In the past, I’ve shared my ‘low-volume’ indicator which typically precedes significant corrections in the stock market. I use a 10-day Exponential Moving Average of the volume on a daily chart of the major stock indices (SPY, QQQ, IWM, etc…) while placing a red line at the extreme-low levels which often precedes significant corrections. Quite often, a drop to the ‘red line’ will be followed by a correction in a relatively short amount of time (a couple of days to a few weeks) while occasionally, the average trading volume can stay persistently low for up to a few months before a tradable correction sets in. It is worth noting, however, that the periods of extended persistently low-volume are usually followed by much larger corrections such as the ~20% drop in Q4 2018 as well as the ~35% plunge in Q1 2020.

SPY daily Aug 25th

SPY daily Aug 25th

As drops to these extreme low volume levels can either provide a “one & done” sell signal, with a correction starting shortly afterward or up to several months later, this should not be used as an exact timing indicator, rather a “heads up” indicator that should be used in conjunction with other technicals to help zero in on the timing of a sell signal such as trendline, price support, and/or bearish chart pattern breakdowns; bearish candlestick reversal patterns, etc…

IWM daily Aug 25th

IWM daily Aug 25th

Regarding the timing of those sell signals, on the daily time frames, I’m still awaiting solid breaks and/or daily closes below the blue uptrend lines on SPY & QQQ.  Note: multiple charts in gallery formats, as below, will not appear on the subscriber email notifications but may be viewed on rsotc.com (short url)

While we have yet to trigger any sell signals on the more significant daily time frames, the sell signals that were triggered on the 60-minute intraday charts last week remain intact for now with SPY, QQQ, & IWM all backtesting resistance levels (trendlines on SPY & QQQ, price resistance on IWM), thereby offering objective, albeit somewhat aggressive* short entries or add-ons.

*Due to the unusual resiliency of the uptrend, going short any of the major stock indexes before any solid sell signals on the daily time frame or other evidence of a trend reversal carries a higher chance of failure & counter-trend trades should be considered aggressive at this time.