Sunday, April 22, 2007

Looking behind the headline number.

Here's a good example of the power that acrues the minute that we begin to look behind the headline number and see what other factors might bear on the meaning of what we are seeing.

The Big Picture Watching Trading Volume Fade . . .

In this case, insteaed of just looking at the S&P 500, Barry Ritholtz points us to a Michael Kahn Barron's article where he takes a look at the volume as well and discovers some interesting patterns.

What other factors might be worth adding into the mix and giving us even more depth of understanding of the basic workings of this important headline financial indicator?

For example, it would be interesting to see what percentage of the S & P volume was NEW short sales and what percentage of the volulme was Covering Purchases for previous short sales.

It might also be worthwhile to look at the average number of shares per trade which might give a clue into what percentage of the volulme was due to large financial instituions and what part was coming from the "little guy."

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