Sense on Cents

Have you ever wondered why the market often times makes a very early move one way or the other then just seems to sit all day? Take today, for instance. The market moved solidly higher on the open, but has sat at up 160 points all day. Why? Let’s look at a 5 minute graph of today’s price movement for the Dow Jones Industrial Average:

The market has traded in a 10 to 15 point range for the better part of the last 4 hours. Why isn’t it moving? A lack of overall trading volume and accompanying conviction on the part of many investors. With fewer market participants involved, volatility diminishes, and the market sits.

Is this good, bad, right, wrong? It’s none of the above. This is merely the market.

All other things being equal, it is healthier for a market to trade up and down on heavier volume as that indicates a stronger conviction and develops a stronger foundation. One may agree or disagree with the price action of a market.  That said, a market will do whatever it may want. That is, “the market is the market.”

LD

This entry was posted on Monday, January 4th, 2010 at 2:55 PM and is filed under General, markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.