Monday, June 15, 2009

Markets Rally and Decline With Low Volumes - Update June 15

In May we posted an article on the current rally having no volume. We showed that SPY was trading with volumes 31% lower than average, and DIA with volumes 54% lower than average:

Today we have a good drop in prices. The question is whether the volume is higher or lower when the market drops. At first glance, it appears that we are haivng higher than average volume today. As of 1:50PM, SPY had traded 142M shares vs the 30-day daily average of 292M shares. DIA has traded 8.5M shares vs the daily average of 11.9M shares. With over 2 hours to go, the volumes are on their way to still being lower the average totals, but definitely higher than when there are rallies, percentage-wise. We will update at the end of the day.

However the above figures are misleading. This is because the daily volume averages are coming down hard. Let us take a look at what has happened with the daily average volumes since May 5. As of 2:30PM:

(click to enlarge) June 15 vol. as of 2PM (incomplete)

What we are noticing is that the volume averages have considerably come down from early May. For instance, SPY 90-day average is down 21.5% compared to what it was in May. For DIA, the drop is 38.6%.

To say that volume is higher (today) when the market drops is misleading. The data above shows that volumes are still anemic.


Here is the updated table with volumes as of EOD:

Note that only DIA had higher volume today than on May 5 (2nd last column). However, all these ETFs that we tracked still have significantly lower volume than the 90-day average volume (last column). This confirms that we have lower volumes with the markets going up or down.

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