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DJIA Volume Extremely Low?

  • Written by Syndicated Publisher No Comments Comments
    September 30, 2013

    Markets have been running with lower than normal volume for quite some time, but this week I noticed that the Dow Jones Industrial Average (DJIA) was running with only about half its 250-EMA of volume, and I wondered if there was some technical significance to this fact.

    (This is an excerpt from recent blogs for Decision Point subscribers.)

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    On the chart below the last four day’s volume stands out as being consistently very low. One technical interpretation would be that the accompanying price decline is not serious because there is not a lot of participation, but that’s not it at all. The real reason is that three DJIA component stocks were replaced at the open on Monday.

    Screen shot 2013-09-27 at 10.01.55 AM

    A quick review of average volume (50-EMA) reveals that the three new stocks trade at significantly lower volume:

    GS   3.4 million shares
    NKE  4.5 million shares
    V    3.7 million shares

    AA  20.6 million shares
    BAC 92.3 million shares
    HPQ 15.5 million shares

    The difference is profound. The old stocks trade at eleven times more volume than the new stocks, and the low DJIA volume this week doesn’t mean anything technically. This is good to know if you give volume a lot of weight in your analysis. This week’s DJIA volume represents the ‘new normal’ for this index, and comparisons to earlier volume levels is not valid.

    Images: Flickr (licence attribution)

    About The Author – Carl Swenlin, Decision Point

    Carl SwenlinCarl Swenlin is a self-taught technical analyst, who has been involved in market analysis since 1981. A pioneer in the creation of online technical resources, he is president and founder of DecisionPoint.com, a premier technical analysis website specializing in stock market indicators, charting, and focused research reports. Mr. Swenlin is a Member of the Market Technicians Association.