Hedgeye CEO Keith McCullough wrote about the lack of recent buying conviction in today’s Morning Newsletter and has argued that volume matters because “stocks are making lower-highs versus the all-time-bubble highs; it’s extreme price versus volume divergences (from unprecedented prices).”
But we wanted your opinion in today’s poll: Does volume matter?
At the time of this post, the heavy majority went toward 70% voting YES; 30% responding NO.
As one YES voter explained, “It matters because it shows lack of participation by the broader market players. The broader market is likely positioned for a downside move and waiting for that catalyst can be painful and expensive.”
Other noteworthy YES comments included:
- “Only in the very immediate term. Having been in secular decline, volume has held a near-perfect inverse correlation to the equity market over the past 5+ years. Better said, stocks pretty much only go up when volume is falling over longer durations.”
- “Volume is only one of the many components that should be considered in gauging market up vs down days. Price action, VIX, sector rotations, bonds, currency action(s) are other major components. Albeit for this poll; Yes, volume does matter.”
- “More importantly, [Dennis] Gartman is now Long of equities in equity terms. Combine all factors and you get a major warning signal.”
Over in the NO group, however, one responder explained that volume “only matters if you’re on the wrong side of the trade,” while another believed volume “hasn't mattered for five years since the current rally began.”
Though one NO voter acknowledged that volume has been in secular decline since 2009, they specifically stated that it “will be even under more pressure with the rug being pulled out from HFT.”