Letters To S&C by Technical Analysis, Inc.
I just finished reading L.A. Little’s article “Price And Volume Disconnect” in the November 2010 issue of Stocks & Commodities. I have a general question I was hoping he could answer for me. (I loved the article, by the way.)
While I completely understand his reasoning behind identifying disconnects between price and volume as well as how to act when a suspect trend is spotted, I was hoping he could speak to why such situations sometimes arise in the first place. I know it’s a loaded question and I don’t expect a lengthy response, but I’m curious as to what might trigger a suspect trend. I would be happy to do further reading if he had any recommendations.
L.A. Little replies:
Suspect trends are a natural occurrence, in my opinion. They are part of the natural ebb and flow of the market. In the current market environment, there is less overall interest in stocks as a result of the lingering worries about the future that are predicated on the 2008 financial debacle. Those concerns do not disappear quickly, and despite a rise in the market of tremendous percentages, the concern remains for a subsequent fall along the lines of 2000 and 2008.