Thursday, August 14, 2008

Exceptionally Low Volume Casts Shadow

The market bounced on Thursday, but volume was anemic. On the NYSE it was the lowest volume since the July 3rd holiday-shortened session. When the market moves up, you’d normally rather see it occur on strong volume. Exceptionally weak volume, like we saw today, has been followed by some difficult market conditions over the last 10 years. Some statistics below:



One additional thought on volume for the back half of August. Over the next two weeks it is probable that volume will drop off due to traders taking vacations. When monitoring volume, shorter-term comparisons may need to be made to gain value from the information. For example, rather than comparing volume to its 50-day average, you may get a truer indication by comparing it to the last 1-3 days.
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3 comments:

  1. Johan LindénAugust 15, 2008 at 2:59 AM

    so why compare it with a 20 day avg then?

    Compare it to a certain percentage below the 3 day average instead. Might be more interesting.

    I would also like to have a filter that shows which figures that came from bull resp. bear markets.

    I don't trust any studies for the last year that don't have such a filter. But that's just me :)

    Have a great day!

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  2. AnonymousAugust 17, 2008 at 3:39 AM

    the volume study says sell but the sox study says buy. which one would you trade?

    ReplyDelete
  3. Rob HannaAugust 19, 2008 at 8:03 AM

    Johan -

    I'm not looking at a 20-day average in this study. Rather I'm looking at a 20-day low. I frequently will look at above/below 200ma for studies.

    In this case extra filtering would have reduced the sample size below what I typically prefer to see.

    Anon -

    Think of the studies as indicators. See my early July post on the Quantifiable Edges Aggregator for more discussion on this.

    Regards,
    Rob

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