Today’s FT says of the rally in US equities:

“Volumes were relatively low, suggesting a lack of broad investor conviction.”

I do not think this is the right way to look at it. It is correct to say that if the market is rallying on relatively low volume, that would suggest the rally is mainly down to selling pressure abating rather than buying starting to hot up — but that is how short-term rallies usually start. The chart below shows the Dow, with the second proper day of a rally (identified using a very subjective process) from a recent low identified by a vertical line. The lower charts are my estimates of supply and demand. In all the recent cases, the rally begins with supply (i.e. selling pressure) falling away; demand may increase from the start of the rally or may only appear in the middle phase.

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