Barron’s Michael Kahn points out that Weak Trading Volume is Troubling for Stocks:
"In the stock market, fuel is trading volume. Without volume, a price advance
will soon slow down, if not stop and reverse. Momentum may keep trends going for
a while, but sooner or later the market is going to require buyers to put real
money where their collective mouths are and buy a lot of shares.
Chart watchers call this a bearish divergence as prices rise
while indicators, volume in this case, fall and typically it is price action
The market has reached new highs but has done so on less
activity. It is a warning sign that something is not quite right with the rally,
but it does not constitute a sell signal on its own. Still, the fact that the
public is not buying like crazy, despite what the pundits are saying, is worth
As most people know, Wall Street is ripe with colorful sayings
and one that comes from the technical side is "In price, there is knowledge." It
is another way to say that all information is in price action."
Weak Trading Volume Troubling for Stocks
Barron’s Wednesday, March 15, 2006 http://online.barrons.com/article/SB114243868226998965.html
In the past, I have warned against relying on the magazine cover indicator for specific companies. There are some very specific caveats on this here. The reason for this is that, in my experience, the Cover Indicator is useful for determining when large social phenomena are reaching an emotional crescendo. Oftentimes, emotions take over at…Read More
The WSJ streak of taking very interesting columns and hiding them on Saturday continues.
Yesterday, they asked: Are some CEOs reaping millions by landing stock options when they are most valuable amatter of dumb luck — or something else?
"On a summer day in 2002, shares of
Affiliated Computer Services Inc. sank to their lowest level in a year.
Oddly, that was good news for Chief Executive Jeffrey Rich.
annual grant of stock options was dated that day, entitling him to buy
stock at that price for years. Had they been dated a week later, when
the stock was 27% higher, they’d have been far less rewarding. It was
the same through much of Mr. Rich’s tenure: In a striking pattern, all
six of his stock-option grants from 1995 to 2002 were dated just before
a rise in the stock price, often at the bottom of a steep drop.
lucky? A Wall Street Journal analysis suggests the odds of this
happening by chance are extraordinarily remote — around one in 300
billion. The odds of winning the multistate Powerball lottery with a $1
ticket are one in 146 million.
Suspecting such patterns aren’t
due to chance, the Securities and Exchange Commission is examining
whether some option grants carry favorable grant dates for a different
reason: They were backdated. The SEC is understood to be looking at
about a dozen companies’ option grants with this in mind.
Journal’s analysis of grant dates and stock movements suggests the
problem may be broader. It identified several companies with wildly
improbable option-grant patterns. While this doesn’t prove chicanery,
it shows something very odd: Year after year, some companies’ top
executives received options on unusually propitious dates.
analysis bolsters recent academic work suggesting that backdating was
widespread, particularly from the start of the tech-stock boom in the
1990s through the Sarbanes-Oxley corporate reform act of 2002. If so,
it was another way some executives enriched themselves during the boom
at shareholders’ expense. And because options grants are long-lived,
some executives holding backdated grants from the late 1990s could
still profit from them today."
The chart below implies that the odds against these being random are quite high. (I guess Sarbanes Oxley didn’t root out all the corporate corruption after all).
Last week it was the mortgage resets, and this week its CEO Options. Great stories, buried on the front page — of the Saturday edition . . .
The Perfect Payday
CHARLES FORELLE and JAMES BANDLER
WSJ, March 18, 2006; Page A1
How the Journal Analyzed Stock-Option Grants
WSJ, March 18, 2006; Page A5