The divergence between higher price and confirming volume levels continues, with Friday’s gain in the S&P 500 SPDR (SPY) coming on volume that was 21% less than the 50 day moving average of volume. The rally in October saw similar anemic levels of participation, but of course that was of little concern to those who were invested in the broader market. Price is the final arbiter and trumps volume readings, oscillators and indicators, and analyst expectations.
Questions do remain: If the major indices are able to continue to advance and eventually breakout to new highs, will the capital that has been on the sidelines commit?; will those who benefited from the rally take profits at that point and wait for a pullback to reenter?