Thursday, 4 October 2012

NYSE & Nasdaq - Trading Volume - Last 3 Yr Trend

There's been much chatter in the markets about the recent trend of super low volumes in the stock markets.

Various points have been made about:

  • Average retail investor bailing out of the stock market
  • High frequency algo trading taking over the market (though this would drive volume up)
  • Low volumes indicate poor confidence in current market price trends
Volume is definitely an important indicator but how much of a change or drop has there really been?  Lets take a look at the charts:

First up - The NYSE volume.  Over the last 3 years, there is a definite trend of drops over time.  Note that the regular 3 month volume peaks are the high volumes associated with triple witching expiration.  So 3 yrs ago, NYSE 50 day average trading volume was at 1500 on this scale and is currently now at 867 for a 42% drop in average volume. 

Next up is the Nasdaq total volume.  Over the last 3 yrs, it went from 2300 to 1722 for a more moderate drop of 25%.  

So overall, there is a severe drop in volume for NYSE but not as much for the Nasdaq.  However, the trend is overall worrying somewhat as this is a very regular and consistent trend.  I won't speculate too much in the cause but fleeing retail investors is definitely an important consideration.  

There's lots of supporting data indicating net money outflows from equities in general.  Reuters reported back in July that equity funds had net outflows of $31.4B and bond funds had net inflow of $223B, a rise of 94% vs same time last year...  This also correspond with my post made the other day, referencing how Fidelity's bond/money market assets have now surpassed its equity assets.  So its clear that equity flows have been negative based on these data points.  What's less clear is how much these outflow quantities are responsible for the volume drop as its unlikely to be one single factor.

Interesting none the less.         

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