redback report, week ending 1 march, 2013, page-8

Hi Mungo,

Thanks for the kind words.

In relation to the decreasing volume, I've had this discussion before. Here's a long term chart:

In, and of itself, decreasing volume is no impediment to further advancement in the Index. The longer it goes on, naturally, the market becomes more vulnerable to distribution (selling pressure) on increasing volume . Decreasing volume is not, however, a causal factor, merely a contextual factor to be aware of.

The decreasing volume is a conundrum. Supposedly, HFT now makes up about 70% of trades on the American market. These trades occur in milliseconds and take advantage of small anomalies to make arbitrage trades. Those anomalies disappear as quickly as they appear - in milliseconds. They don't, as far as I can ascertain, affect the long term trend of the market where larger forces are at work. The amount of trading ascribed to HFT has been increasing in recent years. If you excise that from volumes, then the volumes going through on "real" trades have now dropped to miniscule levels.

Adding to the conundrum is the increasing use of "dark pools". These are trades made by big institutions/brokers for off-market sales/purchases which are not reported on the exchange. There's nothing illegal about this. But, nobody knows just how large these trades are, but it is suspected, given the participants, to be very large indeed. That might account for a large proportion of the drop off in the number of reported trades.

The average retail trader (like you and me) just doesn't have the information needed to make an informed opinion.

Action in the index chart then must assume dominance in the decision making process.

Anyway, that's how I see it. Others may have good reasons for disagreeing.

Redbacka