Back when SemiBizz, a trader on Traders-Talk.com rather precisely called the top in 2007 (blue circle in the middle of the chart below), he introduced the notion of a lower monthly price coming on higher volume being a clue to a sell off and possibly even a substantial top.
His was a pretty simple and clear signal (which I have subsequently marked with the red vertical lines on the chart). At the time I liked his monthly price/volume call a lot as a longer-term signal — clear and simple being, to my mind, the best adjectives for market signals.
Although the downside had trouble getting follow through all last year (see the multiple red lines and results on the chart), one had to keep in mind we were on red lines each time the signal triggered. That lack of follow through to the downside spoke volumes (so to speak) on how bullish the market was internally (and maybe still is).
Regardless of last year’s results one must still be on alert each time this signal triggers because just when one thinks something this simple and clear isn’t working, it will. On that note, it must be stressed we are again on a monthly red line in the Nasdaq Comp. .
(Click on chart for a larger image)