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Volume Surge On Indexes On Friday

|Includes: SPDR S&P 500 Trust ETF (SPY)

Some could be surprised when I tell that Friday was the most interesting day of the past week. The market indexes were basically flat on that day - the S&P 500 lost 0.13%, Nasdaq 100 dropped 0.06% and DJI declined 0.08%. From the price prospective it was just an ordinary day like the rest days of the week (with exception on Wednesday when the market indexes rallied up after FED's rate increase).

However, when you look at volume traded on the major indexes, you will be surprised to see that on Friday March 17 of 2017, trading volume on the S&P 500, DJI, Nasdaq 100 and Russell 2000 surged up - it was the strongest volume spike on these indexes over the past 3 month - last time something like that was seen on December 16th of 2016. At that time (on 12/16/2016) it marked the end of the November-December post-election rally. The S&P 500 and DJI were in the side-way range trading for month and a half after that.

Such strong increase in volume is not an act of retail traders - some institutional traders ("Big Boys") were playing on Friday. After checking intraday index volume charts, you may notice that the Friday's volume surge was generated just before the market closed (last 30-minutes). It may look like some institutional traders expected something to come over week-end or early next week and they wanted to act on Friday at the market close.

We are not here to speculate about the reasons behind a strong increase in activity among institutional traders. We want to define whether they were selling or buying.

So far, we cannot say whether the ''Big Guys" were buying or selling. We had bearish (during price decline) volume surge on the S&P 500 and we had bullish (during price advance) volume surge on the Russell 2000. Next trading day (Monday) may help us to understand the Friday's high activity of the "Big Guys". If on Monday

  • the market (S&P 500index) declines on high volume then we may say the "Big Guys" were buying on Friday and they continue to buy - we may expect a run up in the near future;
  • the market (S&P 500index) moves up on high volume then we may say the "Big Guys" were selling on Friday and they continue to sell - we may expect a correctional move down in the near future;
  • the market (S&P 500index) declines on low volume then the "Big Guys" were selling on Friday - however they halted their selling (drop in volume) - we could be looking into side-way range trading with the possibility of a correction later;
  • he market (S&P 500index) moves up on low volume then the "Big Guys" were buying on Friday - however they halted their buying (drop in volume) - we could be looking into side-way range trading with the possibility of a new rally-up later.

Note: The market volatility is at very low levels. Even we see some signs of weakness, we cannot expect to expect from the market to make a strong down-moves. The current volume surge may affect market in a short-term only. if the reaction is negative, at these volatility levels, we may expect to see only a modest decline only.

Chart courtesy of https://www.marketvolume.com/membership/compare_services.asp

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.