CNNMoney is the latest media outlet to acknowledge the fact that trading volume is light. In their estimation, it is at a five-year low. There could be several reasons for this. The most obvious is that it is summer and many buyers and sellers, both individual and institutional, are away.
The explanation probably goes deeper than that. The most convincing argument is that individual investors have watched the initial public offerings and insider selling debacles at Facebook Inc. (NASDAQ: FB). These same people have witnessed what were considered premier IPOs, like Groupon Inc. (NASDAQ: GRPN), unravel. According to CNN:
What’s more, the unusually low volume comes as stocks trade near four-year highs, raising concern that the recent move higher lacks conviction, and it’s just a matter of time before markets are mired in a sell-off.
It is always just a matter of time before a sell-off. But, as the harsh economic news that is likely to come out for the balance of the year is released, volume will have nothing to do with it.
Douglas A. McIntyre
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