells out why a lot of |
| involved. What's going on here? | | | | program pops are sold back off. No one else bit. But |
| The market is not the same as it was just 5 years | | | | when the DOW moves 60 points and some individual |
| ago folks. This market is driven by program trades, | | | | stocks are going up at 2 bucks a clip, should we wait |
| not widespread participation as was always the | | | | on volume to confirm it? Do so at your own peril. |
| situation in the past. In years gone buy, live people, | | | | In 97 we never did a trade unless there was |
| making big decisions would make a move to buy | | | | confirming volume. In 98 the volume was there |
| stocks, and as they were buying other managers | | | | anyway, just like in 99. But, since then, just about |
| would see the action and they'd buy and so on and | | | | every roll higher has been on what one would call |
| so on. Often volume and price appreciation "grew" on | | | | "low volume" and frankly I don't pay that awful much |
| each other. | | | | attention to it any more. The entire run up of 03 into |
| But today, it's computers. Really bright fellows with | | | | 04 was accomplished on considerably less volume |
| slide rules (well, maybe little calculators now) and | | | | than the averages would have had us "need". Wait |
| degrees decide what is the "buy area" and sell area | | | | on the volume and miss the ride. Nope, not gunna do |
| for a basket of stocks, based on all sorts of | | | | it. |
| parameters, some of which you'd never know of. For | | | | Sure volume is important, we'd love to see a price |
| instance there are programs designed to kick in when | | | | breakout, confirmed by volume, it's got a much |
| the futures get too high. Some kick in based on the | | | | better shot at sticking. But I will not hesitate to buy |
| amount of foreign currency that the particular bank | | | | a breakout on lousy volume any more. Hey, I can |
| holds. (why? as the currencies fluctuate, they buy | | | | always sell the darned thing. But, I can't make up a 3 |
| and sell stocks as hedges against the currency) | | | | dollar miss out on a breakout. See my point? Good. |
| Some programs are tied to interest swaps, some to | | | | |