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Interesting note from Merril Lynch’s Technical Analyst Mary Ann Bartels about NYSE volume. Ms. Bartels observes that the market’s Volume, anemic though it appears, is actually not all that bad when compared to similar periods in recent years (See chart above). She observes that the primary trend is upwards, and with volume and breadth confirming, she is constructive on US Equities, especially the Megacaps.

But it was her take on volume that was so noteworthy:

“There has been concern that volume is not supportive and we disagree with this view. Average daily NYSE consolidated tape volume year-today in 1Q12 is down 14% vs. 1Q11 and down 38% from peak financial crisis average daily volume in 1Q09. Since 1Q09 peak volume was associated with extreme bearish sentiment during the financial crisis, 1Q12 volume should not be compared to 1Q09 levels.

Average daily volume in 1Q12 is 36% higher than it was in 1Q07, which was prior to the financial crisis and also a period when the US equity market was rallying to new recovery highs. Taking this into consideration suggests that volume may not be as low as it seems. Additionally, our Volume Intensity Model (VIM) still has accumulation stronger than distribution which is a bullish reading for the market.”

While our earlier comments about margin were cautious, volume is not. If you are looking for an excuse to exit equities, this is not it.
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hat tip John Melloy, CNBC

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Source:
S&P 500 holds breakout, trend remains up
Mary Ann Bartels
Market Analysis | United States
BofA Merrill Lynch 26 March 2012

Category: Markets, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Volume is Surprisingly Constructive”

  1. gman says:

    It is even more constructive than it appears. At points in 2010-11 as much as 30% of overall volume was in C alone. C did a 10 for 1 reverse split. Using simple math that could account of 27% of overall volume in those years when compare to 2012.

    Many people posting on volume from both a bull and bear perspective..nobody remembers C and what a huge part of the tape it was and that it had a huge reverse split.

  2. neddyj says:

    gman – agree with your C observation. isn’t BAC similar, perhaps not quite as extreme – but exhibiting daily volume that resembles monthly volume of yester-year?

    I think the bottom line is that the oddities that sprang forth from the 2008 financial crisis have made this data less useful. what i see from that graph is steadily rising volume in a steadily rising market from 05 – 07. what i see now is declining volume in a rising market (or maybe flat volume if you factor C back in), and my read is a lack of conviction.

    no idea where this thing tops, but fundamentals don’t support the rally – free money does. even perceived free money juices this bull up – yesterday’s move seemed to be driven by what bernanke said during his lecture…market got a contact high even at a vague hint of more free money.

    my sense is that the recent bulls pounding the table and getting even more bullish signals that we’re in the 9th inning of this thing.

  3. neddyj says:

    also – the recent rise in rates must have the fed nervous that the steering wheel has been snatched by the market. the rates on longer dated treasury bonds are much higher now than they were when the fed started operation twist.

    that the fed has the market’s back has been supporting this rally….but who has the fed’s?

  4. Pantmaker says:

    Just an observation. If you look at 1st quarter volume relative to each year total annual volume, I think her chart actually makes the opposite point. Beginning in the second half of 07 overall market volume skyrocketed…most likely due to the explosion of HFT/Algorithmic trading.

  5. MaxMax says:

    Barry, what’s your exposure vs your cash position?

  6. AlexM says:

    While there are a few technicals that are showing divergences, the amount of skepticism and non-believers of this rally tell me that it still has a bit more to run. My personal view is that we can have a dip from here, but the market can produce a summer rally just in time for the elections. If there is a natural disaster, Greece, Spain, Ireland or Portugal blows up, or Mitt somehow becomes electable, then all bets are off.

  7. AlexM says:

    @Max,

    Usually when Barry thinks that there might be a short term turn around, he polls us to see what the peanut gallery thinks. Maybe the Meisler margin chart and the volume info was a round about way for him to feel the waters.

    I see a great deal of bears and skeptics around here and other blogs.

  8. PDS says:

    The Big Picture problem with this equity bull mkt thing BR?….it is induced by the Fed….and an even bigger problem?….the Fed is targeting the wrong asset class…their QE, ZIRP, Twist cocaine addiction is supposed to be geared toward the housing market where most of consumer wealth is still locked up!….the investor class has been exiting the stock market now for years leaving the field to the BATS!!!

  9. argh says:

    would like to see an overlay of HFT volume for each quarter . . .

  10. SOP says:

    would like to see an overlay of Margin Debt, retail IRA/401K in/outflows and HFT volume for each quarter . . .

  11. Pantmaker says:

    would like to see an overlay of all beef hot dog sales, avg. elephant lung capacity, median life expectancy of all fish species and HFT volume.

  12. [...] at the end of the first quarter this year, Barry Ritholtz posted this excerpt from a Bank of America Merrill Lynch note (hat tip to Tim Duy for sending it our way): [...]