This page has been archived and commenting is disabled.

Five Financial Stocks Dominating Market Volume

Tyler Durden's picture




 

Since the beginning of July, the most prominent feature of the market has been the divergence in volume between financials and "all other" stocks. While overall stock market volume has been flat if not down over the past two months, and a continuation of a long-term downward trend since the March ramp up, the volume in financial stocks has staged an unprecedented pick up.

First, note the volume drift of the SPY since March, the best proxy of overall volume participation via key money managers:

As the chart below demonstrates, five primary names have been responsible for the bulk of the volume in not just financials but across the entire market. The five stocks are Citi, AIG, CIT, Fannie Mae and Freddie Mac.

A summation of the individual volumes since March reveals an unprecedented dominance of the total market volume represented by just these five stocks, hitting nearly 2 billion shares on Friday, August 21.

As a reminder, roughly 6 billion shares trade on average on the NYSE daily, and 10 billion in the domestic markets combined. This means that on Friday, 5 stocks accounted for nearly roughly 30% of the entire NYSE volume, while a stock like AIG traded its entire float in a narrow price range.

The fact that more than the entire float of AIG has traded daily on several occasions, should be a bright red light for the regulators to analyze whether this abnormal activity is due to i) massive forced recalls of stock, forcing indiscriminate short covering, of if ii) a stock trading algorithm has essentially taken over all the trading in financial stocks, and is churning volume for the pure reason of consistently painting the tape, or collecting rebates, while the overall market drifts higher on low volume. Furthermore, if the SEC considers 5 stocks accounting 30% of all NYSE volume as a normal phenomenon, one wonders just what would cause their computerized alerts to actually go off. Well, aside from a market crash, of course, which would prompt the uptick rule to be implemented within minutes of any sudden price drop, as well as the prohibition of shorting of all financial stocks, at least if one tries to determine their pro-cyclical response MO based on empirical evidence. 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 08/22/2009 - 13:39 | 44779 Lothar the Rott...
Lothar the Rottweiler's picture

Testing... my pic.

Sat, 08/22/2009 - 17:29 | 44939 Anonymous
Anonymous's picture

Hey, give the bag back, I had it first!

Sat, 08/22/2009 - 13:39 | 44782 Lothar the Rott...
Lothar the Rottweiler's picture

Argh.  Nevermind.  Nice work as always, TD.

Sat, 08/22/2009 - 13:50 | 44789 Eduardo
Eduardo's picture

I just want to say: Thank You!

Sat, 08/22/2009 - 13:56 | 44793 deadhead
deadhead's picture

Thanks for this analysis TD....kind of amazing when you think about it that a handful of stocks represents such a massive percentage of trading.  As robo would say, it's the riverboaters.

 

Sat, 08/22/2009 - 21:08 | 45051 Anonymous
Anonymous's picture

Would be good to have a long term chart of NYSE volume excluding the volume in these 5 stocks.

I know recently volume in general has been low, but I think if you compare the NYSE volume ex these 5 stocks, we will really be ridiculously low.

Sat, 08/22/2009 - 14:03 | 44796 john bougerel
john bougerel's picture

I love this question:

if the SEC considers 5 stocks accounting 30% of all NYSE volume as a normal phenomenon, one wonders just what would cause their computerized alerts to actually go of?

Sat, 08/22/2009 - 22:52 | 45139 Ghettomedic
Ghettomedic's picture

I suspect it would be a number less than 1 causing at least 50% of the volume to trip the warning bell.

Sat, 08/22/2009 - 14:08 | 44798 Anonymous
Anonymous's picture

Brilliant analysis as always. Thank you. I wonder if there will be a place for a class action lawsuit on behalf of those who have owned financial inverse ETFs like SKF, FAZ.

Sun, 08/23/2009 - 11:34 | 45323 Blunt
Blunt's picture

there's at least one such lawsuit going already:

 

http://online.wsj.com/article/BT-CO-20090806-717968.html

Sat, 08/22/2009 - 14:08 | 44799 Anonymous
Anonymous's picture

Brilliant analysis as always. Thank you. I wonder if there will be a place for a class action lawsuit on behalf of those who have owned financial inverse ETFs like SKF, FAZ.

