Does Low Volume Make This Rally Any Less Real? [ProShares Ultra S&P500 (ETF), ProShares Ultra Dow30 (ETF)]

stock rallyDavid Fabian: Yesterday marked a year-to-date low in NYSE trading volume despite the S&P 500 Index hitting a new all-time intra-day high above 2,000. Despite the fact that many stocks are seeing fewer buyers and sellers, the markets are continuing to build on this 5-year bull market in earnest.

However, when the gains come at the expense of fewer participants, the bears are quick to point out that this rally can’t last. Whether that is true or not, the reality is the gains are still as meaningful as any other trading day. Billions of dollars change hands even on a low volume session that has the ability to impact millions of market participants.


In fact, aggregate NYSE trading volume has been trending downward over the last several months. Excluding some single-day anomalies of strength, the pervasive trend has been on the decline and stocks don’t seem to care.

Volume is a traditional metric that can help establish the credibility of a move within an individual stock or index. It also provides an indicator of liquidity for buyers and sellers that are exchanging shares in real time. Conventional wisdom is that higher volume indicates the majority of participants believe in the move. Conversely, a low volume move in a stock may indicate a weaker consensus that is viewed with skepticism.

However, at the end of the day, the only thing that really matters is price. Volume certainly doesn’t contribute to the total return in your account other than to aid in efficient executions of trades. Looking at various technical or fundamental technical indicators can help build a case for why you are investing in a specific area of the market, but it won’t tell you the ultimate outcome.

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