Friday, August 22, 2008

Need More Volume

The S&P 500 Index remains in a downtrend since the market correction began in October of last year.

(click on chart for larger image)

S&P 500 chart one year as of August 22, 2008
On a shorter term basis though, the market is attempting to move higher as detailed in the chart below. It seems one missing element is the lack of volume on the S&P Index.

(click on chart for larger image)

S&P 500 chart six months as of August 22, 2008
As noted in one of my earlier post, Sell in May and Buy in November, the market has a tendency to be weak during the May through November time period. One reason cited for this phenomenon is many investors and traders take vacations during the summer months.

A large amount of cash still remains on the sidelines that could find its way into equities. The Investment Company Institute reports a continued increase in cash in money market funds. As of August 20, 2008, cash in money market funds totaled $3.5 trillion dollars. At year end 2007 money market cash equaled $3.1 trillion dollars and this was up from $2.3 trillion at year end 2006. I will be watching trading volume as we get closer to the 4th quarter and the election.

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