9/10/2012
By David Urani

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As you might recall last month was, frankly, boring. There was a relative lack of game-changing news in the markets, while investors awaited some key decisions from Europe and the world's central banks. Consequentially, volume was startlingly low. With just 23.5 billion shares traded on the NYSE in August, it was the lowest reading since they began compiling the data in 2004. Yet, the slow newsflow only exacerbated a clear trend of declining volumes in the markets. Over the last four years, volumes have been down consistently, and at a fast pace.

And what's also notable is that volumes are materially higher on down days. For instance last August, when the market collapsed under the European crisis, saw the highest volumes in the last two years and three months. Subsequently, volumes this August were down 54% from a year ago. And so far this year, the month with the highest volume was in May, which also saw a big dive.

Surely most of the decline in volumes is a downsizing in institutional trading, not helped at all by the wave of new regulations on the financial industry. But as advisors for retail investors, we can say that the public really does seem to echo the same ambivalence to the market, along with a sense of fear that the world is in peril, and that investing in it is a lost cause.

Yet, what's particularly interesting is the fact that the S&P 500 is up approximately 19% since the end of last August. So in a sense, investors pulled out in droves from a major money-making opportunity. The fact is, the markets are at 4-year highs, having finally broken through the barrier last week. But its almost like nobody is even aware of it. And those who are aware really don't seem to be convinced that it deserves to be here.

We'll admit just as much as the next guy that there are huge hurdles facing this market. But the idea is, by the time most people finally decide that the coast is clear the bulk of the money has already been made.

David Urani
Wall Street Strategies