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Posts Tagged ‘market volume’

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

HFTCourtesy of Tyler Durden at Zero Hedge 

For those who follow our periodic updates on intraday stock volume, today’s article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete.

Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine "price discovery."

From the WSJ:

On the day the "flash crash" bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.

Rick Oscher and Steven Rubinstein weren’t playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor "specialist" traders started in 2008, is mostly active at the stock market’s open and close.

In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children’s schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi’s pizza.

"We actually planned on working a full day," says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. "But from 11 to 2, the markets are pretty quiet—what’s the point? As a specialist, you have to stand in your spot all day and we did that for 20 years."

Briargate—an anagram of "arbitrage"—isn’t the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the


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The Eerie Implications of Market Volume and Mutual Fund Flows

The Eerie Implications of Market Volume and Mutual Fund Flows 

Courtesy of Doug Short 

Once upon a time, market volume, in combination with price, was a useful indicator. Or make that indicators (plural), including Rate of Change, Volume Oscillator, On Balance Volume, Price and Volume Trend, Accumulation Distribution, Chaikin Oscillator, Money Flow Indicator, etc.

Even so, S&P 500 volume has been falling since early May with no sign yet of a post-summer seasonal increase. Of course, we’re still in the holiday shortened week following Labor Day. But look at the 2009 volume pattern on the chart. Where was the volume to confirm the market advance after a choppy October?

A recent WSJ article, SEC Is Looking at ‘Quote Stuffing’, mentioned in passing that high-frequency trading (HFT) accounts for about two-thirds of the market’s volume. 

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I don’t know of a single comprehensive guide to what the retail investor is really up to, but the impression I get is that the equities are not high on the list of where to park money. The next two charts, covering the same timeframe, are based on data in a PDF file I downloaded from the Investment Company Institute. Since the chart above is a broad U.S. Index, the first chart below only measures fund flows for domestic equities. 

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Naturally these charts are open to various interpretations. Bond Bubble Cassandras will see the last chart as a confirmation of their prophecy. Cheerleaders of ETFs and other alternatives to mutual funds may be inclined to disregard both fund-flow charts as largely irrelevant.

I used the wood "eerie" in the title to this piece primarily to convey my impression of a vague sense of disquiet about markets and the economy. Are retail investors sitting on the sidelines or scurrying to bonds because of anxiety about the market? If so, should we take this as a contrary indicator?

Here’s a more compelling question: If two-thirds or more of daily volume is a function of high-frequency trading, what are the implications for index prices over the long haul?

A year has passed since I posted some charts illustrating the incredible ratio of S&P 500 volume devoted to five financial stocks (see Gaming the Market). Today’s game is no doubt different…
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The Other 44 Percent Is Really Bernanke’s Jerk Off Hand

Why is market volume so low? Jr. Dep. has an interesting analogy. In theory, 56% of the volume is controlled by Bots, and the other 44% is Bernanke alone (but read the CNBC article for a contrary view). – Ilene  

The Other 44 Percent Is Really Bernanke’s Jerk Off Hand

Courtesy of Jr. Deputy Accountant 

As I already clearly stated, there are no investors left, just HFT robots getting jerked off by the Fed. If I wanted to see that I’d cash my paycheck in dollar bills and head to the Lusty Lady.

CNBC, however, needs to point out that volume is light. Don’t worry, that recovery should be here any day now, just keep jerking…

CNBC:

Volume was lighter than normal for August, and so far it is also lighter than normal for September. How much lighter? In the first 5 trading days, September consolidated trading volume at the NYSE was down 31 percent compared to the same period last year. August volume was also 31 percent below the same period last year.

Why? Look at who does the trading:

1 ) High frequency traders are 56 percent of all trades. This includes proprietary trading shops, market makers, and high-frequency trading hedge funds, according to Tabb Group. But as volume and volatility drops, this group gets less opportunity to profit from the statistical arbitrage trades most of them do.

You can almost hear the fapfapfap every time you look at a damn chart, careful not to get any in your eye. 


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S&P VOLUME IS RISING – WHAT IS THIS TELLING US?

S&P VOLUME IS RISING – WHAT IS THIS TELLING US?

Courtesy of The Pragmatic Capitalist

By Data Diary:

It’s been notable that volume has been stepping higher on the S&P500:

SnP500 price and volume 400x252 S&P VOLUME IS RISING   WHAT IS THIS TELLING US?

Volume peaks tend to be associated with short to medium bottoms in the index.  Similarly, troughs in volume often signal some kind of top.  Or course this relationship doesn’t always hold – a wicked example being that 2008 price avalanche where volume peaked around 8bn shares per day and then thrashed around below that level until the March 2009 floor was eventually reached.

Still is there some significance to the recent rise in activity?  Some thoughts for your consideration…

1) It’s a ‘reversion to mean’ volume – While it’s incredible (and clearly unsustainable) that volume increased over 20% per annum since the beginning of 2004, the question remains what is the underlying trend in daily volume.  On a trend basis we may still be south of that level.

2) Buy the dip – the risk compression trade is alive and well and about to enter it’s next phase.  This would have more credibility in my book if risk appetite had also blown out already.  It hasn’t.

VIX Credit spreads1 400x247 S&P VOLUME IS RISING   WHAT IS THIS TELLING US?

Credit spreads in Europe may have dissolved in a gelatinous mess, but the US credit markets remain blase about this state of affairs.  Similarly, the VIX has sprung to life but not nearly enough to signal that we are in a renewed bout of risk aversion. The relative calm can be seen a little more clearly via our risk appetite index:

Risk appetite index1 400x246 S&P VOLUME IS RISING   WHAT IS THIS TELLING US?

As an indicator, we would normally expect the index to have dipped towards -2% before the ‘panic’ volume spike was upon us.

