Key insights
- The article highlights a divergence between the SPY's price action (new all-time highs) and trading volume, which is significantly lower than in Q1 2024. This divergence raises concerns about the sustainability of the rally and suggests potentially weakening market breadth and conviction. Low volume rallies can be followed by sharp corrections.
I've been staring at the SPY chart and noticed something that doesn't sit right. Since the March 30 trough, SPY hasn't just recovered.
It was in fact 18% above the trough and 8% higher than the old high.
But volume tells a completely different story.
Average daily volume since the trough is 53.8M shares, compared to 88.3M in Q1.
That's a 39% drop. It dropped fast and has flatlined around 48M, roughly half the Q1 average.
So what's going on?
EDITs:
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The numbers are for SPY only. I did check across major S&P500 indexed ETFs (SPY+VOO+IVV+SPLG), in aggregate the total volume did drop 38% post the March trough. Same story as SPY. So looking at SPY seems sufficient.
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SPY volume by year below. 2024 saw low volume but had a great run. So low volume is not be bad necessarily according to history. BTW, has SPY volume been trending down since 2020?
● 2020: 100.4M (avg daily volume), +17.2% (return)
● 2021: 73.8M, +30.5%
● 2022: 94.8M, -18.6%
● 2023: 81.9M, +26.7%
● 2024: 57.4M, +25.6%
● 2025: 72.4M, +18.0%