December’s Nasdaq composite ($COMPQ $COMPX) closed lower than November on higher volume.
In the past that was as simple and elegant a longer-term sell signal for the general market as there was (see red vertical lines on the chart below).
In the past two years, however, it gave way to chopping up and down with alternating buy signals (closing higher on higher monthly volume, the green lines on the chart below)…it seemed almost monthly. Not quite sure, but I suspect that was because of the Fed Reserve QE efforts in the market making it hard to get any traditional bull-market correction against cheap credit constantly infusing the market (also suspect we may be paying dearly for that Fed manipulation now).
But it appears the simplicity and elegance of the sell is back, and compelling. If so, the market’s general indexes (DOW. SPX, NDX, RUT) are going down until further notice, a bear-market trading and investing environment of “sell the bounces” (one is coming up soon) instead of the bull-market dictum to “buy the dips.”
P.S. I first learned the value of this from a poster named “SemiBizz” on Traders-Talk.Com. when he ended up calling the top prior to the 2008 bear market (see the blue oval in the middle of the chart). He deserves all the credit for his contribution to that most difficult of market tasks — calling tops.
(right click on the chart for a larger image)