Trading slowdown steepest in decades

I don’t usually concern myself with broad economic themes but this graph intrigued me.   The number of shares traded on the major exchanges has begun to slow to a trickle, when compared with past years.  It is not unusual for trading to slow in the summer.  In fact, the volume and number of shares traded generally is less in the summer, as opposed to the beginning of the year.  But this year the trading has been especially slow.

What exactly, then, does this portend?

I suppose you could surmise that we will stay in a tight range of trading for the rest of the summer.  Volume is essential for any move, up or down.   For whatever reason, the general public doesn’t have much of an appetite for the stock market, and this understandable after the last year.  Many people lost large portions of their stock-based assets in the decline late last year and early this year, and there is a general mistrust of the regulation and operations of the equity markets.

Potential investors have also parted with goodly portions of their real estate equity as home prices continue to take a pounding.  Many experts continue to predict continued declines in upper end housing as the housing bubble unwinds the bloated prices of housing.

So maybe the current rally, which has been robust in terms of price gains, is about to take a breather and wait for new money to enter the market.  On the other hand, there are probably large stock gains waiting for profit taking activity.  I don’t make predictions on the direction of the market but some caution for longer term investors would certainly seem to be the order of the day.