NYSE & Nasdaq Volumes.
Last week I mentioned capital inflows to managed / mutual funds and the general rule is that capital inflow results in a rising market. Not being one to take anything for granted, I decided to check for myself to see if it was upheld by the data.
Nasdaq Trading Volumes.
Here is the chart of volumes for the last 5 years on the Nasdaq Stock Exchange:
There are some interesting things to note: the volume was relatively steady until early March 2020 when it increased. Why? Covid, and people being confined to their homes. There was a huge surge in interest in the stock market, and volumes increased, and never really dropped back again.
GameStop Frenzy
There are some noticeable anomalies – the spike at the start of 2021 was due to the GameStop frenzy. Remember that? Retail traders, mostly from the Reddit group WallStreetBets targeted heavily shorted stocks like GameStop (GME, AMC and others.)
Zero Commission Trading
It was also affected by the introduction of Zero Commission Trading by platforms like Robinhood, and by the stimulus checks that were being mailed to people.
Short Squeeze
This led to a massive short squeeze, where institutional investors who had sold short had to cover, which amplified the trading volumes. There was a huge increase in activity as ‘investors’ piled into these stocks, often trading them several times in one day. Daytrader frenzy!
Options Expiry – Triple Witching
We can see that that spikes occurred on Triple Witching, which is the third Friday of March, June, September and December. Four types of derivative expire on the same day: Stock Index Futures, Stock Index Options, Single Stock Options and Single Stock Futures.
This is when Institutional Investors & hedge funds adjust their portfolios. The S&P 500 (and some other indices) rebalance their components which leads to heavy trading of stocks that are added to or removed from the index.
Thanksgiving Holiday
Well, we all know that last week was a shortened trading week due to Thanksgiving. The market missed one full and one half day leading to reduced volumes. You can trace this back through previous years.
Market Bulls & Bears
You can compare the market increases with the volumes in the chart above.
2024 Volume - Nasdaq
I have separated out 2024 volumes in this chart:
The volume spikes are apparent on Triple Witching – but has the volume increased recently? Apart from the triple witching spikes, the volume was pretty level for most of the year, and started increasing in September 2024. At the risk of upsetting people, I think that was when the betting markets started to reflect a different election outcome to that which the press and the polls were showing.
NTSE Trading Volumes.
Let’s check out the trading volumes on the NYSE. For the same period:
What do we notice? That we still have the regular spikes like the Nasdaq, but they are even more pronounced. But more interestingly, there hasn’t been the overall increase in trading volume that we saw in the Nasdaq. Apart from the Covid bump it seems pretty level to me. What about this year?
Again, a pretty flat year, no discernable trend. What does this mean?
Does the story check out?
We started this analysis to check whether the reported capital inflows were impacting the market, and I think we can see from the charts that the Nasdaq has been the greatest recipient of the inflows, with the NYSE relatively unaffected.
Will this continue? Nobody knows, but it is a statistic to keep our eye on.
Fed Chairman Stays
Last week I foreshadowed that there may be increased volatility if the Fed Chariman was replaced. I have just seen on Bloomberg that the incoming president has ‘no plans to replace the current Fed Chair’, so that; s one bit of volatility we don’t have to worry about.
ITM Chat
I set up ITM Chat for ITM traders to be able to chat to one another about trading. Not just ITM, but other trading ideas and strategies, brokers etc. Currently, I am not moderating it – George Halongton keeps an eye on it, and I am sure he would alert me if there was something inappropriate.
Trader’s Forum
I think it best if I keep out of it – have it as simply a trader’s forum. If anyone wants me to answer a question, the Q&A at the bottom of the blog is where to do that – I check that almost every day.
I also don’t want ITM Chat to become moribund, so I am thinking that if the last post in a thread is more than 2 weeks old I should delete the whole thread as it is not of interest any more.
Anyone can set up a new thread or respond to threads that are already there. I have set it up without a login (for the present at least) as I find it annoying when I have to log into this and that – so archaic.
Feel free to comment on any of this and tell me what you think in the Q&A.
To the markets . . .
A rather nice week on the market. No surprises, shocks or drama. Just a gentle rise. Lovely.
SPY Charts
Well, I was pretty happy with last week. No dramas, just a nice steady increase – good for the nerves. We are comfortably over the 600 level, which is good, but it will still be normal behavior for SPY the drop and test it for support at some stage.
We will not be happy, but the market does what the market does. If support at 600 holds then that will be a good sign. And cheer up, it may not happen, SPY may still continue going up without a retest.
The long term chart shows that the uptrend is still in place. It is getting a bit boring writing the same thing every week, but in this case, I am very happy to be bored!
SPYG Charts
WOOHOO!! SPYG made a new all-time high. ‘Let joy be unconfined.’ (anyone know where this comes from?) Last week I commented ‘SPYG has not yet made a new high (it is below the high of early November) but it is still a nice-looking chart with support established at the $85 level.
Well, the nice-looking chart did what we wanted; a new high was made. It has been trading above this for 4 days, but, like SPY, it may retrace and check $87.50 (previous high, green line) for support.
The longer term chart shows SPYG approaching the upper band of its trading channel.
