SPY’s Volume Speaks Volumes
I do not claim to be an avid student of market volume, and most market technicians would refrain from calling me an expert on the subject. However, I have enough knowledge on the matter to notice a few things once in a while. With this disclosure out of the way, I will now tell you what I have been observing. There are myriad volume measurements and statistics. There is the NYSE volume, NASDAQ volume, and let’s not forget BATS volume. For those of you not familiar with BATS, it is the third largest U.S. exchange. BATS captured a 22.0% market share of all U.S. equity trades in the month of August, so it is a name you should become familiar with. There are also statistics on up volume, down volume, and unchanged volume for each exchange. Many traders rely on volume indicators such as “on-balance volume” to guide their trading. Today, I want to focus on the volume of a single security – the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). It is the most heavily traded equity on the planet. It is just one of the more than 1,760 ETFs that are listed for trading in the U.S., yet it captured 35.2% of all ETF dollar volume in August. SPY trading averaged $35 billion per day last month, more than seven times the daily amount of the PowerShares QQQ Trust ETF (NASDAQ: QQQ ), the second most traded equity security. Meanwhile, Apple (NASDAQ: AAPL ), the most actively traded stock by dollar volume, averaged just $8.6 billion per day. Given the importance of SPY as a security, the importance of its volume is elevated, in my opinion. Earlier this week, many financial commentators were attempting to ascribe enormous bullish action to Tuesday’s +2.5% surge in the S&P 500 index, accompanied by an 11.6% bump in NYSE volume and a 12.1% rise in NASDAQ volume. However, I saw something different. The volume of SPY did not increase. It went the other direction and did so in an unambiguous way. The volume of SPY declined more than 43% versus the previous day. Additionally, that 2.5% rise in price came on the lowest volume in the past fourteen trading days. Not since August 18, before the market went into its recent tailspin, has SPY traded on lower volume than it did on Tuesday. Given the fact that most of the recent down days for SPY have occurred on increasing volume while up days have seen declining volume, I’m not ready to get bullish on SPY just yet. Additionally, since I believe SPY is one of the most important securities, I’m going to remain cautious on the overall market for the time being. Disclosure covering writer: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.