By: Evan Lazarus
Last night I decided to do a little research. Yesterday the QQQQ’s traded 26,927,600 shares. The last time they traded with this type of low volume was over four years ago on July 3rd 2006, a ‘half day’ of trading, right before the 4th of July holiday. As far as a full day of trading, I ended my search after going back a decade when August’s worst volume was averaging around 45 million shares on average a day and that was when the QQQQ’s weren’t traded nearly as much as they are now especially with the rise of “the machines.”
Even in August 2009 we averaged well over 100 million shares a day with some days close to 150 million shares. Volume, in and of itself isn’t reason enough to maintain a bearish stance. However, one can make the case that when futures failed to confirm a new marginal high in the S&P500 cash index for August, that yesterday was nothing more than a bull trap (A bull trap occurs when longs take on a position when a stock is breaking out, only to have the stock reverse and shoot lower. This counter move produces a trap and often leads to sharp sell offs). Confirmation of this sinister pattern would be a break of yesterday’s lows both in futures and the cash index and so far we have just that in futures as we have already taken out the lows of yesterday in overnight trade. Further confirmation will be needed if the S&P 500 cash index does the same.
The key to today will be can the uptrend line be saved from the early July lows like what happened last Friday after the jobs report.
