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Why low volume actually is bullish, according to Ryan Detrick: Total-dollar volume is higher now...

Why low volume actually is bullish, according to Ryan Detrick: Total-dollar volume is higher now than in the 2003-07 bull market, so how can bears say lower share volume is bearish? "As long as volume stays low and bears use it as ammunition for lower prices, just smile and nod your head, knowing this isn't true."
Comments (40)
  • wyostocks
    , contributor
    Comments (8056) | Send Message
     
    What BS logic he uses to make his case.
    18 Aug 2012, 09:27 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    Here is a chart:http://bit.ly/PvRyBH
    other than one day as you can see this 100,000 dollar stock "trades in hundreds of shares." would you like me to explain why that is? hence why volume is really not a factor at all in determining price.

     

    indeed using this same chart we can see that one day where the volume was 30,000 shares traded (is that the day he bought Burlington Railroad?) you can see the stock price...while surging afterwards, then declined quite dramatically as well. in that sense high volume represented a sell signal...at least over a certain period of time. later of course "the total lack of volume represented a buy yet again."

     

    now imagine other companies doing something similar: never splitting the shares, just letting the price rise (ideally)...how can you say since this clearly depresses trading activity that somehow the holder of said equity is worse off?
    18 Aug 2012, 04:29 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9951) | Send Message
     
    Sounds like a perfect opportunity for Mr. Deitrick to load up the boat for himself and his clients with maximum equity exposure. And might as well max out his margin as well. Heck don't want to miss any upside or maximize those returns. Always good to see pundits actually risk their own money on market calls. No doubt Mr. Deitrick will find plenty of sellers willing to sell him any equities he actually is willing to buy. Rumor has it that HFT's , algo's, prop desks and the like have plenty of equity inventory they are more than willing to let go of, since they account for 70% of daily volume now, even if volume is down reportedly by over 30% of the last 5 year average volume.
    18 Aug 2012, 04:37 PM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    Anytime somebody makes an argument that something is "bullish," the persistent purveyors of doom jump to the fore with exaggerated sarcastic suggestions, as if anybody who is now mentioning a bullish rationale wasn't bullish before and is going to go from all cash to "loading up the boat." The reason the pessimists think this way is that they imagine that everybody must be sitting on reams of cash, as they have been for many months, or even a few years, since 2008. It's not plausible that those who see positives now saw opportunities far back and have been invested for quite a while. In fact, that they see further gains, now, probably doesn't require them to "load any boats;" they just have to sit there with an already-long portfolio and do nothing.

     

    It's those that never got in, who are always left with the gnawing doubts that invariably occur when markets run away from them, while they remained timid or, worse, betting the downside. I know; early in my investing career I was one of them, always trying to guess the market direction, keeping my cash buried and being all too willing to believe every calamity story that gets pumped out, daily. But I learned that it's hardly a way to get rich, but it can generate a lot of angst and regret, later.

     

    "Rumor has it,..." love that as an investment strategy.

     

    P.S. The average HFT holding period is seconds to hours, at longest. They hold zero "inventory." http://bit.ly/SBzBlD
    18 Aug 2012, 05:18 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Aristiphones
    how can you say since this clearly depresses trading activity that somehow the holder of said equity is worse off?
    ======================...
    Let say I am holder of security, which selleth $100000 per piece

     

    Let say there is undesirable event taketh place

     

    It would not unthinkable to suggest that in that situation it is hard to find buyers able to pay $$ = $1K * N while being not mentally fit kind of person enough not notice undesirable event taketh place

     

    In good hi volume market this is less than a problem
    18 Aug 2012, 07:55 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2055) | Send Message
     
    One thing I'm certain. Lower and lower volume means reducing revenues and profits for the brokerages. It is the number of chargeable trades that counts. A one million dollar trade at Fidelity costs only $7.95, the same as a $500 one. So the logic of total dollar the author postulates is likely falsehood.

     

    With less and less coming in, and expenses keep piling up, there is but only one outcome. That is, layoffs.

