I MADE the bold statement last week that it was not unreasonable for investors to ask their financial advisors where they thought the bottom of the market would be.

It is only fair and reasonable, therefore, for myself to continue to look for signals that may assist the thought process.

I ended last week by commenting on the part played in stock markets, or any markets for that matter, by human psychology.

It would be nice to think that the value of any investment would be reached after a thorough financial analysis of the company and the market environment in which it is placed.

Although this theory may hold water in the longer term, over shorter time all manner of opinions and expectations can move share prices up and down.

This is where psychology can play an important part.

If it were possible to plot buying and selling an investment on a graph against the top and the bottom then we might be able to prove the adage that most investors, private and professional, buy at the top and sell at the bottom. This is, of course, the complete reversal of what we should be doing.

In reality, it is easier to compare overall volume, buying and selling, with the peaks and the troughs.

The conclusion is that high volume is associated with both the top and the bottom of the market.

We would be being generous to suggest that high volume at the top of the market is all selling, when experience and anecdotal evidence would suggest otherwise.

For example, it is easier to be swayed into, or attracted to, an investment when it is moving upwards and there is lot of interest and coverage.

At the moment, markets are a little quiet. Looking for a disappointing day with a high volume of transactions may provide a useful signal.

John Pearson, Assoc Director

* Gerrard Ltd is regulated by the Securities & Futures Authority. Share prices and the income from them can go down as well as up. Readers are advised to seek professional investment opinion before entering into dealings in securities in securities mentioned in this article, which may be unsuitable in their personal circumstances