Tuesday, May 22, 2007

Buying Panic Among SPY Traders?

SPY Traders Are Jumping Into This Market. Monday's rise took the S&P 500 Index to a new all-time high. As we can see from the chart above, the recent market rise has been accompanied by quite a spike in the ratio of volume of the S&P 500 Index ETF (SPY) to NYSE Volume.

In the recent past, spikes in SPY volume relative to general market volume have occurred at market lows as a function of panicky selling. To that degree, SPY traders as a whole have not looked like smart money; spikes in their participation have been a contrary indicator. This was particularly evident during the market weakness of late February/early March.

This is the first time I can recall during the bull market when we've had an elevated ratio of SPY:NYSE Volume on a market rise. It invites the perception that, just as SPY traders panicked on the downside during the Feb./Mar. weakness, they are now panicking to the upside, eager to get into a market making fresh all-time highs.

I'm watching closely to see if this, too, proves a contrary indication of sentiment.


NASDAQ Volume as a Sentiment Measure

Equity Option Volume and Sentiment

Mutual Fund Sentiment


T. said...

Thanks for continuing to provide excellent points for thought. You never cease to impress me with your prolific work and thoughts.

T. (also Dr. ;-)

Luke said...

What values did you use for the SPY:NYSE volume? I never see the ratio going over .50 and yet you get values by 0.8?

Chisoccer said...

Hey Brett

I like the indepth blogs. You leave definite work to back up your thoughts. I was brought to your site by 247wallstreet. I have a site (www.wikiwealth.blogspot.com) that I have started on my personal investing/trading. I would always like some comments Keep up the good work.

Brett Steenbarger, Ph.D. said...

Thanks much, Dr. T. I appreciate the feedback quite a bit--


Brett Steenbarger, Ph.D. said...

Hi Luke,

My bad, here; I should have clarified. The data come from Pinnacle Data; SPY data lops off the last 2 zeros and NYSE lops off the last 3. So the relative ratios are the same, but should read with an extra zero. Thanks for pointing out--


Brett Steenbarger, Ph.D. said...

Thanks for the note and the link, ChiSoccer. Best of luck with the blog!


Yaser Anwar said...


Just to confirm- You've taken daily ending volume SPY ETF divided by NYSE Volume (pink) and plotted it against the SPY market's total volume right (blue)?

Thank you!

Brett Steenbarger, Ph.D. said...

Hi Yaser,

Sorry for the confusion. The blue line is a daily price chart for SPY; the pink line is the ratio of SPY volume to NYSE volume.