Notorious market timer Joe Granville predicted a 50% market plunge yesterday on Bloomberg Television: Joseph Granville, whose âsell everythingâ call in 1981 sparked a decline in U.S. stocks, said the Dow Jones Industrial Average (INDU) will drop toward 8,000 this year because of waning momentum and volume. âVolume precedes prices,â Granville, 88, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for about 50 years, said in an interview on âStreet Smartâ on Bloomberg Television. âYou are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected.â Read more: http://www.businessinsider.com/noto...ille-predicts-a-50-crash-2012-1#ixzz1nRY3EkUW So considering how bad Joe has been as a market timer does that mean the market will now have an extended bull run? Or will he finally be right. And what's WITH this low volume? Especially the Q's?
I didn't know Joe Granville was still alive. I love the way his 1981 call is reported here: "whose 1981 call 'sell everything' triggered a market decline"! His bearish 1981 call remains in history as the epitome of failure: it preceded a 20-year roaring bull market of historic proportion. Yet media tell you now with a straight face it "triggered a market decline". Yeah, a 2 day market decline followed by a 7000 days bull ride. Goes to show that in markets, talking heads always get a second chance, they just have to sit out the audience and come back with the same advice over and over again, it will sell. Sucker's born every minute. Joe G just had to wait for 30 years, but guess what? he's back. I'm not surprised, only amazed by his age (88!) and mostly the fact that he does get an audience. Keep up the good work, Joe: I'm going to load up on stocks on Monday, your advice is priceless, only in reverse.
I am not like lots of people that know what volume is doing min to min, but it does seem that trade vol in most equities is lower. Regardless of what Joe did in the past - 1. Does the data support that for most equities trade volume is trending down? 2. Do you think that consistently lower volume forebodes of a move in the opposite direction? 3. Care to venture a guess on the relationship between change in vol vs. change in price e.g. 10% decrease in volume - 5% change in price?
Makes sense to me. Low volume means fewer and fewer market participants. (Hope we have no problems agreeing on this statement?) In a bull market, it means fewer bulls are buying=nearing the top. In a bear market, it means fewer bears are selling=nearing the bottom. Unfortunate to the bulls, this low volume occurs in a bull run. That means you can't find many bulls to put their money into the market. It takes only some bulls to start taking profits and then a reversal will occur. Another possibility is that the bulls are taking a rest before lanuching another leg of bullrun. But we have to take a look at the fundamentals to see if it is true. If Europe is going into a recession, triggering a global slow down, we can't be sure this is merely a rest taken by the bulls. More likely, a down trend will soon begin.
Given the share of HFT in total volume, I tend to think that volume changes are way less relevant than when Good Ole Joe was basking in his glory. It's not like all trades reflect a commitment to hold the stock until retirement. Due to the share of HFT, I'm sure the average holding period is like a minute or so. Therefore I think volume stats don't tell a compelling story anymore.
While the declining volume during a bull run is technically supposed to indicate an end to the run, a visual examination of the weekly SPY over the last three years shows the opposite happening. The bull run of sept '10 to march '11 for example happened on decreasing volume. In march the volume started up just as the market neared the top for the year, and of course in August the market plummeted. We are only now back those march '11 levels. So my take, FWIW, is that until we see increasing volume indicating some resistance, most likely this run will continue.
Low volume = reversal??? Low volume means that volume will eventually be greater and probably nobody really knows which way price will go... I remember Granville on his TV show way back in the day, he'd blather on about something then he'd say "I'm Joe Granville and you heard it here first" or something like that.. he has a name that is very easy to recall and he reinforced the name recognition thingy.. I think he invented On Balance Volume or something, I've never found a use for it..
Volume has been much higher than in the 2003-2007 bull run. I do not see why he thinks volume is lower. Can anyone else see lower volume on the charts?
Yes you're right. Looking at the SPY. The volume over the last five years is much higher than the volume of the previous five which was a long bull run. But the end of the run in the middle of 07 came with a sudden increase in volume, giving credence to the idea that the end of bull runs see increased volume. The higher volume over the last five is a result of the 07 08 crash and shows the battle that has resulted ever since from that upset. I suspect comparing volume changes over ten year periods is not very helpful, but over two year spans may have more predictive value. Bottom line, I think Granville is, once again, an interesting sideshow but otherwise once again baseless and useless with his prediction here.