As expected, volume decreased over the last 4 sessions with most investors on vacation. We can see on most of the major indexes that the Smart Money made their final trades for the year on the 18th as the volume was enormous.

Over this light trading, the markets drifted higher and even broke out of the top of the trading channel. Most surprising for me is that the Nasdaq moved an astounding 3.35% higher. Also, the Russell 2000 advanced 3.85%.

While we can’t immediately dismiss this move, I don’t buy it until we get a full day of full volume trading. If the market continues its rally after the professionals return, who knows how high we will go.

I do think that we are in or near a hazardous situation in the markets. It seems like the market has gone up just enough in this latest rally that investors who have missed out on the gains so far are jumping in taking new long positions. This could be the perfect time for the Smart Money to dump their shares to these investors.

In this situation, these personal investors would be described as “weak holders” in VSA. This means that they are on the wrong side of the market and could easily be under pressure if the market changes trend.

If this is the situation, we could find the perfect storm of professionals and personal investors dumping their shares causing a rapid decline in the markets.

Overall, we will have to watch Monday’s session to get a better idea of the health of the market.

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