Thin volumes and stocks are trading way out of their narrow trading ranges, this low level of trading volume is reminiscent of August 28th 2008 when the Dow starting to sell off that took the index to it's 10th October 2008 lows. Yet market speculation is rife thus adding to stock gains, but the divergence between the OBV (on balance volume) and volume is astounding. A pull back is guaranteed, how significant depends on 'worst' news, or the Dow falls back into it's trading ranges. But money has left stocks and now sits in safe havens such as gold.
(Note on the graph the large spike in Volume on 8th July 2009 which was the beginning of the market rally.)
The liquidity support argument is relevant regarding stock gains. Also the holding '0% rate US dollars leads to market speculation' argument is relevant. Both would answer the reason why stock gains have been so significant. Yet the market is still cautious and the level of 'smart' money is being pulled out of stocks and is ending up between gold, oil and Treasuries.
The ultimate question is when will there be a correction and how significant will the correction be; at this point we can only say the market is so overbought a due correction is a no brainier.
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