Wednesday, April 7, 2010

A warning sign ...

As of late, I've been in the camp of "let the bulls run".  I've watched other folks discuss the drying up of volume across the board, yet I've not seen it, at least through last weekend.

That has changed.

The graphic above shows average volume for the past 15 months, plotted with the GGT index.  Reading this chart and inferring patterns is like reading tea leaves -- just because we see a drop in average volume does not mean the market will fall.  Nevertheless, we've been on a good run with respect to average volume, and just recently I'm seeing the peak.  In fact, 4 of the 6 past trading days have seen daily volume less than average volume, which blows the previous 57-day streak of daily volume being higher than average.

Given that the GGT price index is extended above the shown artificial trend line, and given that volume is peaking, I think you may want to consider protecting some gains.  I know that I am.