While still technically trading within the “neutral zone” range of 2800 and 2725, the NASDAQ is showing clear signs of strength as it has recorded three Accumulation Days (moving up in price on increased volume) over the past six sessions.
Also adding to the optimism is the fact that several Darvas stocks are acting very strong; either extending gains or breaking out of sound bases on increased volume.
When in doubt about the health of the market, always trust the behavior of your leading stocks over the action of the indexes.
Still, there is reason to remain cautious.
We’re now 10 days into a rally attempt and only one of those sessions has come on above-average volume (and that session was actually a Distribution Day on March 18th as the NASDAQ reversed sharply off its highs in heavy volume).
This type of lower-volume action doesn’t mean that we can’t enter a new uptrend, but it certainly isn’t typical behavior for the start of a strong uptrend. You normally want to see an uptrend confirmed with one or more days of big gains on above-average volume. Lower-than-normal volume tells us there’s still some hesitation among institutional investors.