THE CASE OF THE DISAPPEARING VOLUME
A truly healthy stock market is one that rises on broad participation from “big money” investors – folks who control pension plans, insurance floats, and large mutual funds. If the “big money” isn’t in the pit and buying shares, it’s impossible for stocks to make meaningful long-term gains.
At the bottom of the chart, you’ll see a series of black and red bars. These bars represent the trading volume of the benchmark S&P 500 index fund. Volume has tailed off drastically as the market has gained. The big money is participating less and less in the market rally these days.
This lack of volume isn’t cause to sell everything and move to cash. But until you see trading volume picking up and large money flowing into the market, the “skeptic’s approach” is the best course of action.