Volume Analysis Flash Update – Back to Support

In our 2022 Volume Analysis Outlook, the S&P 500 was fresh off new highs exceeding 4800. We suggested that while it is rarely a good idea to fight the trend, there were many signs of caution developing. As such we discouraged the temptation of purchasing additional equities on potential forthcoming equity market pullbacks. We also identified two potentially key areas of market support to watch as key decision points. Now that the market (S&P 500) has achieved the first of our two downside targets of 4410 (4315 being the second), in this issue of Volume Analysis we will once again review those criteria which earlier gave us pause. Further we will update you on what those same leading indicators may be suggesting now.

Let’s begin with the chart below illustrating those breadth indicators that were strongly diverging from the broad market’s up trend.

Source: StockFinder, Worden Brothers

Previously we pointed out all three of these breadth indicators were bearish, diverging against the primary uptrend of the market raising the yellow precautionary flags. As of the date of this writing, all three indicators are still headed south. When New Highs are falling, it may mean the market has stronger overhead resistance. When the Advance Decline is declining, this suggests liquidity is failing. And when Percentage of Stocks Above Trend is decreasing, it indicates many stocks are finding it more difficult to move up than down. A few weeks ago, all of these leading indicators were negative, and they remain so today.