In the following two charts NYSE (since 1965) and NASDAQ (since 1978) volume has been plotted with the current year overlaid. The lines are calculated by taking difference between the volume for each trading day and the average daily volume for the year. If a trading day has been historically heavier than the average for the year, than it is above the zero line, if it has been a light trading day historically, it falls below. Due to sizable day-to-day variations in volume, a two period exponential moving average has been applied to smooth the numerous spikes (up and down) that exist in the raw data revealing the underlying trend.
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Note the yellow shaded box in each chart. This is the peak of the summer doldrums. Beginning in late July or early August, trading begins to decline as more and more traders and investors depart from air conditioned offices in favor of beaches, back yards and beyond. As a result of this lack of participation, trading in August is often uninspired producing either a fractional average gain or a modest average loss depending upon index and time-frame chosen.
Written By: Christopher Mistal