By Nicholas Santiago on March 11th, 2010 12:45pm Eastern Time
Where has the volume gone in the stock market? Since the March 2009 bottom the stock market rallies have been on very light volume. However, the few and rare pullbacks in the major indexes have been on very heavy volume since that bottom. Here we are in the month of March. It has always been a very pivotal and heavy volume time frame for the markets. However, this March is looking is looking more like the summer doldrums.
Light volume is not normal nor is it healthy in the month of March. As I have stated many times before, healthy markets rally on strong volume and decline on light volume. This current market does the complete opposite. It advances higher on light volume and declines on heavy volume. Historically, this type of action is not a healthy bull market from the lows and is reminiscent of 2007.
Thank goodness for the government controlled stocks. Fannie Mae (NYSE:FNM), Freddie Mac (NYSE:FRE), American International group (NYSE:AIG), and Citigroup Inc (NYSE:C) are just a few. If we did not have these stocks trading the volume in the market would be even lighter. Where are the participants? Last year at this time the SPDR S&P 500 ETF (NYSE:SPY) was trading nearly a half billion shares a day and one year later it is averaging just 150 million a day. Last year the market was in the eye of the storm and volume was at unprecedented levels. However, it is now at unprecedented light levels.
It's a good thing that Citigroup (NYSE:C) has traded over a billion shares a day lately or this market would almost be non existent in trading volume. As long as the volume is light it is easy for the institutional money to keep this market up. Hence the old market adage, "never short a dull market." This is a dull market especially for the month of March.
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