S&P 500 Trading Volume: A Black Hole Around Fed Minutes

S&P 500 trading volume slipped into a black hole ahead of Wednesday‘s FOMC meeting minutes as traders saw little cause to weather the event risk. April alone has delivered 5 of the index’s 6 lowest volume trading sessions, and volumes moving average has slipped to its lowest level since late September 2018.

S&P 500 Price Chart: Daily Time Frame (September 2018 - April 2019) (Chart 1)

Similarly, the indexs average true range has fallen alongside volume. That said, traders are oft reluctant to risk exposure during Fed meetings. In the following days of an event, average volume is frequently heightened, and the highs are astronomical – suggesting traders are coping with a notably revised policy outlook.

S&P Trading Volume and the Fed (Chart 2)

Data compiled from Bloomberg

Despite Thursdays sparse economic calendar, volume should pick up – albeit not to the same degree given the uneventful minutes release. With event risk in the rear-view, traders can look to the future and position for earnings season and the implications from an announcement from US Treasury Secretary Steven Mnuchin on trade war progress.

S&P 500 Price Chart: 1 – Hour Time Frame (March 24 – April 10) (Chart 3)

As for the technical perspective of the index, it trades narrowly beneath trendline resistance from late December. Although the line has been subject to breaks, it continues to influence price action. Conversely, the S&P 500 has horizontal trendline support from the high of February 2018 beneath it at 2875. With earnings on the horizon, IG clients have only increased their short exposure.

Retail trader data shows 24.8% of traders are net-long with the ratio of traders short to long at 3.04 to 1. Since we typically take a contrarian view to crowd sentiment, the fact that retail traders are overwhelmingly short suggests the S&P 500 may continue its recent trend.