Tuesday, August 19, 2008

An Instance Where Light Volume Pullbacks Don't Provide Bullish Expectations

Normally light volume on a pullback can be regarded as a good thing. When the pullback is fairly large and the volume is extremely light the expectations can turn bearish. For instance, the S&P dropped about 1.5% today on the lightest volume since July 3rd. I loosened the parameters slightly to get a decent sized sample and ran a study:



Of course volume this week and next week are expected to be a bit lighter due to traders taking vacations. Still, I don’t find the results terribly encouraging for the bullish case over the next two weeks.

3 comments:

Alex Marion said...

Where can I get accurate volume data for the S&P500? Is Yahoo accurate?

Rob Hanna said...

Most data providers provide NYSE total volume when showing a chart of the S&P 500.

"Accurate" is more difficult to determine than you'd think. It's measured a number of different ways. Some may count NYSE securities volume traded away from the exchange - others may not. The raw number will vary greatly.

When checking one vs the other you can really only compare the relative size of their bars. (Bigger or smaller than yesterday or bigger or smaller than a movg avg for instance.)

I normally check a few to see that the bar looks similar on a chart.

The most important thing when looking at volume is that you are consistent with the data provider you use.

Johan Lindén said...

alex,

The data providers who give the biggest volume should be the better ones since they include more participants.

At least that's my view.

But who those are, I don't know.