Stocks Drop on Low Volume

by The Investment U Research Team

The mainstream media is reporting that markets are down is based on declining payrolls, fears that the broader economy will continue to slide, and concern that economic recovery will not be as quick as expected.

The reality is that we’ve been in a holiday weekend pattern. Volume was sharply down late last week as the markets dropped.

When volume for any movement isn’t strong, you can assume that the market isn’t sure of that direction. On days when many workers are out – or wishing they were out – you can be sure that there will be little true direction.

And it makes sense if you think about it. In the days around long weekends and holidays many workers take extra days off or mentally “check out” early. It happens on Wall Street as well.

The result is that the traders still on the floor have more influence and once a direction or mentality is set, that’s where it moves. This time it happened to be down.

We may not see a boost in volume or positive movement today, but as the week goes on and traders get back to their desks, we could see some up days on heavier volume as the institutional money managers get back in.

We need to remember that we’ve got a lot of negative news out there, and that’s not going to stop. Look for strong movements with large volumes to confirm any up or down motions.

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