Friday, October 31, 2008

Two Perspectives on Recent Stock Market Activity

I recently posted on the topic of record volatility in the stock market. Volume and volatility tend to be highly correlated; it takes the participation of large institutions to move markets. As we can see from the top chart, depicting the S&P 500 ETF (SPY; blue line) and the 20-day moving average of volume in SPY (pink line), volume has also greatly expanded with the recent decline and bounce back.

Meanwhile, we continue to see a bid underneath this market, as the Cumulative NYSE TICK line moves to new highs. For an explanation of the recent divergences between the TICK line and price during the market bottoming, check out this post.