Sat, 08/22/2009 - 14:27 | 44809 Howard_Beale
Howard_Beale's picture

There is an attempt at a class action suit regarding lack of disclosure for the SRS. However, these are not ETF's to own. They are temporary rentals, hostels if you will, for minimum stays. Due to daily resets as well as the mechanics behind them (which have nothing to do with the underlying stocks) it is truly a case of know what you are buying before you get in the leveraged ETF game. Full disclosure, I trade many of the 2X leverage index ETF's daily and have been involved in Profunds since inception. The longest I have ever owned a leveraged fund or ETF has been 2 weeks. That was an extended holiday.

Sat, 08/22/2009 - 20:33 | 45021 Anonymous
Anonymous's picture

i agree but why did they do reverse split when FAZ went down to 4 bucks ? While FAS was not. This is because they can milk whatever is left of shorts. Now anytime financials go up, FAZ loses its value in big steps. If they would have left it at 4 buck, the % drop would not have been of much use for MOMO. I think this is outright fraud. If they do reverse split - they should have done it at both sides of the equation - for both FAZ and FAS. Simply bastards.

Sat, 08/22/2009 - 22:05 | 45092 Icarus
Icarus's picture

I'm not sure if you don't understand how percents work or how stock splits work.

I assure you, the consolidations were a good thing. 

At $4 it was ulcer inducing for daytraders, and the ECN fees were deadly.

Sat, 08/22/2009 - 14:38 | 44815 Anonymous
Anonymous's picture

This is so bizarre. These five stocks should not even be tradeable right now. They are all worthy candidates for the top five worst stocks list.

Sat, 08/22/2009 - 14:47 | 44819 vicelord
vicelord's picture

What's the most heavily shorted stock on the NYSE right now?  I tried to find it, but the only service that offers it is a pay service and I don't feel like paying.  I know the short interest in the financials in general has decreased dramatically.  As of the last reporting,  BAC has only a 1.8% short interest.  Which is extremely low.  C went from around 20% down to 6%.  WFC is just 2%.  Shorting the financials has become a losing proposition.  Especially since they got serious about enforcing the ban on naked short selling.  Or has it?  Maybe that's evidence right there that going long the financials has become a really crowded trade.  Or that USED to be how it went, anyway.  None of the old laws of trading seem to apply anymore.  Like, I bought into FRE @ .91 a couple of Fridays ago when the reported.  It went from .72 to over a dollar in AH trading, and then came back down.  I was sitting there debating whether or not there'd be a sucker's rally, and then I just knew.  I got myself about $15K worth of it @ .91 and .92, and sweated it a little over the weekend.  But not much.  Sold it right at the open on Monday.  Just about doubled my money.  It was nice.  But my point is is that should never have happened.  FRE is a worthless company that shouldn't even be trading at all.  Even this new CEO came out and tried to sound a note of caution, saying this was a one time deal and they were still looking at massive losses.  And yet, still, here we are, two weeks later and it went back up to almost $2.  None of it makes any sense.  But I'm trying to trade with that in mind.

 

Here's another for instance - since C  went to $1 back in March, at least 3 times over the course of the next couple of months, in April and May, it got up to 4.60 in pre-market... and each time it did it came crashing back down right at the bell.  4.60.  It was like the magic number.  It became so easy to play.  Well, this Friday it got to 4.60 in pre, once again.  Only this time it didn't come crashing down.  It actually got up to 4.80 or so in regular trading, to close @ 4.70.  I was pretty sure they were gonna crash it back down to 4, in order to make to 4 calls AND puts expire worthless.  That's what they did last month to the 3 calls and puts.  It's a ruthless strategy.  But, for some reason or another, this month they weren't able to do it.  Those 4 calls were up about 200% in 2 days - Thursday and Friday - and expired seriously in the money.  My point is that they shouldn't have, if you went according to the rules that have seemed to dominate the financials over the last few months.  It's whole new game out there.

 

 

 

Sat, 08/22/2009 - 14:58 | 44829 agrotera
agrotera's picture

Tyler, a huge amount of our government's expenditures are unnecessary--i say, take all that financial funding and allow it to be a new division called ZH Investigation Group, led by you, which feeds  files to a new, NONCORRUPT court designed for prosecuting the crime that is overwhelming our country.

