Bearish Cross in NYSE Volume Suggests Rally Will Crumble   (December 4, 2009)

A chart plotting simple moving averages in the New York stock exchange (NYSE) volume reveals a fundamental weakness in the current stock market rally.

If "volume is the weapon of the Bull," then this Bull Market Rally is either flat-out doomed or extremely fragile. Frequent contributor Harun I. graciously shared a deeply insightful chart--a chart of deceptive simplicity. It plots only two lines, as Harun explains:

The attached chart of 52-week (blue line) NYSE Total Volume and 200-week SMA (magenta line) is a reality at odds with mainstream propaganda.

Before I post the chart, please read the HUGE GIANT BIG FAT DISCLAIMER below to refresh your awareness that this is not investment advice but merely the freely offered musings of an amateur.

Here's a snapshot of the chart:

Click the snapshot to open the full chart in a new browser window.

If you examine the entire chart, you will notice how perfectly the lines track the great Bull market and the underlying economy; the moving averages only intersected during the 1990-91 recession/Bull market pause.

Now, however, the moving averages of volume are dropping and diverging as the 52-week moving average is plummeting below the 200-week for the first and only time in 26 years.

Simply put: volume is not supporting this rally, and if "volume is the weapon of the Bull" then the Bulls have no weapons at all--unless you count propaganda about "green shoots" and blatant government manipulation of the credit and stock markets as "weapons" which can compensate for declining volume.

But that's just another way of saying propaganda and manipulation can overwhelm reality. They have done so for 9 months, but reality has a nasty habit of wresting free of manipulation, lies and artifice at the most inopportune moments--like right now, for instance.

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