Big news today that the Treasury Dept has a plan to deal with the so-called toxic assets plaguing financial institutions; those holdings which simply are not worth the paper they're written on. The reaction? A huge jump in the market. As I write this, the Dow is up over 350, the S&P index cleared 800 and the NASDAQ 1500. Great, huh? Don't be fooled. For situations like this you have to use a technical approach. Specifically, look at the volume of shares being traded. With one hour to go, Exxon is up $3, yet its trading volume is well below its daily average. This means there is no conviction, no big blowout. Hence, this is a rally based on one news event which will have no coattails. An important lesson in trading stocks and measuring the market. Big upswing on big volume=good. Big upswing on small volume=bad.

Ah. I see. Low volume means not many people are actually buying then, right? The traders just expected something bigger?

My bet is that institutions and short coverers did most of the buying, and there was next to no selling. Hence, volume was not in proportion to the indexes' increase. There is still a bundle of money on the sidelines; when that hits market, there will be a real rally.