Big Price Moves On Low Volume – How?

If you think about price itself being the “mind” of the market – consider that “volume” is the heart.

Try to think about volume as the amount of people behind a given move, or even the “emotional excitement” (or lack there of) surrounding  moves in a given asset. Volume measures the level of commitment in a move, and lets you know how many people are behind it.

When an asset makes a considerable move in price on very low volume ( as USD has now done over the past two “holiday” days ) we deduce that very few traders /investors  are actually involved (relatively speaking) – and that the movement lacks the commitment one would like to see when looking for momentum.

Simply put – if there are only buyers (and in this instance to “few” sellers) an asset can make considerable leaps in price with little actual participation. One could argue that on low volume days markets aren’t exactly balanced, so it’s not at all uncommon to see dramatic movements in price – even though fewer people are actually involved. Counter intuitive yes. Glad you’ve now got it under your belt? Excellent.

A valued reader asked me just today,  if I was considering throwing in the towel on my USD shorts. A valid question considering the giant leap in price we’ve seen here today. Hopefully,  now that you as well have the ability to factor “volume” into your analysis – you’ll be able to ride out a couple of these instances and stick to your guns / trust your instincts and not let the market push you around.

All good in Kingdom Kong – I haven’t even blinked.

Have a great weekend everyone.

Kong…..gone.

 

10 Responses

  1. PT July 7, 2013 / 2:35 pm

    Senor Kong,
    A lot to chew on in part one of this essay regarding currencies: safehaven.com/article/30372/consolidated-weekend-reporta-look-at-the-chartology-of-a-developing-deflationary-episode
    Wonder your take and its expansion on the state of commodities and metals. Gracias

    • Forex Kong July 7, 2013 / 3:00 pm

      Well here we are at a fairly “pinacle” place in the markets, again faced with the age old question of “deflation or inflation”.

      At any point that one looks to “get this pinned down” the charts are almost always equally interpreted the opposite, and so the debate continues.

      The argument for a stronger dollar difficult to put in perspective these days, as with such central bank intervention and money printing globally – ones head spins when really stopping to consider “is the damn thing worth more or less than it was a couple months ago”? or…was this other currency just devalued more? or what?

      As well one needs to question of indeed USD will get it’s “safe haven flows” this time around. The Fed’s talk of tightening ( and I believe thats all it is – talk) has certainly upset the apple cart for a short term bump here, as everyone is left wondering if / when this will happen…and I’m no global economist.

      My hunch – rates will get squashed here before 3% on the 10 year…and the USD will be rejected here as originally suggested, but hey – perhaps not before taken everyone out on both sides right?

      • Forex Kong July 7, 2013 / 3:02 pm

        As well…….(if it plays out longer term) usd, stocks and bonds suffer – gold takes the safe haven flow?

        Makes crazzzy sense to me but I’m not running things.

        • Forex Kong July 7, 2013 / 3:24 pm

          Again…just having a look at the report – the charts being weekly – still leave lots of room for one to consider “either scenario” short term…at least thru into Sept…..USD could dump past the prior low…”then rebound strongly” as global slowdown / other issues surface later this year, and it would “still” only represent a tiny squiggle of black ink.

          If you want my macro opinion ” are we headed for hell in a hand basket ” – I’d say you betcha…..just doin it as slowly ( or so it seems ) as humanly possible.

          I remain “short humanity – long interplanetary travel.”

  2. devilyell July 8, 2013 / 3:38 pm

    >>I remain “short humanity – long interplanetary travel.”

    I will empty the ashtrays and sweep the floors if you take me with you.

    • Forex Kong July 8, 2013 / 3:49 pm

      I’m sure I can make a lil more room in the back. The damn spaceship has been on “hold” for a couple months now as someone called the Mexican authorities with regards to “what the hell is that on your roof”?

      I’m back at it so…….stay tuned for lift off!

  3. lee322@cox.net July 9, 2013 / 1:37 pm

    Cool. I can wait for a ride like that. And the back of the bus is fine with me.
    After all, I was born a poor, black child.

    Mission Theme Song: Ground Control To Major Kong

    About Mexico:

    What is the state of civil liberties, especially for foreign nationals?

    Ownership of real estate by foreigners is now permitted, but is that ownership

    irrevocable excluding Eminent Domain or defaulting on a mortgage?

    Banking in Mexico?

    Availability of quality healthcare for ex-pats with money?

    How many guns do you own? (joke)

    Inquiring hombres want to know.

    Thanks again. I always enjoy and appreciate your comments and info.

    • Forex Kong July 10, 2013 / 3:08 pm

      Dev.

      Im beat – but “will” get to your questions Ok?

      My area of Mexico is amazing….tonnes of retired types…very very cheap – no guns.

      Google it…. Playa Del Carmen

Leave a Reply