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What Light Trading Volume Reveals About this Market (VIDEO)
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What Light Trading Volume Reveals About this Market (VIDEO)

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What Light Trading Volume Reveals About this Market (VIDEO)

What Light Trading Volume Reveals About this Market | Breakout - Yahoo! Finance

Trading volume in S&P 500 SPDR etf (SPY) --otherwise known as "spiders" over the past week is 25% below its 3-month average.
While nervousness about stocks and a reluctance to buy into a market that's up 15% in 6 weeks may seem obvious, there is a unique and unusual rift in this trading trend that is both telling and potentially optimistic. Specifically, that volume is light only on the buy side, while sell volume is actually running above average. It brings to mind the old adage that fear of getting hit by the bus is greater than fear of missing the bus, as it pertains to the investor confidence.
As Macke and I discuss in the attached clip, there a numerous inferences that can be drawn from the overall dearth of trading and the bias we have uncovered towards selling.

First, that with only six holiday-crimped weeks left in the year, fund managers are simply running out of time to beat their benchmarks and are practically begging for a reason to buy, and will return in size the moment they find one. At the same time, even a whiff of weakness sends investors fleeing towards the exit.

A quick look at November's biggest winners and losers confirms this bias against buying, with 8 of the top 10 gainers showing volume decreases in the past week versus their 3-month averages. At the same time, a comparable 80% of the top 10 decliners have seen an increase in short-term volume versus the long-term average.

The takeaway from all of this voluminous research, at least in Macke's view, is that the odds of the market breaking out now look better than it breaking down. He's now adding to his position in the Nasdaq 100 etf (QQQ) and Spiders (SPY). At the same time, we both accept the idea that, in terms of ranges and levels, S&P 500 at "1270 is the new 1250" and any move above that point will see buyers rushing back in, in size.

Of course, any unforeseen shock is always a threat to the downside, but with markets largely holding their ground and reports of "crisis fatigue" reaching pandemic levels, it may just be time to find something else to worry about for a while.
Are you worried about the low volume trading environment? Let us know in the comment section below.

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