3 replies to this topic

[DonBart]

Time to debunk some more volume myths.

Speaking of debunking though reminds me of a Seinfeld episode:

"Jerry: I thought the whole dream of <low trading volume being bearish> was debunked.

Elaine: No, it's not debunked, it's totally bunk.

Jerry: Isn't bunk bad? Like, that's a lot of bunk.

George: No something is bunk and then you debunk it.

Jerry: What?

Elaine: Huh?"



Anyway, where was I?... Yeah that's right volume.

Here's a link to a good article from Mark Hulbert debunking the myth that low volume in Summer months is a bearish omen.

excerpt:

"trading volume's relationship to the market's subsequent returns is - to the extent that it even exists in a statistically significant way - is very complex.
Consider a simple statistical model that I tried to construct relating trading volume to the stock market's return over the subsequent one-, three-, six- and 12-month periods. Try as I might, I was unable to come up with any model that explained more than 2 percent of those returns.
The bottom line: You may or may not want to be bearish right now. But, regardless, you should not be deciding on the basis of August's low trading volume."

read more at this link:

http://www.marketwat...r...tw&dist=nbc

Don

[OEXCHAOS]

Worthless study. Want to know why? no context. Further, simple methodology he could quickly whip up a study on would be largely exploited away by programmers and AI guys. We have several here. Meanwhile, I'm short right now for our Premium Service from just off the highs yesterday largely based upon volume. We're at first minimum target. I suspect that we'll get down to ES 153200 before this pullback is over. We'll see how the volume looks. Mark

[thespookyone]

HMMMM. So now he is debunking the "go away in May" theory-funny, in a $$$ trading sense-that has worked pretty well over time. Maybe if you could eliminate the trading and money variables-he'd be right

[sam]

Time to debunk some more volume myths.

Here's a link to a good article from Mark Hulbert debunking the myth that low volume in Summer months is a bearish omen.

excerpt:

"trading volume's relationship to the market's subsequent returns is - to the extent that it even exists in a statistically significant way - is very complex.
Consider a simple statistical model that I tried to construct relating trading volume to the stock market's return over the subsequent one-, three-, six- and 12-month periods. Try as I might, I was unable to come up with any model that explained more than 2 percent of those returns.
The bottom line: You may or may not want to be bearish right now. But, regardless, you should not be deciding on the basis of August's low trading volume."

read more at this link:

http://www.marketwat...r...tw&dist=nbc

Don

"Hahaha, yer funny. I like that in comedians."

Oh yeah, where was I? No, seriously, I think you're missing the point, which is.......What's your time frame? I don't think anyone here is saying that just because people take vacations every August that THAT is proof of a Bear Market in the way. That would be silly. But in shorter time frames, volume can be very indicative of ST moves. OEX (i think) is trading on 5 minute volume and had been darn effective. If you're trading on MONTHLY volume, you're not trading, you're investing.

no ones saying that volume isn't important, not even Hulbert.

This isn't to say that volume is unimportant. - By Mark Hulbert, Sep 1, 2004

He's just saying you have to use more than monthly volume as an indicator. as he wrote:

The bottom line: You may or may not want to be bearish right now. But, regardless, you should not be deciding on the basis of August's low trading volume.- By Mark Hulbert, Sep 1, 2004

I think that's ALL he's saying. And by the way, that's 3 years old.