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. 

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. 

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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Zero Hedge

11 Dead After 2 Ships Catch Fire In Kerch Strait, One "Struck By A Blast"

Courtesy of ZeroHedge. View original post here.

At least 11 sailors have died after two ships caught fire while moving through the Kerch Strait separating Crimea from mainland Russia  - the location of the latest escalation in tensions between Russia and Ukraine in November - after one of them was apparently rocked by an explosion the Russian Maritime Agency said. One vessel was "allegedly struck by a blast" ...



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Phil's Favorites

Martin Luther King Jr., union man

 

Martin Luther King Jr., union man

Dr. Martin Luther King Jr. on the picket line at the Scripto plant in Atlanta, Ga., December, 1964. AP

Courtesy of Peter Cole, Western Illinois University

If Martin Luther King Jr. still lived, he’d probably tell people to join unions.

King understood racial equality was inextricably linked to economics. He asked, “What good does it do to be able to eat at a lunch counter if you can’t buy a hamburger?”

Those disadvantages have persisted. Tod...



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Chart School

Weekly Market Recap Jan 20, 2019

Courtesy of Blain.

After entering the week quite overbought, indexes took a small retreat Monday before hurling back upwards.  This is typical of the “V” shaped moves up after any significant selloff, we’ve seen most of the past decade and watching them unfurl is quite amazing actually.  Thought maybe this time would be “different” but not so much.  So two week’s ago we asked “Has the Fed solved all the market’s problem in 1 speech?” – and thus far the market has answered resoundingly yes.  The word of the year thus far in 2019 is “patience” as that simple insert into a speech change the whole complexion of everything.

China has also been busy stimulating; on Tuesday:

An announcement from the People’s Bank of China that ...



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ValueWalk

Everyone Else Is Selling Stocks, So Is It Time To Buy?

By Michelle Jones. Originally published at ValueWalk.

After a difficult few trading days in the beginning of the year, U.S. stocks are bouncing back with meaningful gains on Monday following Friday’s strong rally. The S&P 500, Dow Jones Industrial Average and Nasdaq 100 were all up by more than half a percent by midday. It looks like investors could be taking advantage of the end-of-the-year declines, but is this a wise time to be buying?

Trying to time the bottom of the market will almost always be a fool’s errand, but one firm suggests equities could have much farther to fall before they hit bottom in 2019.

...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

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

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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