It is shaping up to be a banner month for December volume. On this chart, the vertical black line shows the beginning of December, the red line the end of December (D) and the green line the end of January (J). Over the last three years, there was strong volume in early December (usually the first 2-3 days). In 2002 and 2003, volume soon tapered off and December finished with its normal below average volume performance.
Things are different this year, at least for the first 17 calendar days of the month. Nasdaq volume started strong and continues strong with 12 of the last 13 trading days above 2 billion. The 13-day average is 2.314 billion, which is comfortable above the 2-year average of 1.71 billion shares per day. This kind of high volume was last seen in January 2004, which marked a peak in the index. Perhaps the fund managers are making their move a month early. Also notice that the Nasdaq peaked in the middle of January the last two years. 2003 marked a relatively minor peak and 2004 marked a more significant peak.
So what does it mean? Even though volume has been high the last 13 days, the index has basically traded flat. This amounts to spinning your wheels or burning up a lot of fuel without going anywhere and suggests that a period of correction or consolidation lies ahead.
