Today’s chart is a study I’ve completed on volume of stocks traded on the S&P500 and ASX200 share markets. Given its still the first month of the year, it is expected that volume would be low (and hence volatility high?), with the gnawing possibility that the current rally in risk assets is nothing more than a melt-up.
Leaving that aside, let’s look at the charts, and something stands out clearly, particularly when you apply a 12 month moving average to the monthly volume:
Monthly volume on SP500 since 2005
Volume peaked on the US bourse in early 2009, with no noticeable spike during QE2 (August 2010) and remains at October 2006 levels, the ramp up in volume during the bull market clearly broken.
Monthly volume of ASX200 with 12 month moving average
The ASX200 paints a similar picture, with monthly volume tapering off sharply, even during the crack-up rally of 2009-10, volume has disappeared in the last 3 years, breaking the dominant trend throughout the secular bull market that ended in 2008.
Interestingly, volume during the last bear market (early 2002 to mid 2003) didn’t change materially and actually grew, a clear sign of a dominant, secular bull market (even when the market effectively went sideways from 1999 to 2003):
Has there been a fundamental shift away from equities? Does volume or lack thereof actually move prices over the long term (aside from short term bear marker rallies or bull market corrections)?