Money Beat: Traders Pump Up the Volume In Rally to New Highs

Some good news for bulls: this week’s gains in stocks have come on heavier than average trading volume, a rare dynamic of late.

That suggests the Dow Jones Industrial Average is likely to push further into record territory. John Kosar, director of research at Asbury Research, sees potential for another 5% gain from current levels.

On Wednesday, the Dow rose for a third-straight session, closing at the first record high of 2014. Meanwhile, NYSE trading volume has been above the year-to-date average during those last three sessions.

Chart watchers view volume as a sign of participation, so they feel increasing volume helps confirm the direction of the underlying trend.

“Volume indicates urgency, either to buy or sell,” Mr. Kosar said. “Any time you see the market go higher on better volume is good.”

The last time the Dow rose three-straight days on above average volume was Dec. 18 through Dec. 20, according to WSJ Market Data Group. The Dow closed at record highs all three of those days, as well as in five of the next six sessions.

“It’s key to watch volume trends as the market is trading near a key technical level, like the Dow is around record highs,” Mr. Kosar said.

The Dow was essentially changed Thursday in late-morning trade.

On Wednesday, the Dow rose 45.47 points to 16580.84. NYSE volume was 3.7 billion shares, above the year-to-date daily average of 3.47 billion. Volume was 3.61 billion shares on Tuesday and 3.92 billion shares on Monday.

That marked a change from earlier this year, when higher volume days regularly coincided with down days in the market.

Before Monday, the largest volume day last month was April 7, when the Dow dropped 166.84 points. The biggest volume day this year was March 21, when the Dow reversed an early gain to close down 28.28 points. The lowest volume day was April 21 when the Dow gained 40.71 points.

With volume now on the bull’s side, and if the Dow can hold on to recent gains over the near term, Mr. Kosar said the index could extend gains by another 5% from recent highs. That would put the Dow at around 17400.

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