     

    That is why your broker is calling you to 'come in' and be 'in' so desperately. They were told to get on the phones at the weekly staff meetings.
    18 Aug 2012, 09:40 AM Reply Like
  • FWS
    , contributor
    Comments (136) | Send Message
     
    This guy is nuts. All macro economic signms are pointing down. The BOTS are moving the market based on technicals, nothing else. Wake up. Retail sales figures are good compared to what?, real poor numbers, come now...
    18 Aug 2012, 09:41 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    http://1.usa.gov/NbC9EG this is EIA data on oil...production is up massively...so is price. the amount is storage is quite high as well. this chart says natural gas in storage top 3 trillion cubic feet for the first time in history: http://1.usa.gov/NbCbMG the spot price for that fuel shot up 50 percent in just a few months. that obviously increases the value of that gas in storage dramatically. i would agree with you gasoline consumption is down http://1.usa.gov/MEfllj means "this economy sucks" plain and simple. and how about these statistics on the price of electricity:http://1.usa.gov/MEfmFS 30 percent price declines year over year for electricity i highly doubt have ever been experienced in the post war era. a definite indicator of a total collapse in the US economy "in general." on the other hand if you want to make widgets and you're worried about your energy supplies there's no place better than the USA. and here's a company that only sells and delivers widgets:http://bit.ly/t2V5me must be taking advantage of the "50% off" electrical rates in the Pacific Northwest. and that is a "retailer" btw sporting those numbers. the rest are in the 6-8 p/e range i imagine. oh, well!
    18 Aug 2012, 05:15 PM Reply Like
  • Archman Investor
    , contributor
    Comments (2455) | Send Message
     
    Wow.
    What utter deceptive sales talk.

     

    Actual volume as proven over history by people such as William O'Niell does matter.

     

    Guess why dollar volume is higher? 4 letters: AAPL.

     

    This is exactly the kind of lying sales talk that Wall Street is known for.
    18 Aug 2012, 09:57 AM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (6173) | Send Message
     
    Just think if AAPL split 10-1 and traded at $65 as most companies did in the past. The avg 3 month volume of 14.2M would turn into 142M. My guess is that at lower prices more trading would take place in AAPL so maybe 200M shares daily. Thats just one example of how lack of stock splits is leading to lower volume.

     

    Not really good for the market, but an example of how volume can be misleading.
    18 Aug 2012, 11:50 AM Reply Like
  • apberusdisvet
    , contributor
    Comments (2883) | Send Message
     
    It's not so much "lying sales talk" as it is purposeful propaganda; they can't keep the Ponzi going without more suckers. Those few who believe articles like this deserve to be "corzined".
    18 Aug 2012, 12:21 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Stone Fox Capital

     

    Not really good for the market, but an example of how volume can be misleading.
    ======================...

     

    Lack of stock splits. Is it misleading indicator ?
    18 Aug 2012, 12:37 PM Reply Like
  • WMARKW
    , contributor
    Comments (10383) | Send Message
     
    Where is Jon....To bad the SEC hasn't a clue.
    18 Aug 2012, 03:00 PM Reply Like
  • CautiousInvestor
    , contributor
    Comments (3052) | Send Message
     
    Nice comment Archman.

     

    I would simply add that the author's caution that(remember, volume always surges at lows, not tops) is at odds with recent history when S&P volume peaked at the end of August 2007.
    18 Aug 2012, 04:54 PM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    why would a Wall Street trader celebrate low volume?
    18 Aug 2012, 05:17 PM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    "never short a dull market." in other words in low volume how do a "juice it higher"? the answer of course is "i can't." but the economy stunk in the 90's, too...job growth was crap and incomes were flat...did that stop the equity space from going to the moon? no.
    18 Aug 2012, 05:23 PM Reply Like
  • Skull & Bones
    , contributor
    Comments (59) | Send Message
     
    AAPL is the cultish 800 lb. gorilla that is distorting all kinds of market averages. Simply, remove AAPL, as it's stellar performance is clearly a "rare event" compared to all other companies that make up the averages. AAPL is permanently fixed "many standard deviations from the mean which tends to create an optimistic overconfidence in the broader averages of which it is a component.
    18 Aug 2012, 07:38 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (2817) | Send Message
     