3) Risk aversion is on the rise  - My best guess is that the rising volume is part of a change in trend – that’s it’s more likely to represent distribution than accumulation.  Witness the Merrill Lynch hedge fund position report (via Market Folly) suggesting that funds have been reducing their equity exposure. If this is the case, then it’s likely that there are a few even higher volume days in the wings. 

 


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S&P 500 Rebound Continues to Defy Trends

S&P 500 Rebound Continues to Defy Trends

Courtesy of Trader Mark at Fund My Mutual Fund 

There used to be a saying that markets fall much faster than they rise. Like many things the past year, historical trends such as that truism have been blown out of the water.

The S&P 500 is now up 7% in 3 weeks (the Russell 2000 is doing even better) and continues to steamroll anyone who stands in its way. The 8% correction in late January to mid February? Similary, it took 3 weeks. (Click to enlarge)

Our "ups" now happen as quickly as our "downs"… and yet again (a broken record) with little volume to show for it on the upswing. You can see that on the bars at the bottom of the chart, the only days the liquidity flood can be contained (selloffs) are on heavy volume days. Almost all lighter volume days mean sideways or upside action.

The beat goes on; another V-shaped, light volume rally to mimic those of 2009. Anyone using traditional technical analysis (use of volume) continues to look the fool. 


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Google – There And Back Again… In Half The Time

Google – There And Back Again… In Half The Time

Courtesy of Tyler Durden at Zero Hedge

A peculiar side-effect of the current low-volume rise market dynamic can be seen by the curious price (and volume) action in investing public darling Google. When the market was climbing in the low volume days since November, the stock grew from $531 to a peak of $626 in 42 days, on average volume of 2.02 million shares per day. Then, when the selling started, the volume picked up by more than 100%, with daily average volume of 4.7 million shares, while the decline in the stock to the onset price of $531 took less than half the time, or 19 days. Such are the vagaries of the VWAP unwind, as algorithms seek to reverse to a longer and longer mean. Google demonstrates very accurately what would happen to the stock market should there be a real, exogenous selling catalyst. Now consider that the S&P’s VWAP since the March lows is around the 950 level. If the market is unable to sustain the most recent relief rally, and if this is coupled with geopolitical news or a default the PIIGS or some other unpredictable event, expect a very prompt but highly doable correction. If the market volume doubled and the time of decline was cut in half relative to the rise, consider what would happen if all mutual funds suddenly switched from a buying to a selling posture… And what this would mean for the final closing level on the S&P of that particular D-Day.

 

 


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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Chart School

Philly Fed Business Outlook: Highest Six-Month Outlook in 22 Years

Courtesy of Doug Short.

Note from Doug: Having lived for two wonderful years in Paoli, PA, a suburb west of Philadelphia just south of Valley Forge, I have a special interest in this regional indicator. But, more importantly, it gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.

The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. The latest gauge of General Activity came in at 28.0, an increase from last month's 23.9. The 3-month moving average came in at 23.2, up from 19.0 last month. Since this is a diffusion index...



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Zero Hedge

Ebola Patient Dr. Kent Brantly Leaves Hospital - Live Feed

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

After 19 days in isolation, the Fort Worth doctor who became infected with the Ebola virus while serving as a missionary in Africa will be released from an Atlanta hospital later today, the hospital announced early Thursday. As NBC reports, Dr. Kent Brantly is scheduled to make a brief statement to reporters Thursday morning before leaving to spend time with his family at an undisclosed location, the hospital said. Fellow missionary Nancy Writebol, who also became ill with Ebola while working in Li...



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Phil's Favorites

Japan PMI "Strongest Since March": Does That Mean "Strong"?

Courtesy of Mish.

The spin in media reporting, in both directions (but typically bullish), is pervasive.

Here is a case in point. Markit reports Japan PMI Points to Strongest Manufacturing Expansion Since March.

Does "strongest since March" mean "strong"?

Here are the Key Points:

  • Flash Japan Manufacturing PMI™ at 52.4 (50.5 in July). Modest improvement in growth registered in August.
  • Flash Japan Manufacturing Output Index at 53.2 (49.8 in July). Output increased at solid pace.

A few charts will put this into perspective.

...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Option Review

Elizabeth Arden Put Option Activity Revisited

It’s an ugly day for investors in Elizabeth Arden, with shares in the name losing roughly one-quarter of its value overnight after the retailer of beauty products and fragrances reported a wider than expected loss and sales that were lower than analysts anticipated. Shares in the name are down more than 23% in the final hour of trading to stand at $14.95.

On Friday of last week we wrote a short note about put option activity on the stock...



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Sabrient

Sector Detector: Bullish investors jockey for position as if the correction is over

Courtesy of Sabrient Systems and Gradient Analytics

As many investors enjoy the final weeks of summer, some optimistic bulls seem to be positioning themselves well ahead of Labor Day in anticipation of a fall rally. Indeed, last week’s action was impressive. After only a mere 4% correction, investors continued to brush off the disturbing violence both at home and abroad, and they took the minor pullback as their next buying opportunity. But was that really all the pullback we’re going to get this year? I doubt it. But I also believe that nothing short of a major Black Swan event can send this market into a deep correction.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then ...



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OpTrader

Swing trading portfolio - week of August 18th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

The Stock World Weekly Newsletter is ready to go! View it here: Stock World Weekly. Just put in your user name and password, or take a free trial. 

 

#120692880 / gettyimages.com ...

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Market Shadows

Helen Davis Chaitman Reviews In Bed with Wall Street.

Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews In Bed with Wall Street. 

By Helen Davis Chaitman   

I confess: Larry D...



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Digital Currencies

BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Courtesy of Reggie Middleton.

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent ...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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