Chart of the Day - Wednesday, August 19th, 2020

In fact, $SPY volume over the past 5 days has never been lower, even during holiday weeks. Volume always spikes into sell off lows; arguably, it starts to rise into highs, too (lower panel) pic.twitter.com/28l95L2WDf

— ukarlewitz (@ukarlewitz) August 19, 2020

Today’s Chart of the Day was shared on Twitter by Urban Carmel (@ukarlewitz). The market has been extremely quiet lately in terms of volume, despite the recent breakout to record highs. Urban points out that the 5-day rolling average of volume on $SPY has never been this low, even during holiday weeks. Some would argue that this is bearish because you want to see high volume confirming a breakout. We would argue that volume isn't very useful anymore in today's world of dark pools and high-frequency trading. Also, it's quite common to see low volume in the late-summer months like this. Urban shows that low volume, on its own, isn't necessarily bearish. If anything volume often rises along with price into market tops rather than falling like it is now. In a comment to The Chart Report, Urban said, "volume is highest during periods of stress: participants get bullish at different rates but panic all at once." The bottom line here? Low volume ≠ market top, and as long as price stays above the February highs the risk is to the upside.