    SPY and QQQ both hit cyclical highs on Friday. I'm reducing the overall volatility of my portfolio, taking most profits out and putting the money into cash, treasuries and inverses
    18 Aug 2012, 09:57 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    time to triple long the 30 year?
    18 Aug 2012, 05:24 PM Reply Like
  • enigmaman
    , contributor
    Comments (2686) | Send Message
     
    low volume could be as a result of the smaller pool of retail investors, with many fleeing to treasuries, cash and or the mattress. When rates begin to rise even just a smidge and their treasuries take a hit, inflation eats away at their cash and their mattress is maxed out many will begin to return to the equity markets in one way shape or form and that would be bullish for the markets because they would be pushing prices higher. Supply and demand
    18 Aug 2012, 11:10 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    http://bit.ly/S6nPlN "natural rate of inflation" exists in the US economy. PERIOD. People going hog wild in the debt markets are crazy. PERIOD. Rank speculation, nothing more. the Fed can inflate at will...and has announced its intention to "want inflation" i might add. besides how does one "pay down the debt by buying more of it at an ever increasing price and an ever decreasing yield?" not that i'm saying don't do that of course.
    18 Aug 2012, 05:31 PM Reply Like
  • wyostocks
    , contributor
    Comments (8056) | Send Message
     
    more stupidity.
    18 Aug 2012, 05:31 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    Here's the conclusion to the piece:

     

    "In conclusion, does stock volume matter? A few years ago, I would have said absolutely. Now, after this study, I'm not so sure. Nonetheless, the results speak for themselves."

     

    I defy anyone to try to draw any possible actionable information from this "analysis".
    18 Aug 2012, 11:34 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    buy General Electric stock.
    18 Aug 2012, 05:31 PM Reply Like
  • itsAme
    , contributor
    Comments (99) | Send Message
     
    He makes some really great and interesting points. I also think its silly to compare volume now to the bubble days of 2007 and the bottom of 2009.

     

    And his point on high priced stocks seems to resonate with retail investors. I'm sure volume would skyrocket in names like aapl if they did a 10-1 split
    18 Aug 2012, 11:38 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    the fact that Apple's stock is expensive makes it MORE compelling not less. to me Buffet is right...stock splitting is a form a dilution...don't do it.
    18 Aug 2012, 05:33 PM Reply Like
  • James Sands
    , contributor
    Comments (2088) | Send Message
     
    It's the same story as always. Buy solid companies and you will get solid returns. Maintain adequate consistent cash for market cycles. Stay disciplined.

     

    It's like being a professional athlete. Don't buy into what everyone is saying negative or positive. Stick with your practice goals to improve and work hard. Keep focused on improving and performing on game day.
    18 Aug 2012, 11:43 AM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    Many "volume bears" don't seem to understand the equally important underlying impact of capital disposition on market risk. Like Pavlov's dog, they see lower volumes and immediately presume that that presages a loss of market liquidity, making for a volatile market sell-off, as has been seem previously when buying volumes shrunk at market tops. However, volatility can be exerted in both directions, not just downward.

     

    Where this correlation goes awry, however, is that, while lower volumes may indeed open up the possibility of higher volatility, it's the current disposition of capital that determines whether the risks posed by increased volatility lie on the upside or downside. Unlike, previous instances where volumes tail off due to buying exhaustion, and most money that might flow into equities has already done so, now we see that massive amounts of capital reside outside equities in Treasuries, cash and gold.

     

    That is, the vast bulk of the money that might try flee equities has already done so, and those that remain are either more recent entrants or those with longer horizons and more immunity to nervous selling. On the other of the ledger, amongst all that capital already out of the market, lie many bond holders, the earliest of whom have made huge gains in their positions. It's these folks who have reason to be nervous, especially as they see rates nudge upward and knowing the rapid capital losses that will be occasioned by bond convexity at present yields. Some of these folks are starting to cash in their gains and convert back to equities. It doesn't take many to easily overcome the current increasingly smaller base of sellers.

     

    We've been seeing the impact of this capital imbalance, and the shifting behavior of some bond holders, in recent trading patterns. On "bad news" days, the market cannot find many sellers and usually rises from early lows to finish near daily highs, even green. On "good news" days, the increased demand from motivated buyers finds that there are very few motivated sellers, so prices must rise briskly in order to find enough sellers to meet demand.

