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A Failure of conventional Technical Analysis (volume) |
nodoodahs
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 Posted: Thu Jun 23, 2011 11:54 am Post subject: A Failure of conventional Technical Analysis (volume) |
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http://ftalphaville.ft.com/blog/2011/06/23/603596/phantom-indices/
| Quote: | US stocks are traded today on more than 50 market centers. according to TABB Group, stock exchanges trade 67% of overall volume. The biggest exchanges are NASDAQ (26% of total US stock exchange share), nySE (19%), NYSE Arca (19%), DirectEdge (14%) and BATS (12%). The balance of shares traded (about 33%) occurs in dark pools, electronic communication networks (ECNs) and broker internalized alternative trading systems.
As a result, many stocks are traded on exchanges other than where they have their primary listing. NYSE actually only trades 27% of the volume of NYSE-listed stocks and NASDAQ 29% of the volume of NASDAQ-listed stocks. Most major indexes, however, are calculated intraday using sales from only the primary exchange where the component stock is listed. Thus they do not incorporate the majority of shares traded. That means that these indexes are based on a little more than one out of every four shares traded. |
If you trade on the primary listing market, the price there is obviously the price there. If you trade off-market, then there's an open question about how much the off-market price depends upon the market price for discovery. These were discussed in the link, above.
What was NOT discussed in the link was the impact on volume calculations.
From time immemorial, technicians have used volume-related indicators as confirmation or as outright signals. If a majority of shares trade hands outside the market - even if they trade at the market price! - and if the proportions of off-market trades vary over time - then TA signals based on volume become much less meaningful.
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A Failure of conventional Technical Analysis (volume) Replies |
nodoodahs
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| Posted: Wed Jun 29, 2011 9:02 am Post subject: |
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Yeah, I don't trust the so-called "fear" indicators anymore, either, for many of the same reasons.
Pretty much all down to price, spreads, and term structure for me, on the technical analysis front nowadays.
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rffrydr
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| Posted: Sat Jun 25, 2011 8:12 am Post subject: |
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Yes....and then there's Citi. And then there's buybacks (XOM).
And computer trading is obviously skewing things. Don't trust the outside reversals and "turnaround tuesdays" almost a thing of the past. I suspect that the quoted volume is probably indicative of the trends that technicians want to watch however just as that amazing Dow 30 with its divisor and archaic price weightings somehow manages to track the SP on the button.
We just had a classic retest of 200dma on lighter volume and less fear than march and a lower low WITHIN bollinger bands, on a fearful friday, let's see what we get. 
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