This six year old bull market has been marked by both low volatility and declining trading volumes.
The trading volumes story is a somewhat complex. Some argued that it was a sign of “low confirmation,” meaning investors didn’t have a lot of conviction in their purchases as reflected by small bets.
Some argued that because prices were actually higher, the dollar volume was actually going sideways.
Perhaps the most interesting observations regarding volume was that stock prices did substantially better on below-average volume days than above-average volume days.
This could be a bad sign as trading volumes have been picking up.
Deutsche Bank’s Torsten Slok believes this could have something to do with the prospect of tighter monetary policy via interest rate hikes from the Federal Reserve.
“The increased uncertainty is showing up in the form of higher volatility and higher volumes,” Slok said. “In the coming months, we should expect higher volatility and higher volumes across all asset classes, as more and more investors realise that the Fed is actually going to hike rates this summer.”
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