Go kitty cat, go!
On the right is the S&P chart and you can see the huge volume levels as we sold off with 553M shares traded on the S&P ETF (SPY) in two down days as the S&P fell from 2,113 on Thursday to 1,991 on Monday (122 points, 5.7%). Yesterday, we popped back to 2,036, which is 45 points off the low but the volume on SPY was opnly 158M.
Let's say, for example, that you are re-building a 122-point wall that was knocked down and there were 550 bricks in the wall and you begin to re-build the wall and, as you are 45-points back up (37%), you realize you only used 158 bricks (29%). Is that wall going to be weaker or stronger than the one that got knocked down? Would you trust your family to be safe behind that wall? Would you trust your investments to be safe?
Yes, an 8% difference doesn't seem like a big deal but it's actually 158 out of 203 (37% of 550) that should have been used so we're 45 bricks short, so far, and that's 22.4% short. So, going back to the market, we are getting to the same overbought levels but now with 22.4% less cash supporting the run than we had before. That's really not good!