NIFTY VOLUMES PICKING UP AND FILLING UP LAST MISSING PIECE IN SIGNS OF TOP

As discussed in last note (http://speculationanart.blogspot.in/2013/01/small-mid-cap-froth-adds-to-nifty-worry.html) dated 9th Jan 2013, only missing piece from signs of meaningful top formation was spike in Nifty Volumes. Let us see how volumes have done since then. 

Signs of TOP


FROM LAST NOTE...
Only thing missing for meaningful top is spike in Nifty volumes (though not necessary). If we were to have spike in Nifty volumes and then reversal, case for top will be strengthened significantly. 

What does volume says.....

A) Capitulation both buying and selling can be observed through spike in volumes. 

B) once a price trend has been in place, spike in volumes typically indicates end of trend (short/medium or long term). On other hand, spike in volumes in flat to downward market is typically sign of new trend. Let us see this through actual Nifty data. 

1) The above table contains daily average traded  shared during respective month. Average shares traded has been used because there were wild swings during 2008 and 2009, thus making value comparison distorting. 

2) As can been seen from the table, volume spiked in Nifty  towards 2008 end (selling capitulation - buying opportunity sign). Nifty had been falling since 2008 start, thus volume spike indicated selling climax. 

3) Post the spike Nifty was essentially sideways from Oct-Dec Bottom. Volume spike during Apr-May 2009, thus indicated start of new trend. 

4) Since May 2009 spike in Nifty, Index has been trading in wide band of 4500-6300. however withing those bands, Nifty peaks occurred with spike in volumes. November 2010 and February 2012 were each month of peaks and spike in volumes. 

C) Each of the peak month November 2010 and February 2012 had spike in volumes across Nifty, Mid Cap and Small Indices. This typically indicates "all in" or buying climax. Nifty was followed by sharp correction in following months.

CURRENT SCENARIO

Nifty volumes have considerably picked up in last 2 days. Though 11th Jan volume was largely attributable to Infosys. But volume nonetheless are showing signs of pick up. If we have follow through in volume activity in Nifty, that would indicate we are about to make meaningful top in market. 

Conclusion

Nifty volume pick up would complete all signs required for meaningful top, which should be followed by very meaningful correction.