Continued Anemic Trading Volume a Sign of Negative Things to Come?

Market continues its lackadaisical maneuvering and shows that traders are unwilling to exemplify any conviction whether bull or bear. I don't know that I have ever seen such a dead market following a volatility laden correction and unwavering global unrest (unrest as in the Japan situation and MENA instability).

Typically, seeing an unwillingness of sellers to step in after retracing into prior support like we have seen in the past week, would lean me toward a bullish frame of mind. This type of consolidation is often a sign that a breakout is imminent. But it works both ways and buyers are also failing to bring the market higher. I mentioned a key resistance level in the post from March 30th. The ES has failed to confirm above that level for the fourth consecutive day on low volume.

Looking back, the last time volume was this low during a non-holiday period was just before the market crash in September of 2008. Not a great thought if you are long the market. I did say in the previous post that I like buying the dips, and I will still considering doing so, but only after support has confirmed so that I can put a tight stop on any long positions. I would not defend any long positions right now.

You really have to entertain both long and short positions and look for the best entries so that you can use tight stops. Market could break in either direction. However, there are new warning signs that a sell-off could be on the horizon:

• Crude Oil (CLK11) settled at a 30 month high today (Monday) at $108.24
  
  
• Bernanke has acknowledged that commodity prices may create a transitory or temporary rise in inflation. He also said the following:
  
  “We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability.”
  
  The fact that Bernanke is acknowledging that he could be "wrong", shines some negative light waves for the trading community to digest.
  
  
• TEPCO has authorized the dumping of more than 2.6 million gallons of radioactive water into the ocean. Listen to the explanation that a TEPCO spokesman gives:
  
  "Filtering radiation from the water would take too long and its release will help protect equipment in the buildings housing the reactors," said Junichi Matsumoto.
  
  Is this action in the best interests of preventing further danger or is this in the best interests in saving money by preventing further damage of TEPCO equipment??
  
  I don't know whether the radiation levels that are being added to the sea pose significant long term threats to the ecosystem or not (some "experts" say no), but the fact is that the containment of the situation at the Fukushima Dai-Ichi nuclear station continues to be a problem and the lack of positive news coming out of Japan is certainly not a good sign.
  

The reason I bring up these signs of negativity is just to present the case that we could see another dip down before officially returning to the bullish ways. In fact, I fully expect a bit of a shake-out via choppy action before the markets go on to make new highs. I do maintain my belief that we will see new highs this year, I just don't think the timing is now to jump on the long bandwagon...