In his book "Winning on Wall Street", the late Marty Zweig showed us the value of volume ratios. A ratio of 9:1 or greater of up/down volume is considered to be very bullish and 9:1 down/up volume is considered to be very bearish. We certainly met the bearish threshold today. In the short history shown on the chart, we can see that it is a mixed bag. Quite often the ratio spike actually pegs an important bottom, but other times it occurs earlier in a decline.
(To see a live version of this chart click here.)
Considering that prices are due for a correction back to the rising trend line drawn from the June low, I think I will interpret today's high down/up ratio as bearish.
Watching the windsock,
Carl
About the author:
Carl Swenlin is a veteran technical analyst who has been actively engaged in market analysis since 1981. A pioneer in the creation of online technical resources, he was president and founder of DecisionPoint.com, one of the premier market timing and technical analysis websites on the web. DecisionPoint specializes in stock market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and blog contributor.
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