Volume Spikes Are Very Bullish If the Stock Market Has Been in Decline

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True or false: Conditions are bullish if market declmes take place on low volume? As a general rule, tlus is false–very false. This is a very common misconception. Long-term and serious intermediate declines that take place on low volume ten, to continue for some time. Low volume during market decline signifies two things. First, there is probably little panic on the part of investors; instead, there’s complicency Prices are likely to be declining not so much because of active selling, because buying demand is drying up. When buying demand slows, prices frequently fall under their own weight. Second, prices have not yet fallen to levels that will attract aggressive buyers. Buyers are remaining on the sidelines while the typical, still complacent investor retains positions even through periods of slowly falling prices.

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