The Great Volume Expansion

US market volume has been expanding since enormously since 2005.  There has been a lot of scuttlebutt this year regarding a lack of volume, usually referring to NYSE trading because of its availability.  The chart below shows NYSE floor volume as reported by the exchange in red (this is the same number you would find on WSJ.com or any other data provider).  As shown, NYSE volume is largely unchanged since 2000 because there are actually four key stock exchanges in the US: the New York Stock Exchange, the NASDAQ, the NYSE Arca, and the FINRA ADF.  Birinyi Associates has been a long-time commentator on structural changes occurring in the market; the pinnacle of that work being "the Next Crash."  

By digging deeper and looking at total volume for NYSE issues we find that there is significantly more trading than many people realize.  To calculate total volume, shown below in green, we added shares traded on all US exchanges for each NYSE listed stock, and then added all of the stocks' volumes for a given day.  Using this methodology we find that on 11/6/09 total volume for NYSE issues was actually 4.89 billion shares versus NYSE volume of 1.29 billion shares.

We realize that this shift in volume is becoming more widely publicized, and that this post is not groundbreaking, but we also note that any analysis using volume to confirm a market's move should be scrutinized.

Comments

[aviat72]

The issue is not absolute volume but relative volume. In the November rally the volume has been declining every day while prices have been rising. And the volume was much less compared to the preceding days when prices fell. It is highly unlikely that ratio of trades executed on the NYSE and other exchanges changes on a day to day basis. Do you believe that traders prefer to route orders to NYSE on down days and other exchanges on up days?

[RiskAverse]

It appears data presented at StockCharts accounts for aggregated volume across all exchanges where NYSE-listed issues are traded, and so, I would side with @aviat72 observation above. Likewise, that the volume trend has been diminishing over the entire course of the market's advance off March '09 bottom is suggesting complacency is ruling the day. This might not seem a matter of great concern were not this condition so much like the situation from March-May, 2008 when the market similarly was in the midst of a counter-trend rally. Thus, I fear a massive unraveling far steeper than last year's might be in store, and believe an abundance of evidence beyond diminishing volume is supporting this probability. For example, look at the cumulative A/D line on NASDAQ. The question, then, in light of this becomes where are the animal spirits necessary to sustain the market's reversal off March '09 bottom? Running into large caps? And what safety was gained in BRKA last year?