Stocks Up, Volume Down
Standard & Poor’s 500 Index versus Volume (200-day ma)
Source: Bloomberg Chart of the Day
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Futures look strong this morning, following yesterday’s low volume back and fill — the NYSE consolidated volume was the quietest of the year to date.
But as the chart above reveals, the further this rally has run, the lighter the volume has become. I cannot speak to what the silicon is up to, but broad carbon based participation is surely missing. That is surprising, because sentiment — a carbon, not silicon factor — is up in the nosebleed areas: Bulls at 57.3 versus Bears at 15.7.
While volume has been anemic, breadth has been especially strong, with individual names fairly correlated to the broader index. Hence, it is less of a “stock pickers market” and more of a market participation environment.
David Wilson of Bloomberg notes that trading volumes are going to get even worse: “Trading may contract further when Citigroup Inc. carries out a 1-for-10 reverse stock split, proposed in March. Citigroup has accounted for 6.2 percent of U.S. volume during the past two years, according to Bloomberg data. The reverse split is set for completion after the close on May 6.”
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Source:
Trading Dwindles as U.S. Stocks Revive Rally: Chart of the Day
David Wilson
Bloomberg News, 2011-04-05
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=avOoQpriV_98
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April 6th, 2011 at 9:07 am
The carbonoids are not buying into the recovery story (literally).
April 6th, 2011 at 10:07 am
Looks like the $ VALUE traded is about flat over the period. This is what matters.
Bc price is up 60-70% and volume is down about about 1/3.
And another point is that share prices today are 3-4-5x many past prices… just take AAPL which is the big $ volume trader (really, its enormous. what fantastic liquidity!)… and its price is $300/shr. GOOG is $600/shr. PCLN is $500/shr. CRM, NFLX, CMG, IBM, OPEN, POT, AMZN… all of these are $100 to $300/shr and consistently rank in the top names by $ value.
We happen to be in this period of few stock splits.
If those 10 names all split 5-to-1 this author and similar bad technicals guys would be screaming, “look at all the volume!”. Its stupid.
April 6th, 2011 at 11:10 am
My feeling, purely subjective and not fact-based, is that the ‘pro’ buyers have all placed their bets and are waiting for Joe Public to decide to come back and drive the market higher. Joe, however, is thusfar either too poor or too untrusting to put his foot in the trap.
April 6th, 2011 at 11:35 am
besides bloomie, where to find the Daily trading of exchange-listed shares (200-day moving average) / S&P 500?
April 6th, 2011 at 11:52 am
Inanimate carbon is making animated carbon nervous
April 6th, 2011 at 11:57 am
So what I am wondering is how HFT has distorted the meaning of volume. When a vampire squid front-runs EVERY transaction, the volume traded will double (or is it triple –they buy, they sell, you buy??).
So is this decrease a decrease in HFT?
Noting again cognos’ comment that $VALUE seem flat…
Good, now I have something to think about on my drive home.
April 6th, 2011 at 11:58 am
Despite the volume there are still some good trade setups. Even some opportunitys to “invest”. A good trading/investing opportunity is setting up in Well Fargo. See my blog for details…
http://ghickeyblog.blogspot.com
gh
April 6th, 2011 at 12:11 pm
Indeed, this is notable and very interesting. For me, the lower volume goes, the more it says; ‘everyone who was going to execute a trade has already done so’. So, the questions to answer now are; Who’s got the weak hand? Who’s going to give up first? Longs or shorts? Is there potential for cascading trades in either direction?
I talk about what this low volume means here: http://greshams-law.com/2011/03/05/low-volume-just-another-broken-indicator-or-something-more/
April 6th, 2011 at 1:16 pm
It would be nice to see the same chart during other bull markets. I suppose I’ll have to do my own homework. I believe the fall of 2006 had declining volume rallies with higher volume on sell-offs. It took another year to top out.
April 6th, 2011 at 3:28 pm
I think cognos is right that traders trade in $ volume, not so much the number of shares.
Recall that fund flow into equity was negative through out 2010 that was a very good year. Believed that I posed a question herein on why negative fund flow resulted in higher prices instead of lower prices because of lower demand.
April 6th, 2011 at 5:06 pm
There is also the worry that there are a lot of cycles peaking in the next few weeks..
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=180_cycle-review-dont-tell-the-retail-investor-but-2011-04
April 6th, 2011 at 6:51 pm
I remember as a child adults talking about silicon based life forms.
April 7th, 2011 at 9:09 am
… I suppose that when volume gets low enough, we will have another flash crash, but who knows what constitutes “low enough”?
I am eager to see what happens to cognos’ notions when the share volume is in the single digits, and the share prices are all at Berkshire Hathaway levels … the fact that mere mortals will not be trading is not a factor … for all practical purposes, mere mortals have not been trading sine 2008 …
April 7th, 2011 at 9:11 am
Is this data possibly merely an indicator of how much volume has moved (and continues to move) out into “dark pools”?
Kind of an extension of our societal movement away from transparency …
April 7th, 2011 at 9:38 am
Just as disturbing in the last couple of weeks, is that market leaders like GOOG and AAPL have not really participated in this last rally. Their respective charts look terrible. Seems like the market is setting up for a deeper correction than most anticipate.
April 9th, 2011 at 3:31 pm
[...] the low volume moves off of the lows that DeGraaf mentioned: 1987, 1998, and 2003; Add to that the fading volume since early 2009. All 4 of these years had major Federal Reserve interventions via a combination of rate changes [...]