Volume on Everyone's Mind

“It’s yet another way that the market feels like it’s in the low-volume, Fed-medicated, range-trading, easy-corporate-credit, buyout-happy days of the middle part of the last decade.”

– Michael Santoli

I have this thing where I think the “low volume” lament is the bears’ equivalent of “the dog ate my homework” in terms of missing rallies.  Like, “yes, the S&P 500 doubled in 24 months, but look at the volume.”

It’s not that volume is unimportant, in fact it is the one thing on all of our minds right now, bullish or bearish.  Michael Santoli‘s column on the topic is this weekend’s most talked about.  Barry takes the quotes and comments throughout Santoli’s piece and brings them to their logical conclusion.

What these three comments hint at, but don’t precisely conclude, is that Fed induced rallies tend to be liquidity, not conviction driven. Thus, the anemic volume.

Look at 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 along with the occasional increases in money supply and/or bond purchases.

This is precisely true, there is very little conviction anywhere.  Even the guys who are most long, myself included, can’t let go of their (our) distrust even for a second.

Except when they’re in front of the media 🙂

Source:

Does Fed Intervention Produce Low Volume Rallies? (TBP)

Read Also:

What is Low Volume Telling Us?  (Barron’s)