Mark Hulbert of MarketWatch wrote a piece about a technical indicator that I had never heard of. In regards to the recent low volume days he says that there is one aspect that might actually quite bullish: On three of the past trading sessions, stock market volume triggered a bullish technical signal known as a “Nine To One Up Day.”
Here’s how this phenomenon is described:
This signal is based on the volume of all New York Stock Exchange-listed stocks that go up on a given day, expressed as a percentage of the total volume of all stocks that rose or fell on that day. On a day when rising stocks’ volume is the same as declining stocks’ volume, for example, this ratio would be exactly 50%.
A “Nine To One Up Day” occurs when this ratio is 90% or higher. According to Martin Zweig, who helped to develop this indicator several decades ago, such a huge imbalance of up volume over down volume “is a significant sign of positive momentum. In other words, when daily up volume leads down volume by a ratio of 9-to-1 or more, that tends to be an important signal for stocks.” The quotation comes from Zweig’s 1986 book, “Winning on Wall Street.”
He details further how this indicator is used and quotes other statistical tests. Personally, I don’t have an opinion either way, but I am constantly amazed at what arguments people try to come up with to support their case, be it bullish or bearish.
In my view, it is totally irrelevant whether you are bullish or bearish, what matters is the direction the market is taking, which it will do with or without your bias. Most investors would be better off to discard their opinions and only pay attention to where the market is headed and not where they think it should head. Eliminating these kinds of emotions is done best via trend tracking.
Determine the trend, establish your positions and provide for contingencies via an exit strategy. That’s all there is to increasing the odds of a successful investment in your favor.