Bull Market in Apathy

This doesn’t "prove" anything about so-called Hampton’s volatility. I’d always rather assume coincidence first and see some evidence before declaring causality.

But it’s pretty demonstrable volatility was lousy in August as this graph of SPY 10 Day historical vol. over the last half year shows . And it has pretty-much underperformed all year for that matter. And that has coincided with low volume in the market. This from Dr. Brett.

Liquidity Drying Up – I see that Rennie Yang, author of the excellent Market Tells service, observes that 20-day volume in the stock market has made a seven-year low. "Once in 2004 and a couple of times in the 70’s NYSE volume hit a three-year low," he observes, "but this is the first time in the last fifty years we’ve seen it hit a 5-year+ low. Volume is not just low, it’s really low."

Many factors have led to kind of punk volatility in a year where we should have seen more. The constant offset between financial and energy probably is the biggest one. But the apathy associated with decreasing volume certainly plays some role as that same apathy dissuades options buying on the margins.

There’s also a directional aspect to this, as Dr. Brett adds.

Of course, it’s not just that volume is low; it’s that we are seeing reduced volume following a bounce from the mid-July lows. If you think in Market Profile terms, this means that higher prices are failing to attract participation–not something you’d expect to see if this were a fresh bull market leg.