I am still convinced that at this point, the financial system has 80%corruption/20%righteous fiduciary types and that this 80% is being protected and supported by the fact that the owners of the privately held federal reserve own half of the DOW, and the biggest interests in the top hedge funds, and as such, the policies that enable the corruption are bought by the group think (and fear) by our politicians that he have to cater to the interests of this group.

The interview by William K. Black at the Hammer Institute, made my eyes pop out with horror when he explained that the crimes from the subprime meltdown alone, are too much for the "system" to handle.  What are we going to do?

Sat, 08/22/2009 - 14:59 | 44832 Anonymous
Anonymous's picture

I find Cramer's Mad Money episodes for the last two Friday's rather interesting and foretelling.

First show: 25 rules on how not to lose money.

Second show, last night: Use a rally to sell and prepare for bad days/portfolio management.

I conclude that Cramer is preparing the sheeple (those that will listen) for the upcoming slaughter so it can't be said that he didn't warn them.

Sat, 08/22/2009 - 20:07 | 45002 Anonymous
Anonymous's picture

I noticed the same thing. But I give him more credit. I think he knows its coming but he feels a social responsibility to warn without sounding the alarm.

However, most wont act until its too late. "Why now when this thing keeps going up?"

Sat, 08/22/2009 - 20:14 | 45010 Anonymous
Anonymous's picture

I noticed the same thing. But I give him more credit. I think he knows its coming but he feels a social responsibility to warn without sounding the alarm.

However, most wont act until its too late. "Why now when this thing keeps going up?"

Sat, 08/22/2009 - 22:31 | 45116 Tripps
Tripps's picture

1st off that ep friday was tape and probably a rerun

 

2nd, he is overly bullish on his paid sites at realmoney.com. he thinks bears are dumb whiners who are clearly wrong.  he chimes in occasionaly on risk reward and about scaling out but rarely on tv unless its a teaching session like on friday

Sun, 08/23/2009 - 11:33 | 45320 Blunt
Blunt's picture

he isn't that savvy, merely hedging himself

Sat, 08/22/2009 - 15:11 | 44845 Anonymous
Anonymous's picture

"First, note the volume drift of the SPY since March, the best proxy of overall volume participation via key money managers"

If HFT is as prevalent as claimed, SPY volume (and participation by key fund managers) is irrelevant.

SPY volume is irrelevant anyway since total volume should be quantified by the S&P 500 index not an exchange traded fund.

While the volume of the two can share similarities, there is no guarantee of that happening. Such is the case currently where SPY volume is down since July and actual S&P 500 index volume is slightly up since July.

Sat, 08/22/2009 - 15:13 | 44847 Anonymous
Anonymous's picture

"First, note the volume drift of the SPY since March, the best proxy of overall volume participation via key money managers"

If HFT is as prevalent as claimed, SPY volume (and participation by key fund managers) is irrelevant.

SPY volume is irrelevant anyway since total volume should be quantified by the S&P 500 index not an exchange traded fund.

While the volume of the two can share similarities, there is no guarantee of that happening. Such is the case currently where SPY volume is down since July and actual S&P 500 index volume is slightly up since July.

Sat, 08/22/2009 - 15:13 | 44848 Anonymous
Anonymous's picture

"First, note the volume drift of the SPY since March, the best proxy of overall volume participation via key money managers"

If HFT is as prevalent as claimed, SPY volume (and participation by key fund managers) is irrelevant.

SPY volume is irrelevant anyway since total volume should be quantified by the S&P 500 index not an exchange traded fund.

While the volume of the two can share similarities, there is no guarantee of that happening. Such is the case currently where SPY volume is down since July and actual S&P 500 index volume is slightly up since July.

Sat, 08/22/2009 - 15:20 | 44853 Anonymous
Anonymous's picture

That is the whole point of nationalization of insolvent companies,that I use to always wonder about the necccetiess of. Just so that those companies do not become vheicles for money transfer as they are now. In this case,those companies were effectively nationalized,however,practically they were not. And they became nice vehicles for money transfer from people outside the loop to people inside the loop. If you all remeber,Aig in fact did drop to a low of 8 something(equivalent .4) most probably due to short. And then back up to the 30's level. So wouldn't it be nice to know "when you are allowed to short" and when the short squeeze is coming?and I am sure there people who know..............

