VOLUME SPIKES GALORE IN SILVER DERIVATIVES
Interesting that today saw the biggest volume day ever in the ZSL.
ZSL is the ultrashort, leveraged ETF on silver. It has gone from 50 to 20 in the past couple of months.
SLV, the silver ETF, experienced its second largest volume day ever today.
Charts are below.
In addition, there comes this news article describing a trader betting $1 million on some way out of the money puts for July expiration.
In my past experience, these types of volume anomalies have typically marked, at a minimum, a period of increased volatility where the general trend - in this case uptrend - begins to become much more volatile and treacherous to bulls and bears. I have also seen these types of volume anomalies indicate market tops. I have rarely seen these types of volume anomalies mark continuation patterns for an uptrend.
click on charts to enlarge
Silver Ultrashort ETF
SLV
April 12, 2011
What is your take on trusting volume on ETF’s? After reading your article I went to see what happened to the volume in the futures. In this situation the futures had a large volume day as well – so it was sixes. Would you still think the same if volume on the futures did not have the same big volume?
Thanks in advance!
April 13, 2011
Felix…I’ve never done any comprehensive work with volume on futures to be able to provide you with an accurate answer. My study has focused on stocks and ETFs.
Volume spikes do prove to be worth watching. However, just as with anything else in the markets, there are a unique set of variables for every situation. Some of which completely render the volume spike useless and some of which reinforce its importance.