Quote from bundlemaker:
1) Jack (as well as others) state that low volume is an indication of disagreement. The difficulty I have in understanding statements like this is that there is always an inverse which can be argued to be true also. In this case, couldn't one say that heavy volume with no price movement is an equal indication of disagreement? If half the traders think price is going up and the other half think price is going down, that's almost perfect disagreement and you will get a ton of volume.
I cannot speak for Jack, but from my own point of view, I prefer to use the word
disinterest, rather than
disagreement when referring to low volume levels. In addition, referring to
ambient level volume when describing Dry Up Levels may also paint a clearer picture.
When I say I prefer the word 'Disinterest' to describe the activity at a certain price level, I mean to describe a situation where the vast majority of traders prefer to sit on the sidelines, rather than, enter into a position (either long or short). At this point in time, the vast majority of shareholders who wanted to sell have already offed their shares. In addition, interested parties looking to buy in have already entered and purchased those shares being sold. As a result, both price and volume sit at an ambient level for a time. I use the word ambient level here because, the volume levels, at which this phenomenon takes place, do not always occur at extremely low levels.
At this point, in order to move additional money off the sidelines, and in order to convince current shareholders to sell their shares and bank a profit, price must head in one direction - higher. As volume begins to increase its pace, price begins to move higher in an effort to wrestle the shares out of the current owners. As more and more volume cascades into the equation, and price continues to head higher, the equity appears on the radar screens of traders all over the world as one of the day's fast mover's. This has the effect of bringing additional interest to bare upon the equity, and driving the price even higher.
Quote from bundlemaker:
2) As hard as I try I just cannot decipher any correlation between the Jokari window (which is just another way to state the old Wykoff rules) concepts and what the charts actually look like. For example, in an up move in an up trend you are to see increasing volume. But, hardly ever do you literally see that on a chart, day to day. I suspect that if indeed the Jokari concept is true, somehow looking at charts after the fact may change how the market looked in real time.
When we use the Jokari window, we need to keep in mind it isn't an absolute model. In other words, "we expect the trend to change" doesn't mean we can expect a trend change
immediately. Any number of factors can, and often do, effect the price trend of an equity. The Jokari window doesn't operate within a vacuum. I call these additional factors which have influence on the price of an equity 'context.' The word
context includes both
micro-economic factors which directly influence per share price, as well as,
macro-economic forces which effect the sector, index, market, country and planet as a whole. Some examples of context type forces include: price location within a channel, news, earnings, time (of day, week, month or year), geopolitical concerns, market sentiment and black swan events. In other words, the 'big picture' plays as important a role in price direction as does our trading rule set.
Again, "All things being equal" the Jokari Window operates as it should - providing a method by which we can anticipate price trend continuation or retracement. However, when the short term forces of 'context' overwhelm the forces which propel a stocks natural cycle, we often see short term divergence from our anticipated results. Fortunately, the influence context plays upon an equity normally occurs over the short term. As a result, once these forces have played their hand, the anticipated results begin to trend back toward the ideal.
I hope you find the above useful. If I can provide additional clarity, please do not hesitate to ask.
- Spydertrader
Edit: Opentrader and justyield provide excellent viewpoints in their posts as well. Hopefully, their combination of posts clarified things for you somewhat.