Sat, 08/22/2009 - 21:46 | 45074 Icarus
Icarus's picture

Any stock with 6.4% short interest is prime for a short squeeze.

http://finance.aol.com/company/american-international-group-inc/aig/nys/...

 

Sat, 08/22/2009 - 15:27 | 44856 Anonymous
Anonymous's picture

I have a question.. GS is making $100M a day by buying and selling a stock +.01/-.01 all day long and getting their liquidity bonus of .001 (or whatever it is). Where are the exchanges that are paying out this money getting it from? I don't think they would be putting up with that if they were not getting paid themselves. And how are they getting paid?

Sat, 08/22/2009 - 17:44 | 44945 Anonymous
Anonymous's picture

The exchanges sell "market data" streams

Sat, 08/22/2009 - 21:35 | 45062 Icarus
Icarus's picture

From the liquidity removers of course.  (Basically any "market order" is charged a per share fee)

For example: http://www.nyse.com/equities/nysearcaequities/1157018931977.html

It all depends on your broker, but they all charge it; either separately, or it's part of their standard pricing if you are still paying >$25 trade.

And I don't think many brokers will credit you the rebate they collect for your limit orders.

Sat, 08/22/2009 - 15:44 | 44860 TumblingDice
TumblingDice's picture

This may be stupid and irrelevant but this feels a lot like be a probe of or an actual attempt to corner the market. When was the last time we've had a honest college try of it, 1907?...I'd say we're due. If that was the goal then it wouldn't be a single group but mostly likely several groups colluding on sort sort of level. And I'm sure there were other attempts at it since 1907 but I can't think of any on this scale if this is indeed one such attempt instead of the "lure all the retail investors in to dump to them" oldschool play, although that is always the contigency plan regardless of what the prefered goal is.

Again...could be just the paranoia speaking here but it is a question to ponder as to its feasibility in this environment.

Sat, 08/22/2009 - 16:25 | 44903 AnonymousMonetarist
AnonymousMonetarist's picture

Well in those days (early 20th century, late 19th) there were a lot of Great Recessions.

W.D. Gann in 1935:

'After the greatest bull market in history, the greatest bear market in history must follow... my philosophy is that one must look back in order to determine how long the bear campaign might run. Going back over all the records, we find that the greatest bear market had lasted not more than 43 months and the smallest had been as short as 12 months. Some of them had culminated around 27 months,30 months,34 months and in extreme declines,anywhere from 36 to 43 months.'

Things have been 'calmer' since... 13 recessions since 1929 lasted on average 10 months. The longest,the Great Depression, lasted 44 months. The third longest(1973-1975, 1981-1982) each lasted 16 months, and we're in the second longest and counting. 

Sat, 08/22/2009 - 15:41 | 44864 Apocalypse Now
Apocalypse Now's picture

Tyler-

The stock market capitalization as of July 2009 was roughly $3.2 trillion USD for Chinese companies and $11.2 trillion for US public companies. 

  • It would be useful to know the dollar value and % ownership of these by category.  Chinese ownership and % change would be interesting on the US markets and US ownership and % change in Chinese markets.
  • What is the $ amount, %, and change that the Fed owns of US markets
  • What is the $ amount, %, and change that banks own of US markets
  • What is the $ amount, %, and change that hedge funds own of US markets
  • What is the $ amount, %, and change that pension funds own of US markets
  • Total market cash inflows, outflows, performance %, and fees %
  • Are there records and independent audits of the DTCC to reconcile total shares outstanding to the total shares actually held in accounts.  Obviously with naked shorting previously, these were not reconciled.  My concern is now naked longing - for non-dividend stocks, you could print money by just accepting new cash and generating a fake new share of stock at the current price (ponzi or counterfeiting of shares- without reconciliation). 
  • For securities settlement, T+3, it would be interesting to see the funds flow to know if at any point cash or securities are stuck in limbo land showing up on DTCC or some other balance sheet.  High volumes of trades could then generate some kind of float like check kiting.

Just a few thoughts I had on trying to understand the big picture.

