Come on guys. All this nonsense talk about low volume. And no one mentions that its the holidays. This was destined to be a low volume time. If the volume is still this low in 2 weeks then you have a right to doubt the directional trend, but for now two truths are evident that are being rather ignored - one, its the holidays and two, we are going more sideways than up. So, low volume consolidation during the holidays. Why are so many people acting shocked and amazed by this?
I don't think anyone is shocked and amazed. But the holidays don't negate market sentiment and proximity to the recent hype cycle, IMO.
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Like I said earlier, might be some upside left here. But I don't think we are going to the moon in the next couple weeks.
May I use your comment to soap box for a moment about a pet idea of mine? I believe what you and others say about the low volume reducing the impact (and perhaps: staying power) of the current uptrend is true, but at the same time, it is not really a relevant objection.
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There's this idea I'm working with, that is neither particularly novel I suspect, nor is it anywhere near formalized, systematized and testable -- it's simply a mental "stepping stone" for me to make sense of market events. The idea is simply that as events unfold, I update previous probabilities (in an intuitive rather than formal sense) about which state the market is in, and which state is likely to follow.
Let me be less vague: After the double top it took until about December 15 (right before the crash) before my internal assumptions switched from "bull market" to "bear market". This didn't happen all at once, but gradually, based on a number of observations and indicator signals.
Okay, so let's start at this point, the "confirmed" downtrend on December 15. What could convince me (or you) that the correction/bear market is over? Surely some drastic event (say, a new ATH) would do the trick, right? But we're nowhere near such an event, of course, so it's probably going to be a more gradual process.
What are the pieces of evidence that are part of this gradual process of changing one's assumptions? For example, we still didn't see a "double bottom", i.e. a confirmation of the previous low of ~460. Could mean we're back in an uptrend. Or that we haven't found real support yet. Evidence in favor of an uptrend is that in the last days, we've seen a break of a major trendline going down, and that several upwards trends across time resolutions are active at the moment.
So here's one observation I'd like to add, based on a simple method I recently started applying to post peak periods. I described this method a bit more in lucif's thread, and I'm still playing around with it, and try to find a way to remove the "intuition" from it so I can properly test it on historical data -- basically, it is the observation that after a peak/bottom cycle, price (or rather: volume weighted price, as it seems to work better like that) stays close to the middle point between the peak and the low of the cycle, and that the relative amount of time above or below that median corresponds to the likelihood that price continues to go up or down. Several details are still fuzzy: What's the input? Price, average price, or volume weighted average price? Also, I'm thinking that more recent price points above/below the median should be weighted higher than older ones in determining the prediction probabilities, so maybe some EMA-type calculation should work. Like I said, it's work in progress.
Anyway. What I'm looking at right now tells me to be (cautiously) optimistic.
Note that we are still below the median of the first December cycle (peak: December 4, bottom: December 7), but recently ended up above the median of what I consider to be the second peak/bottom cycle (peak: December 10, bottom: December 18). This second median is placed at ~769 USD (mtgox), and we've been above it, with a short interruption, for about 4 days now. My assumptions is, the longer we stay above it, ideally uninterrupted, the higher the likelihood that we continue to go up.
Sounds tautological, huh? "If price goes up, we go up." Not exactly. I intend this indicator to work as a short-to-medium term predictor based on the most recent history. It's not so much tautological but more of a compliment to other short term indicators like MA based ones, with the difference that hopefully mine is more predictive rather than lagging.
Let's say for a moment we manage to stay above ~769. Then I expect the next big point of resistance to be the level of the next higher median at ~914 USD.
Now I'd like to come back to my initial remarks about how I am prepared to gradually shift my assumptions about the current market: I'm trying to take into account as many pieces of (relevant) information as possible when deciding whether I believe that the December correction will continue, and for how long.
The most important piece of evidence *in favor* of the downtrend continuing is historical precedence. The objection by bulls is, understandably, that "this time the fundamental situation is very different". And I agree, it *is* different, and this *does* have an influence, but not necessarily in such a way that the length of the correction period is greatly reduced, but it could also be that e.g. the trajectory of the correction/consolidation period looks different based on different fundamentals. As I said before, based on this historical comparison, I would expect the consolidation/correction to last until late January/early February.
On the other hand, I don't take "historical precedence" as gospel. And that's why I watch other evidence, that is specific to the current period, like the results of my experimental method above, closely. Right now, we're undeniably in a short term uptrend since about December 22. It's not clear how long it'll last, it's not sure at all if it'll even break through the 800-850 (mtgox) resistance range before we run out of steam... but the point where we are now, above the median of the 2nd peak/bottom cycle, is one small piece of evidence
in favor of the correction being over, or about to end.
The following is important! Please understand what I'm saying -- I am *not* saying that "the correction is over". It's a much weaker statement: "there is some evidence the correction is over".
It'll take substantially more evidence to convince me we're back on a stable and forceful upwards trend. And right now, the first requirement is staying above 769. If that happens to be the case for a while (a week maybe), then the next step needs to be cracking through (and staying above) the point I defined above, at around 914.
If we should reach that point, and we would stay above it for, say, about a week or two, I will most likely conclude that we do have a historic first where the post-ATH correction period is substantially shorter than the duration of the uptrend that led to the ATH.
Now, to finally come back to the "volume" question: all of the above is why I'm not all that worried about the low volume. It does (in my mind) make the current uptrend somewhat less "relevant", but only in the sense that the weight of the current uptrend as evidence in favor of the hypothesis "the correction is over" is slightly reduced.
More important is the question what will come instead of the current weak uptrend: if the current trend is really that weak in volume, then it also means that a relatively weak *countering* trend could easily destroy it. But as long as no such counter trend manifests, the *existing* uptrend, no matter how weak, is the only piece of information that I need to include in my considerations. In other words, I am aware that this trend could easily turn around, but I also realize that even a weak uptrend is, after all, an uptrend, and should be taken as (possibly weak) evidence that the correction/consolidation won't last much longer.
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Apologies for a very wordy post. I don't have the time to rewrite the above and condense it to a more readable version. I know that it is written in a sort of rambling style that could be greatly improved, but maybe someone will find it mildly interesting anyway.
Poll
