As raised in the latest Keiser report, This week there was baited breath in the stockmarket community as the ASX nearly broke the record 5000 barrier (but failed). World wide the markets are in what appears to be a bull run, just 3years since the GFC. But the attached chart (and link) shows a different pattern. Despite the stock market indexes rising, the actual VOLUME of the parcels being traded has been shrinking. The rich are using trading software to perform high-frequency/low volume trades as a cover for the fact that they're really divesting out of the stockmarket. http://charleshughsmith.blogspot.com/ look for the blogg entry..if volume is the weapon of the bull http://charleshughsmith.blogspot.com/2011/04/if-volume-is-weapon-of-bull-then.html
Posted another to home site... having trouble with my computer..got a virus that's screwing with IE and it won't let me reinstall windows :/
have a wee look at this video, a correction is on the horizon http://www.youtube.com/watch?v=TzQ85ECmqGM&feature=related
Well the argument is that declining market participation would logically see prices decline (the white line shows the falling NUMBER of shares listed) but the index is increasing. In the abscence of some unseen intervention, lots of trades backwards and forwards can maintain the index high through high market acivity but with little actual volume. Whaddaya think?
What would happen to the graphs if "the rich" went long on half their holdings them and used the other half in high volume trading? That is, if people are progressively going long with more and more of their holdings and "playing" with the rest in a very volatile market (which no longer needs massive volumes to be "influenced" by traders).
Well I assume in that case with no new shares available and what's available being traded with high frequency, the index and prices would go through the roof. That's why charles hugh smith says ; "Volume is the weapon of the bull", without volume they have no influence over the market. If the smart money dumped their shares in short order, the prices would plummet, but by spreading out their retreat over the past 3 years (at least) under a cover of high market activity, they can minimise their losses before the herd coddles on. the argument is that the Dow Jones, ASX and markets in general aren't in fact doing well... the indices don't make sense and can't be trusted.
But all those shares on issue are still out there somewhere. Whoever owns them is doing nicely since the market is rising, so it would make sense that a large number of them have been taken out of play and the ones remaining have become scarce, hence the steady increase. If I owned a large number of shares, I wouldn't want to bet them all in a rapid-fire, high speed market because the risk of losing a lot of money in a very short space of time is much higher than in a traditional "slow" market. I don't think volume is necessarily as critical as it once was - if you bought well when the market tanked, you'd be happy to sit back and watch it rise on thin volumes while the tech heads have a pissing match over who's got the better computer system.
I can not comprehend how volume doesn't matter and that anyone could promote the idea that stocks can keep rising on an ever deminishing volume of sellers. It's lke saying price has nothing to do with supply or demand - which, if so, woudl be wholey unnatural and an obvious sign prices are not a reflection of value. Which is the surest sign you can have that it is time to cash out and protect what you have. Have a look at the video HiHo posted and you will know it is time to get your money out of the stock market. Equitites are just a rigged game, like housing, that is all juiced up by the central banks of the world, primed to fail when they have totally screwed the savers of everything they have and there is nothing more left to take. . . imo.
I get your point (and I might also be totally wrong), but I still don't understand how rising prices plus lower volumes equates to the rich bailing out of the market. If they were, then there would be a heap of extra shares floating around out there that they've offloaded, but the lower volumes would suggest (to me anyway) that a lot of people are just sitting on their existing holdings and not trading them. One reason I can think of that would explain this is that when the market crashed, it took down a lot of good quality stocks along with all the rubbish. If you bought those good quality stocks at rock bottom prices, you'd be investing for value rather than for making a quick buck by flipping them and you'd just put them aside, collect dividends and wait for the price to rise back to fair value before selling them. That would mean there is a lot of stock out there that isn't in play and that would explain why prices are rising - there is a shortage of stock on the market and prices are being bid up because there is more demand than there is supply. "Its a bull market" or "Its a bear market" only says which way the market is going, not why its behaving that way. If people are sitting on piles of stock, you could call it either a bull or bear market - holding because you expect prices to rise is obviously bullish, or holding because you're too shit-scared to sell and can't find anything better to put your money into would, I guess, be bearish to a degree, but how do prices rise if the market is bearish? You could make a good argument that the rich haven't bailed out at all and are actually doing the opposite - buying in to a rising market in small volumes. Like I said, I could be totally wrong but I don't see how the evidence fits with the Kaiser Report's conclusion.
