Big Stock Gains Often Come With Low Volume

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NYSE trader

January was the market's best month in over a decade as both the S&P 500 and Dow Industrials posted their strongest start to the new year since 1997.

However, these gains came on the back of considerably light volume.

The New York Stock Exchange’s average daily floor volume in January was only roughly 810 million shares—the lowest since September 1999, when about 780 million shares changed hands daily.

NYSE total volume, in addition to floor volume, has trailed since the start of 2011, with January volume down almost 19 percent, or one billion shares, from a year ago. And January typically sees strong volume.

Additionally, floor volume has been steadily falling every month since August, when the volatility index soared to a high of 48. (Higher volatility typically yields greater volume as high frequency traders execute more trades.)

Last year, NYSE total volume was lowest in December and May—the latter month being when all three major indices were at their highs.

Could this signal a trend—large gains when volume is low?

Over the past 15 years, NYSE average daily floor volume has stayed above one billion shares for each month from September 2000 through December 2010. However, for each month from January 1997 through December 1999, floor volume fell short of a billion shares.

Lowest floor volume in the past 15 years was recorded in March, April and May of 1997 when about less than 500 million shares traded daily. That was the year and the last time the S&P 500 and Dow Industrials made a better January debut.

bythenumbers.cnbc.com