     

    Given that the pool of prospective equity buyers is now so large, relative to interested sellers, the market is likely to continue find lots of support on soft days, and volatility, to the extent that it presents itself, could have a decided upward bias. In this environment only a major unforeseen negative event is likely to be able to provoke a major sell-off.
    18 Aug 2012, 11:52 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    absolutely....spot...on. "and it's not like short sellers aren't making money" either. Hewlett Packard comes to mind. "Complacent market" my ass. here's a support on a "soft day"http://bit.ly/OKfUeF (those are all time record highs btw). to me the tailing off in price represents the return of Alpha to the market as "who wants to be caught holding a stodgy utility merely hitting one record high after another" when you could try one of these: http://bit.ly/OKfWTW
    hard not to like an industrial lender...indeed THE industrial lender...in an economy that the entire Federal Government has now "bought low" in order to sell high.
    18 Aug 2012, 05:47 PM Reply Like
  • David Urban
    , contributor
    Comments (1036) | Send Message
     
    I would be more concerned with the amount of manipulation that is going in the market across many asset classes.
    18 Aug 2012, 12:27 PM Reply Like
  • mweaver
    , contributor
    Comments (201) | Send Message
     
    neat adverb, "corzined".
    where's stan o'neil?
    18 Aug 2012, 02:47 PM Reply Like
  • chanthirani
    , contributor
    Comments (466) | Send Message
     
    Less volume does not mean bearish.
    Less volume means the recent price action is unconfirmed, regardless of whether the recent price action is bullish or bearish.

     

    More volume means that the recent price action is confirmed.
    19 Aug 2012, 11:53 AM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2055) | Send Message
     
    I'm not quite sure your logic applies here. We are talking about shrinking volume consistently and continuously over a ~ 5-year period.

     

    To me, the present trend would suggest that there is less and less interest and participation from the retail investors community.
    19 Aug 2012, 12:02 PM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    Teut:

     

    Not exactly.

     

    I checked the SPX volume chart, and, not surprisingly, volume peaked just at the October 2008 collapse, and it's oscillated a bit since then, but in a slow continuous erosion, on average. This is entirely consistent with the major shift of capital away from equities to where we see it today, crammed into a crowded trade in Treasuries, cash and gold.

     

    In my estimation, it's this capital imbalance that's going to dictate future market direction, more than any other variable, and it's going to bias equities to the upside over the coming months/years. Only a major dislocation in economic affairs would be likely to disrupt this effect.
    19 Aug 2012, 12:14 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2055) | Send Message
     
    Tack,

     

    Good post and astute observation.

     

    Re: ".Going to bias equities to the upside over the coming months/years. Only a major dislocation in economic affairs would be likely to disrupt this effect."

     

    Plausible. But, this is the 'But', are the US fiscal cliff, EU Euro debt crises and China slowdown all going to be 'solved' 'miraculously' in the next year or so for any meaningful and sustainable upside?

     

    Needs a Solomon for the answer!
    19 Aug 2012, 12:38 PM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    Teut:

     

    In my long experience, problems are always transient and are solved, one way or another. The world keeps turning. The list of fears is always never ending (remember, Y2K?). The investment world is divided into those that seek opportunity in the hesitancy of others and those that allow the fears to paralyze them. Only one group consistently makes money, over time.
    19 Aug 2012, 01:05 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (2055) | Send Message
     
    Tack

     

    These are words of wisdom and I certainly hope that you're right. I looked up your resume, you have much richer credentials in the investing than I do.

     

    On August 19 about 100 years ago, 100,000 poor souls trekked up to Dawson City, Yukon, Canada in that stampede of Gold Rush but only 4,000 found something.

     

    A mere 4% success rate, not too impressive though! LOL!
    19 Aug 2012, 06:09 PM Reply Like
  • Nolesince87
    , contributor
    Comments (258) | Send Message
     
    If you're a bull in this environment, you can use ANY argument you want to back your position. If printing money cured all evils, then why has it not always been tried as the solution to economic problems throughout US and world history?

     

    Oh wait, my bad, it HAS been done--and NOT ONCE has there ever been a positive outcome as a result... all of the gains of the S&P500 since 1000 will be wiped out in a matter of a couple days when "the market" decides it is time to follow reality.
    15 Sep 2012, 01:50 PM Reply Like
  • Tack
    , contributor
    Comments (13401) | Send Message
     
    Noles:

     

    The U.S. is printing currency; China is printing currency; Europe is printing currency, the United Kingdom is printing currency. They're all going belly up? All stock markets and currencies will collapse? What, we're headed back to carrying little bags of gold dust around, and they'll be a boom in assayers offices? Or, perhaps, we'll just return to "pure" trade, bartering a pail of milk for a bushel of wheat?

     

    Hysteria is a very poor investment strategy.
    15 Sep 2012, 02:20 PM Reply Like
  • WMARKW
    , contributor
    Comments (10383) | Send Message
     
    The history of failing currencies if replete with "resets". There have been and will be in the future.
    15 Sep 2012, 03:35 PM Reply Like
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