We have been expecting a top in equity indices for the last two weeks. We did see the market start down last week after the previous Friday’s option expiration. A change of trend after option expiration is a common (but not guaranteed) occurrence. So far the pullback isn’t enough to concern the bulls or get the bears excited but there are other signals warning of a pending correction in equities. One of those is volume in the NASDAQ ETF QQQ.
As can be seen on the chart below, QQQ volume tends to spike at market lows and dry up near market highs. Volume spikes can be explained by market participants buying the ETF in order to hedge their stock positions. The complacency associated with a lack of hedging activity shows in low volume numbers – like now.
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