April 24, 2019 Market Update

On 4/23/19 the U.S. stock market closed at the highest level since 9/20/18,  and within 1% of the all-time high set on 9/21/18.


Looking at the current bullish performance of the U.S. stock market, you might be tempted to assume that everything is rosy, without a worry in the world. Fight that temptation.


No matter how well things are going, good advisors always find something to worry about. That’s what makes them good advisors. They look for the potential dangers, but they don’t overreact to them until they turn from potential dangers to imminent dangers.


So what am I worried about now?  Several things, but today I want to highlight trading volume.


Yesterday, the market experienced its lowest level of trading volume for 2019 with only 5,903,570,396 shares traded.


While this may seem like a large number, it is 11% lower than the April month-to-date average of 6,617,461,763 shares traded and a full 46% lower than the 10,923,533,197 shares traded on March 15 – the highest daily amount so far for 2019.


Low volume is concerning during up-trends because it makes me wonder if there is as much bullish support as it appears from the price of the S&P500 Index.


When trading volume is high during an uptrend, it tells you that everyone has bought into the bullish narrative and is likely going to continue buying. Conversely, when trading volume is low during an uptrend, it leaves open the possibility that some investors haven’t bought in to the bullishness and are either sitting on their cash or putting it into other more conservative investments and that more investors could do the same.


As you can see in the chart below, daily volume has been trending lower for the since early February (with the exception of March 15) as the S&P 500 has been climbing.


This is worrisome as it is possible many investors are going to start selling and taking profits off the table once the S&P 500 climbs back to its all-time high of 2,940.91.  That is what happened late last September, which led to an almost 20% decline in the 4th quarter of 2018.


This declining trend in trading volume is one of the concerns I have, and why I have been in a neutral position with some extra cash and conservative investments over the last couple of months.




It’s still too early to really fret over lower trading volume at the moment, but I will be watching to see what happens when the S&P 500 hits resistance at the all-time high. If resistance holds and trading volume picks up, it may be time to protect some profits.


Source:  Investopedia Chart Advisors


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