Heavy volume drop

A rally attempt by the market is under pressure. However yesterdays sell off was not as bad as previous ones with stocks down 4% plus failing to exceed 300. Volume was higher on the move. Now the real test of dip buyers is set up.This is attractive set up for them in short run.

Four days ago the market looked in great shape and going by the comments by some readers on the blog, you could see emotions were taking over and people were becoming bullish and questioning the logic of Market Monitor and the cautious approach of not trusting the rally. Rallies lead by narrower set of stocks (as indicated by 65 days ratio)have higher probability of failure or being more volatile.Many counter trend rallies look very alluring and profitable if caught at right time but are always vulnerable to sudden mood shifts. The market continues to be vulnerable till we cross in positive territory on 65 days ratio in my book. Till that time light commitments and tactical plays is the name of game.

We are again entering a higher volatility phase after few days of calm and market are most likely to continue to churn till Fed decision day.