First let’s take a look at the Nasdaq Monthly. The Nasdaq has led the market higher since March of 2009. As you can see we have broken over the price of the all time monthly high volume high of October 2008. This bearish upthrust is setting up a nasty reversal that will first test the low of the October candle, just below 1500 on the Nasdaq, more than 600 points lower than where we are today.Now let’s look at the DJIA. In March of 2009 we had a “Tsunami” of volume at the low, followed up by a “dragged kicking and screaming” rally on declining volume to the recent high. We expect the DJIA to outperform the next decline vs. the Nasdaq, because the target on the DJIA IS the last candle of volume low or the March 2009 low. While investors have been eager to buy what they perceived as “cheap” speculative Nasdaq stocks, they haven’t “shown the money” on the banks, financials, oils etc. represented by the DJIA and SPX. This is not a recipe for success in the market, because if the banks are no good, none of it is any good.So while we have had a “deadcat bounce”, “green shoots”, recovery rally in stock prices… the volumes are telling us there is no conviction behind it… especially in the places we need it… like the banks.

Meanwhile the fundamentals are still crumbling:

Unemployment – Here in California The August Unemployment Rate was announced this week at 12.2%, the HIGHEST since 1940… and that only represents those collecting benefits and not the people whose benefits ran out, gave up, or could only find part time work.. probably over 20% total. The rate of change (ROC) is alarming, because in August of 2008 the unemployment rate was 7.6% vs 12.2% a year later. California represents 1/8th of the planet’s entire economy, no green shoots there.

Source: California E.D.D. – California’s Unemployment Rate Increases To 12.2 Percent

Real Estate – Moody’s Reports a full recovery in housing prices will not come for 10 years or more in the U.S. and perhaps 20 years in Florida and California.

Source: Analysts say it will take more than 10 years to recapture peak home prices

Of course we don’t know exactly when the stock market will reach it’s tipping point, but we do have enough information reflected in the volumes in the market to know that it will.

For more information on our Volume Forensics approach to trading the markets…

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“Volume Dynamics″

(T&C Forums – Knowledge Contributor)