Despite the euphoria and high fives around Wall Street, now that Dow Jones has made all-time highs, I am not seeing any confirmation on the Price/Volume Diffusion Index. In fact, the diffusion index ticked down on the day, reflecting the weakening volume on upticks versus strengthening volume on the downside. This is while the S&P 500 trades into 2007 price points with comparative volume levels well off the respective levels just 6 years ago. These points lead me to conclude that the rally does not have full demand support at these price levels. The following are the most recent charts for the Price/Volume Diffusion Index, summation index, and the slope of the summation index through yesterday's close.
Price/Volume Diffusion Index
Summation Index
Slope
The diffusion index presently sits at 67.5, still well above the 50 demarcation indicating expansion. This, and other non-quantitative factors, leads me to conclude that despite apparent cracks in the facade of the rally that equity prices will likely continue to power higher, albeit on weakening volume.
Price/Volume Diffusion Index
Summation Index
Slope
The diffusion index presently sits at 67.5, still well above the 50 demarcation indicating expansion. This, and other non-quantitative factors, leads me to conclude that despite apparent cracks in the facade of the rally that equity prices will likely continue to power higher, albeit on weakening volume.
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