A lot of analysts are fretting about the low volume rally on the stock market indexes. Ideally, of course, you want to see heavy-volume trading as stocks move higher. That’s an indication of confidence among professional investors, like mutual funds and hedge funds.
So what should investors make of the steady low-volume climb in the Dow, Nasdaq and S&P 500? Remember: The market looks ahead, so rising stock prices signal investor optimism about the situation a few months from now.
But plenty of investors — and not just the garden variety retail investor — but also the pros, became very frightened in the 2008 bear market. A lot of them remain gun shy about putting money back to work. And let’s don’t forget — political uncertainty, still-high unemployment numbers and doubt about corporate earnings all play a role in investor sentiment.
For the moment, hold onto your longs and even add more shares of stocks that are acting right. As always, be ready to sell immediately if a stock begins falling in heavy volume, quickly plunges below a key moving average or shows other signs of weakness.
But rather than project worries about what might happen in the low-volume rally, go along for the ride. Just be ready to get off the bus quickly, if and when the trip seems to be ending!
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