Adding another measure of money flow to Fib's weekly report, a look at the $weighted up-down volume ($UD) data for the US only common stocks as defined by a few of the Russell indices. The $UD indicators provide a different perspective in measuring money flow with respect to the traditional up-down volume, in that each component's volume is multiplied by its respective closing price. The approach dampens the effects of very low priced, high volume stocks.
The $UD volume adds price into the equation, and paints a different picture than traditional UD volume. A very recent example was the effect of a $2 stock, Lucent (LU), that traded nearly a billion shares 11-30-06, with a two cent decline. A billion shares in down volume had a significant impact on traditional UD volume data, but its impact was far more muted with the $UD volume.
Going to stick with $UD volume McClellan Summation Index (McSum) since all of the cumulative $UD volume lines led the index prices higher (reached new highs prior to price). The McSum indicators often provide an early warning in loss of momentum or confirmation money flows are still healthy for the intermediate term.
First the Russell 3000 (RUA) $UD McSum. RUA is comprised of the 3000 largest cap US common stocks, which constitutes the vast majority of money flow in the US markets. At this point, the RUA $UD McSum has yet to diverge with price, which usually means a least one more price high lies ahead.
Breaking down the RUA $UD McSum into its two component indices, the Russell 1000 (RUI) and Russell 2000 (RUT). The RUI components account for the majority of the capitalization of US publicly traded issues, the reason why its $UD McSum pattern mimics the RUA $UD McSum. Higher price highs are likely ahead in the coming weeks for this index.
The RUT $UD McSum... same pattern as the RUA and RUI McSum money flows, no divergence with price yet.
Next is the $UD McSum for what I call the NanoCaps. This group comprises the 3000th through 4000th next highest cap US common stocks, and are very small cap. Of these 1000 issues 5% often do not even trade on a given day. However, even this group has attracted money inflows, but may be signaling the rate of positive money inflows is slowing down. This group of stocks are the primary suspects that cause the Nasdaq AD line to relentlessly move lower year after year.
In summary, there are signs of a slow down in the very smallest cap money inflows, but for the stocks comprising the indices most of US trading, the probability is high, we have not yet seen the price top in this current intermediate term bull run.