Volume has been lighter this week than any other week in the last few years. This is extremely rare for February, especially since it is options expiration. Where did it go and what does it mean?
Shown below are the daily volumes for the last five trading days on the SPDR S&P 500 ETF Trust (SPY).
- Friday, February 8th, 2013 : 103,133,700
- Monday, February 11th, 2013 : 73,775,000
- Tuesday, February 12th, 2013 : 65,392,700
- Wednesday, February 13th, 2013 : 82,235,100
- Thursday, February 14th, 2013 : 39,618,550 (As of 12:50PM ET)
This volume trend unfortunately represents the calm before the storm throughout history. In mid 2007 the markets were just like this, volume dead, a slow float higher. The retail investor was jumping all in as the media pumped the continued up move to all time highs. The same things are happening today.
Lack of volume means institutions are not going near the markets on the long side. The only volume being generated is from retail investors pushing their cash into what they think is an easy money making situation. There is never anything that is easy and history shows us when the retail investor buys, the markets sell sharply soon after.
The fact that the markets are not jumping higher on this light volume is also concerning. Light volume like this is usually an easy way for the markets to add half a percent a day.
What Happens When Volume Spikes?
Fast Fall
When volume spikes that's when institutions will start to dump. That means the markets fall and fall fast. To get the exact trade alerts from the pros, take the seven day free trial to the Research Center. Learn proprietary strategies to pick every major top and bottom in the market and stocks. Join today and profit for life.
Related: SPDR Dow Jones Industrial Average ETF (DIA) and PowerShares QQQ Trust, Series 1 (ETF) (QQQ).