Market Volume - Expect a Contraction

Several weeks ago Citigroup announced their intention to undergo a 1 for 10 reverse stock split.  The ex-date on the rerverse split is not yet determined, but the implications on total market volume should not be ignored.  The technical folks like to point to market volumes as a signal indicating the importance of market advances and declines, but do not be alarmed if there is a sudden contraction in trading volume after Citi's share price jumps from $4 to $40.

The chart below shows Citi's daily volume as a percent of total NYSE volume.  In a special note to paying customers, Birinyi Associates detailed that - all things being equal - Cit's reverse split will cause total NYSE daily volume to decline by about 11%.  Although we still do not know the exact dates, be wary volume as an indicative measure.

 

Comments

[Gerald Langelier]

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[Economic Depression]

It is true that contraction in volume is negative indication when market is showing up trend. If volume drops continuously with market advancing on up side it is indicating possible end of the rally just ahead

[Palm Riviera Thirumudivakkam]

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