“GAIN and CAPTURE!” market volume is downward

The slope of Volume on the markets has been down for some time now and I’ve mentioned it several times. Market Volume is simply the number of shares trading hands each trading day.  Reduced volume over time is a key symptom of the markets during the Great Depression years. I’m not saying we are in that same type of economic depression but we can and should see very similar symptoms at some point in our history since humanity has a tendency toward recurring cycles.  This being the case, a major downturn extended over time should have a similar effect on the psychology of our citizens as they can afford less and will take fewer risks out of fear.  I’m also not saying to avoid investment opportunities. 

It would be easy to dismiss the volume downtrend of the markets by simply saying “Of course it’s down, since the markets are doing poorly.  It’ll come back when the markets start going up again”.  The problem is the only other measurable and extended time in our market history which shows such a loss of interest, is during the Great Depression.  This being the case, we should pay close attention to risk, especially Time Risk.  If you invest in a poorly performing market which has an extended loss of interest, it only makes since that the longer you are in, the greater your losses or underperformance can be.  Maybe this is why we see so many people abandoning the idea of holding positions indefinitely.  And, unfortunately, many already abandoned the strategies associated with more advance investing, like options strategies.  In a market this short, it may be that only advanced strategies have any real chance of producing reasonable returns for the risk taken.  This would be in the form of good old-fashioned trading, hedging, and very picky stock selection.  Back to the good old days of smart investing outperforming buy and hold.  Maybe we should call this advanced strategy platform “Gain and Capture”.