Volume Speaks Volumes

The volume on SPY, the exchange-traded fund that tracks the S&P 500, speaks volumes about today's Eurozone-inspired drop in the markets.

The question is, how seriously should I take this air pocket? I've spilled a bit of coffee on the folding table and the pilot turned on the seat-belt sign. But how serious is it really? Am I heading for a crash?

Short story even shorter:

Today's volume, Dec. 28, on SPY was 115 million shares plus change.

Last Wednesday, Dec. 21, also a pre-holiday week, 194 million shares.

The Wednesday before that, Dec. 14, nearly 239 million shares.

And the first Wednesday of the month, Dec. 7, nearly 238 million shares.

Today's volume was 48% of the month's peak Wednesday volume.

Based on volume alone, I don't take the decline that seriously. It represents the trading opinion of a far smaller portion of the market than is usually the case. (And probably a higher proportion of them are trading robots, since algorithms don't take lengthy holiday vacations.)

So I don't think my metaphorical flight is heading for a crash. I fasten my seat belt, grab a napkin to mop up the coffee spill, and return to the deep treatise on economics that I'm reading on my Kindle.

No big deal.

But do I ignore today's air pocket?

Absolutely not, no more than I would ignore the coffee spill or the seat-belt sign on my flight to the beaches of Bali.

I've bought some out-of-the-money put options, with deltas under 20, as insurance for my bull positions: Covered calls and bond exchange-traded funds.

They don't cost much, and they will provide a parachute for at least some of my holdings should the Eurozone air pocket indeed prove to be the start of a crash.