|
Faced with the current
confusing batch of economic signals, you
might have expected investors to wait things
out. After all, markets are supposed to
dislike uncertainty. But over the past few
weeks, that hasn’t happened. In fact, quite
the reverse.
One of the interesting features of world stock
markets at present is the buoyant level of trading activity. Volumes
traded on the NYSE, for example, are up 10.3% on a year earlier. ASX
volumes are up 25% on last year’s figures. Even allowing for one or
two special factors - for example, NYSE turnover in Tyco International
has been heavy due to concerns about accounting irregularities - the
overall trend is sharply higher.
This is actually an encouraging sign because it means that investors
are not panicking despite the recent focus on corporate scandals and
economic uncertainties. High trading volumes indicate that investors
don’t agree on the direction of the market. Trades are taking place
because there are plenty of sellers but the lower prices are attracting
buyers. Brokers would describe it as good two-way business.
As long as this continues, share prices are unlikely to plunge suddenly.
The time to worry is when the queue of buyers starts to thin out.
If share prices fall on low volumes, it means that buyers are getting
worried too. And that’s often the prelude to a major market collapse.
On these occasions, even mild selling can cause share prices to crash
because there are so few bid quotes in the market.
|
|
Client Login 
Site Map 
FAQs
