Should we equivocate bonds when trade volume falls? This is a timely question, given we’re entering a summer months in that trade volume typically dries up. If cost follows volume, as many technicians contend, afterwards a U.S. batch market’s trail of slightest insurgency will be down by a finish of August.
I wouldn’t gamble on it. we am incompetent to find any statistically poignant attribute between a batch market’s opening and a altogether trade volume. While a batch marketplace might though decrease this summer, don’t censure malnutritioned trade volume if it does.
Consider a draft below, that plots any month’s normal trade volume when voiced as a ratio to a trailing 12-month relocating average. (This is a correct metric, given trade volume has mushroomed over a past 5 decades.) Notice a graphic decrease over a 6 months commencement with March; August’s normal is 15% next March’s.
The initial idea that there’s no candid attribute between trade volume and lapse is September’s experience. Though a month distant and divided is a misfortune performer of a calendar, a normal trade volume is as high or aloft than 5 other months.
This idea is reliable statistically by measuring a association between all months’ trade volume on a one hand, and a batch market’s opening over a successive one-, three-, six- and 12 months on a other. None of a correlations is statistically poignant during a 95% certainty turn that statisticians mostly use when assessing possibly a settlement is genuine.
A intensity retort that we have perceived when formerly stating identical formula is that aloft trade volume is not what’s bullish per se, though a multiple of larger volume and aloft price.
I don’t buy this evidence either. we segregated all months over a past 5 decades into dual groups: The initial contained all months in that SP 500
SPX,
-0.20%
trade volume was above normal and a batch marketplace rose, and a second contained all months in that volume was above normal and a marketplace fell. What we found is epitomised in a list below; nothing of a differences in a list is statistically significant.
The bottom line? This is a box in that Wall Street’s folk knowledge gets it right. As a aged saw goes, don’t sell a lifeless marketplace short.
Mark Hulbert is a unchanging writer to MarketWatch. His Hulbert Ratings marks investment newsletters that compensate a prosaic price to be audited. He can be reached during mark@hulbertratings.com
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