This chart of stock volumes captures so much of the risk that keeps us up at night regarding equity markets today. Although long-always investment types have been recommending stock allocations throughout the duration of this chart, rational risk-assessing investors have increasingly moved to the sidelines over the past 4 years. Market prices that are built on a few leveraged-hyper-trading-participants are inherently unstable and full of great capital risk.
Consider what the overall falling volume trend means:
• The financial services industry is shrinking;
• Commissions are falling
• Stock picking is being replaced with ETFs;
• Psychology is negative, as Main St is not participating and Mom & Pop have left;
• Active trading is being replaced with passive indexing;
• HFT Algos may spoof millions of phony bids, but they are having a harder time getting executed.