If you are a trend trader or a momentum player, days like today are almost certain to produce underperformance. There isn’t any way that folks who use those approaches would be carrying much inventory in a downtrending market. And if you weren’t loaded up with longs at the close yesterday, you missed the great bulk of today’s gains.
After the gap-up open, the bulls did a fine job of plodding steadily higher all day. Breadth was impressive with nearly 5000 advancers to just 700 decliners, but the bears are going to be jumping up and down and pointing at the very low volume as a sign that there is no real buying conviction. While there was some hopeful talk that the worst is over, buyers were not exactly tripping over themselves to put cash to work.
All we really have is another low-volume, oversold bounce. That doesn’t mean we won’t go higher. In fact, given the history of this market over the last couple of years, low-volume-continuation moves are generally a good bet. Plenty of news is coming in the next couple of days and I’m looking for volatility to pick up.