Wednesday, March 17, 2010

Volume is indeed falling

Today's column is about volume and how it may not matter now but will in the future. Here is a chart that I chose not to include in it. You will definitely have to click on it to see the whole thing.

What we see here is a chart starting in September 2001 although you cannot see that far back. Why September 2001? It was the last time the 50-day average of NYSE volume was as low is it is now.

I ran a regression line from there to the peak of 50-day volume in the summer of 2007. And then another from the peak to today.

How does that fit with a bear and bull cycle we have seen? Beats me. But don't let anyone tell you volume is not falling. Either all the volume has moved to off-exchange areas or the heyday of the stock market is on the wane setting up a fall.

Note - Volume was indeed exaggerated in September 2001 (9/11) so the actual peak may have been in June 2006.

2 comments:

PD Quig said...

I've been wondering for quite a while how so-called "dark pools" could be at play in the volume statistics. The mechanics of the rise from Mar-09 are that much of the activity has ocurred in after hours (when it is easier to dominate the tape), and on Mondays. What if it is really GS and JPM taking turns buying high and selling higher? If it isn't largely manipulated, how do we account for Goldman suffering only a single losing trading day in Q3-09?

What the end game to all this is, I have no clue. Maybe they'll just take turns shorting and covering? Doesn't some big player eventually have to take a loss?

Quick Takes Pro said...

I am sure plenty of activity is taking place away from venue we include in our data. With most of a day's movement often taking place in the opening minutes of the day somebody had to have pushed futures around.

So if all the movement takes place at the tails, there is no reason to trade during the day, hence low volume. Just a thought.