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We have been playing a bit of a parlor game around the office, looking at what are the most important charts of the year. An Apple chart was way too obvious, as was a Fed balance sheet or Interest rates. Josh thinks consumer trends, JC prefers spread between Oil and Nat Gas, Bat like CINF.

I want to nominate what may be the most deceptive chart you will see: NYSE Volume. Its deceptive because its simplicity reveals so many things beyond what it is ostensibly covering of mere trading volume.

Consider what the overall falling volume trend means:

• The financial services industry is shrinking;

• Commissions are falling

• Stock picking is being replaced with ETFs;

• Psychology is negative, as Main St is not participating and Mom & Pop have left;

• Active trading is being replaced with passive indexing;

• HFT Algos may spoof millions of phony bids, but they are having a harder time getting executed.

That’s why I nominate NYSE Volume as my chart of the year . . .

Category: Economy, Technical Analysis, Trading

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.

14 Responses to “NYSE Volume Chart is Deceptively Informative”

  1. dina says:

    it is above 2006 level.

  2. Lyle says:

    The question is how many folks pay commissions anyway? A lot of discount brokerages offer some number of trades, and low rates beyond that (even some large formerly full service operations have done this).
    In the back of my head is the idea that because commissions were de-controlled way back when Wall Street has dreamt up all the “good things” that the provided us such as CDS and mortgage securities to ensure that they have a constant flow of money.

  3. VennData says:

    Will these trends continue?

    Will people pay more to under perform the indices? If the answer is yes, than the answer to the above is no.

    Allocate your assets in fixed amounts to index funds, with a healthy dose in conservative bonds. Mutual funds of ETFS. Find the lowest cost you can. Re-balance once a year. That’s it. it’s so bloody simple, and Republican could do it.

  4. carchamp1 says:

    Guessing at least some of this declining volume trend is due to stocks more than doubling since the crisis. If we account for only being able to buy half the shares we could 4 years ago with the same dollar the chart would look a lot different.

  5. [...] NYSE Volume chart deceptively informative Consider what the overall falling volume trend [...]

  6. Hammer of Thor says:

    The most likely reason is that the 2007-2011 period had higher than normal trading volumes and they’ve just been reverting back to the mean.

  7. Jack Damn says:

    HFT Algos may spoof millions of phony bids, but they are having a harder time getting executed.

    I agree with that, but I disagree with the other five reasons mentioned. HFT “quote stuffing” is still a disease the SEC is unwilling to admit even exists ….

    “Eat food. Not too much. Mostly plants.” – Michael Pollan

  8. eroldictat says:

    If true, all of these are very positive events. High time IMO that financial services was revealed as the emperor with no clothes in terms of the value it adds to an economy. HFT is a joke, commissions should be near zero, and active trading is a net value detractor for most. When the country’s top whiz kids think science and tech are better places to start a career vs being a fake science finance quant, we’ll all be better off.

    E

  9. CharlesII says:

    Um.

    How about this one:

    Volumes are getting back to what they were before the crisis

  10. McMike says:

    Markets rise as main street and mom & pop retreat and overall volume declines? QE ++ flows to state and local govs and into under-funded pension funds, indirectly allowing the fed to prop up indexes? -At least until mom & pop start jumping back in at the top?

  11. cheese says:

    so, can I nominate this chart @ econjobrumors.com as exhibit A for the fallacy that HFT increases liquidity?

  12. Moopheus says:

    ” The financial services industry is shrinking;
    • Commissions are falling
    • Stock picking is being replaced with ETFs;
    • Psychology is negative, as Main St is not participating and Mom & Pop have left;
    • Active trading is being replaced with passive indexing;
    • HFT Algos may spoof millions of phony bids, but they are having a harder time getting executed.”

    And these are all good things, so let’s hope these are real trends and not wishful thinking.

  13. constantnormal says:

    How are dark pools factored into this, as influences on supply/demand, and does anyone have a clue as to (approximately) how big dark pool volume is relative to NYSE volume?

    It may be that most of our transparent public stock trading metrics are meaningless.

  14. Frilton Miedman says:

    constantnormal Says:
    December 18th, 2012 at 9:38 am
    ” It may be that most of our transparent public stock trading metrics are meaningless. ”

    ~~~

    Worth repeating.