Investors need to get over the volume comparisons to bull markets of the past. These comparisons, being relied upon to dictate investment attitude towards the market, have single-handedly been causing investors to either tread lightly or not at all for the entirety of this rally.
There is no scientific explanation for why index volume has been steadily decreasing as this rally has progressed. The absolutists that make up the world of high finance don't seem to want to contend with the fact that markets are in a perpetual stage of change. There is no correct analysis, only the correct analysis of the time. There is no rule that says a rally must come on progressively higher volume, such as what we experienced in the 90s.
To pacify the minds of those who are always searching for the Why? in things, I propose the following list of explanations as to why volume has been steadily decreasing since this rally commenced:
1. ETFs have altered the technical framework of gaining exposure, hedging exposure or outright speculation in the markets. The amount of volume ETFs are attracting by themselves is enough reason to believe that the volume framework for which we are used to as investors will change in this post-crisis world.
2. There isn't enough genuine interest in the markets to cultivate the type of volume increase that comes with true belief in a market. This perpetual state of volume decrease is a testament to how devastating the past decade was to investor sentiment. In speaking to investors on a weekly basis, there isn't one I have come across that isn't skeptical of some or all facets of Wall Street at this point. The distrust is as deeply ingrained in the psyche as the optimistic love bubble that popped in 2000 and was set ablaze in 2008.
Perhaps two reasons is not exactly list, but there are only so many ways to explain a participation based indicator.
In essence, continued utilization of volume as an excuse not be long following years of data suggesting that it doesn't matter is the crutch from which dismissive acts of bearish rebellion are born.
Give it up before the market forces realization.
