NEW YORK ( TheStreet) -- That the Standard & Poor's 500 Index's move above 2,000 was accompanied by low volume Tuesday may not be as ominous as many believe.
The PowerShares QQQ (QQQ) , SPDR Dow Jones Industrial Average (DIA) and SPDR S&P 500 (SPY) moved to record levels this week on improving U.S. macro-economic data and talk of stimulus in Europe, finally. And this comes despite Russia apparently sending troops into Ukraine.
One cautionary note, however, is that the move of U.S. equities to record highs has come on low volume, perhaps because investors may be reluctant to invest fresh capital at levels where valuations appear to be stretched.
The narrative has been the same for many months now: The economy is improving and corporate results remain steady, but investors are waiting on the sidelines.
The issue of low volume, though, appears to be a structural one. The chart below shows the average monthly volume of the S&P 500 from 1950 to the present day.
Average monthly trading volume in the S&P 500 remained relatively flat from 1950 until the turn of the millennium, when it grew exponentially before peaking in October 2008.
The growth of volume was the result of retail investors. Throughout the bull market of the 1990s and the tech frenzy that accompanied it, retail investors flocked to manage their own money in U.S. markets.
Data provided by Yahoo Finance