CI going up on thinning volume

The CI has broken above the upward channel at 956 levels on August 30. While the CI may rise to test the May 9 high of 970, there is some concern that this run-up, if it ever happened, would likely to be unsustainable. Why?

The current “rally” since July 18 has been quite different from the rallies in the past 8 months. Unlike the earlier 3 rallies (denoted as A, B & C in the chart below) that were accompanied by increasing volume as the rally progresses, the current rally (denoted as D), is accompanied by decreasing volume. In addition, the MACD indicator has been making lower “peaks” as the index rises. The divergence in both the volume & the MACD indicator when compared to the index raises doubt about the sustainability of the current rally.

As such, I believe that the better strategy is to sell into strength as the CI approaches the 970 levels.

















Chart: CI's daily chart as at August 30