Thursday, January 19, 2012

The Mystery of Low Volume

Things have been looking pretty good for the economy lately: Unemployment is drifting downward, consumer confidence is up, and even the beleaguered banking industry has finally seen an upturn in loan demand. The market has responded as well, with the S&P 500 being up about 4 percent already on the year after a flat 2011.

So why, then, has trading volume on the stock markets been so low? According to research from Raymond James Equity Research, trading so far in January is down 18 percent from the same period last year. In fact, in the past four years, the only month with a lower average daily volume than this January was December 2011. Trading this month is up 5 percent from the rate in December.

Normally, January is a strong trading month. Average daily volume jumped 21 percent last January, and 23 percent in January of 2010. That makes it even stranger that there should be so little volume now.

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