QQQ Charts
I was just checking what I said in last week’s blog and realised that I had uploaded the wrong chart – and nobody told me!! Does this mean that (a) no-one is trading QQQ or (b) you’d stopped reading by this point? Either way, it’s a worry!
Anyway, I said that QQQ was a nice-looking chart, and now it has made new highs. There has been relatively little comment on this on in the press, who seem to be fixated on the Dow – goodness knows why, but there you have it.
And on the (correct) weekly chart we see it is still crawling along the bottom of its trading channel:
VIX Chart (Volatility)
The VIX continues very low. Boring, I know, but that’s how we want it!
ITMeter
The week ahead
CPI data is due on Wednesday, and the Fed meeting is coming up on 17 – 18 December so expect to see a lot more chatter over interest rates. Bitcoin (that I don’t trade, but keep tabs on) is having its day in the sun.
We are getting nearer to Christmas, so expect to see a lot of talk about the ‘Santa Rally’. Is there such a thing? I’ve written about it before, here’s the link: https://heathercullen.com/santa-rally/
Next week, 16th December, will be the last blog for the year – it will start again in the new year on the 6th January.
The Futures
The futures are up slightly, but it is too early to read anything into that. It is still 6 hours to market open.
Fingers crossed for a good week!
Heather
Q & A
If you have a question for me please put it here. If you want to chat with other traders go ITM CHAT
10 Responses
Hello Ms. Heather,
Ref: from your comments above…deleting old forum threads
In the high performance motorcycle and automotive community I have experienced old forum threads being dormant. But, there have been numerous times that a thread after being asleep for a few weeks, months or even more than a year get resurrected…and many times get resurrected and begin a whole new life with very valuable information.
This came from many reasons. Newcomers would ask a new question on an old thread. Someone would add a new and refreshing twist. Or, an old timer would add updated useful information etc. etc.
Many forums had and have an archived section to put the sleeping threads out of the way, but the old threads and posts were still available.
Just my 2 cents.
By the way, via several weeks ago, thanks for making the blog section(s) searchable. Very helpful!
All you do…good stuff!
Cheers,
John
Hi John!
Yes, I put up the search a couple of months ago, it wasa good idea.
Re the old threads – I just don’t want people to be put off by seeing threads that look neglected – maybe the solution is to see it I can order them on last comment, or somehow archive them so that they can be resurrected. Let me think – and ask ChatGPT how I could do it! I find I am never looking at manuals and documentation any more, just asking ChatGPT to do it for me – such a time-saver.
Merry Xmas!
h
I have never, ever known a Wall Street forecast to be correct and most of the time they are wildly off. The only one I have known, in my soon to be 74 years, to hit the nail on the head was, God rest his soul, was Marty Zweig, who called the 1987 crash to a T on the old U. S. PBS show, Wall Street Week, on Friday night, before the crash on Monday morning. He not only called it he called it a Financial crash and not an economic crash.
Hi Tommy – what a coincidence – I am doin next week’s bllog on how the 2024 predictions from Wall St went – and ithey are hilariously wrong.
Not to detract from Zweig’s success, but with the number of predictions that are out there one of them is sure to be right!
h
Dear Heather,
Thank you for your weekly blog as always and thank you for creating the ITM Chat so more traders and investors can participate and contribute our inputs. I wish ITM much success and 2025 for ITM will be like 1965 for Berkshire Hathaway. Cheers to the next 25 years from 2025 and 2050. Forever grateful…
Sincerely,
George Henry Halongton
Thank you George!
Where / when does the Santa Claus rally start… • My opinion is ( from years of doing everything wrong ) if I think the market is going up … sell • Usually there’s one thing that stands out “ after “ the market starts heading down or a black swan event. Is there such a thing as a neutral position in ITM ( kinda like buy / sell at the same time …
R
Just me from experience, but when the Market is boring people watching it going up and up they expect it to continue to go up there might be danger ahead. I am not agreeing with Warren Buffet and I am not predicting anything. I am like the guys who predicted 6 of the last 2 recessions so my prediction skills are not worth a hoot. I also recognize that I am usually too bearish based upon my experience but I never let my natural bearish tendencies keep me from making money or trying to most of the time. In any event again based on my experience, the market leaders in the tech Sector have undoubtedly been red hot on a historical basis which may or may not be justified. At some point one must recognize that nothing last forever, like Bull Markets and Bear Markets but they sure can wear you out.
Hi Tommy, yes trying to predict the market is a fool’s errand. I am just trying to pin down all the forecasts made in 2023 for year end 2024 – and it strikes me that even trusted names like Morgan Stanley continually change their forecasts and the earlier ones seem to disappear. Frustrating.
As to the Nasdaq being overstretched – it depends on the way you look at it. Yes, it has gone up a lot over the last year (48%) but if you take your timeline out a bit further then over the last 3 years it has gone up 30% – hardly a stellar rise. Time frames and cherry-picking account for much of what you read in the financial press.
I don’t try to predict – I just follow what is happening and see if there are any parallels with what has panneed before. To me, the stock market (as expressed by indexes, not individual stocks) is just one big mass of people driven by and making decisions based on emotions – and people don’t change.
So I’m betting on people, not the market!
h
I did notice the wrong chart last week but didn’t mail you as I figured everyone else would.
Which apparently is what everyone else thought.
Bob