Educational use only. Never intended as advice.

Is volume for losers? Classical texts, like those of Schabacker (Technical Analysis and Stock Market Profits) emphasize the importance of volume. Traders whom I greatly respect (like Dave Landry) downplay it. Research that my son, Conor, has done tends to align with Dave. The major US indexes continued their upward climb, on attenuated volume today.

I didn't do a lot today, except taking a small position in MWD which was oversold by my criteria. Winning trades tend to work from the beginning, and that was the case with MWD.

Dynamics:
4% of NDX stocks and 6% of SPX stocks are oversold by stochastics
80% of NDX stocks and 74% of SPX stocks are overbought using the criteria of above their ten day averages. These data points don't define what will happen in individual stocks but examine aggregate trends. TRIN3 is mildly oversold (excessive bullishness) at 0.86 and the VXO is at 12.02 with a ten-day average of 13.51, indicating 'extended' status. The operative word from a dynamics strategy is caution.

Mean reversion Application: recently I noticed that WFMI was dramatically extended (over 12% from its 20 day average). It also had a tail up. I had sold calls into the weekend (with the advantage of theta-time decay) and made a satisfactory lower risk trade. WFMI reports later this week, and I had no intent of holding this high beta stock into earnings.

The highest priced stocks among the SPX and NDX that are greatly extended (over 10%) from their 20 day averages:

ESRX 80.88-78.90
R 42.04-41.04 (watch transports)
EXPD 68.50-67.05
KRI 63.79-61.55
CTX 71.41-68.68 (housing index)

Some of the most southerly extended:

SYMC 18.96-18.64
GRMN 57.39-54.11

Most oversold active ETFs:

EWH 12.58-12.5

ETF NR7 (volatility trades)

OIH
BBH
TLT
MDY
XLF
EWC

Summary:

The market is overbought, plain and simple. That has a tendency to limit upside profits, and favor entry on pullbacks. Obviously, most of the known trading universe is looking for pullbacks, making it harder to happen. Does that obligate us to chase? I don't think so.

Good trading and great risk management to all.