Where Did The Volume Go? Why Are The Markets Not Spiking Higher?

Volume has been lighter this week than any other week in the last few years. This is extremely rare for February, especially since it is options expiration. Where did it go and what does it mean?

Shown below are the daily volumes for the last five trading days on the SPDR S&P 500 ETF Trust SPY.

Friday, February 8th, 2013 : 103,133,700
Monday, February 11th, 2013 :  73,775,000
Tuesday, February 12th, 2013 :  65,392,700
Wednesday, February 13th, 2013 : 82,235,100
Thursday, February 14th, 2013 : 39,618,550*

*As of 12:50PM ET

 This volume trend unfortunately represents the calm before the storm throughout history. In mid 2007 the markets were just like this, volume dead, a slow float higher. The retail investor was jumping all in as the media pumped the continued up move to all time highs. The same things are happening today.

Lack of volume means institutions are not going near the markets on the long side. The only volume being generated is from  retail investors pushing their cash into what they think is an easy money making situation. There is never anything that is easy and history shows us when the retail investor buys, the markets sell sharply soon after.

The fact that the markets are not jumping higher on this light volume is also concerning. Light volume like this is usually an easy way for the markets to add half a percent a day.

What Happens When Volume Spikes?

When volume spikes it will be when institutions start to dump. That means the markets fall and fall fast. 

Gareth Soloway
InTheMoneyStocks