 

 

Sat, 08/22/2009 - 18:45 | 44965 Anonymous
Anonymous's picture

Those are good questions! Somebody might have the answers but not me, but i'd like to offer some musings.

DTCC- after hearing a pro shorter (sorry, no link) whine about any attempt to force delivery, my gut tells me that there are way more "certificates" than issued stock; for at least major issues but probably all issues.

Hedgies- for the most part, these are big money folk (the 5% that own 80%+ of "wealth) who work, imo, lockstep with the policy objectives of the boyz. Brownshirts, if you will.

Pension Plans- run by hedgie types, but use opm.....sweet deal and who gives a shit about joe and jill, eh?

Fed- hedgie of hedgies.....controls all accounting "law" and accounting "practice" and yadayadabla....

Roman generals used ossuary (bone throwing and reading by adepts) to battle plan. So here we are, trying to pick over the bones lying on the field that we can see, and trying to discern the plan, let alone the outcome.

Like you and most zher's, we try hard to follow, read the entrails, second-guess, and even make a profitable trade! based on those bones. Sorry for spewwing but needed a system purge.......thanks for the outlet:)

Sat, 08/22/2009 - 21:00 | 45044 michigan independant
michigan independant's picture

Mr. Gary North has the scenario we are seeing. He is a Man beyond reproach also as this site also giving a running account. The numbers would fasinating also given the timeline effect over a few years. Some of the central bankers expect the minions to expel bubbles every two years to kill a chicken to scare the monkeys also. IMO 

Sat, 08/22/2009 - 15:47 | 44870 Anonymous
Anonymous's picture

I actually own 3 out of those 5 stocks for the last few months, and they ALL made super money!

Sat, 08/22/2009 - 15:47 | 44871 Anonymous
Anonymous's picture

I actually own 3 out of those 5 stocks for the last few months, and they ALL made super money!

Sat, 08/22/2009 - 15:57 | 44877 BM (not verified)
BM's picture

unusually high volume means it's either the beginning of the trend or its end. most momo's and traders wannabe will be killed as usual.

besides, those who got some from the pipe offerings are just happy to unload after such a pump, including John Paulson.

short XLF, IYR

 

there's a great old interview with some basics about the trading from my past Professor(he is a great guy), enjoy:

http://www.derivativesstrategy.com/magazine/archive/1997/1296qa.asp

Sat, 08/22/2009 - 16:05 | 44881 Anonymous
Anonymous's picture

At least 4 of the 5 companies have heavy government involvement. Perhaps that's the common denominator and there's pure speculation (or otherwise) that some beneficial actions will be taken to favor the shareholders.

Sat, 08/22/2009 - 16:18 | 44899 AnonymousMonetarist
AnonymousMonetarist's picture

That is some serious jello stirring.

Sat, 08/22/2009 - 16:26 | 44904 Anonymous
Anonymous's picture

I'm short the financials since 7/15 and eventhough I'm getting killed right now I will not cover. I keep adding to my shorts on every pop. I do not trade on margin and I can hold for years if I have to (call me a short camel if you wish) but this BS will not last...

Sat, 08/22/2009 - 21:09 | 45053 Icarus
Icarus's picture

And if they ban shorts on the financials again?

Sat, 08/22/2009 - 23:27 | 45165 Ghettomedic
Ghettomedic's picture

Until you are forced to liquidate by your brokerage.

Sat, 08/22/2009 - 20:31 | 45018 Anonymous
Anonymous's picture

TD,

When you consider the shi%storm the insurance complex confronted post selloff (FICC & Equity VAs), a reversal would bring those companies straight back to their knees. Unless they used the rising equity markets and vol compression to lay out hedges to offset the further decline? Wouldn't that be the obvious route? Even if expensive, who in their right mind would take the other side of those traders? Could the ramp in the derivatives on the Fed's book - pure speculation - be subsidized insurance hedge laid out "in case of emergency" - kind of like AIG had to pay out...

Sat, 08/22/2009 - 20:34 | 45023 SDRII
SDRII's picture

TD,

When you consider the shi%storm the insurance complex confronted post selloff (FICC & Equity VAs), a reversal would bring those companies straight back to their knees. Unless they used the rising equity markets and vol compression to lay out hedges to offset the further decline? Wouldn't that be the obvious route? Even if expensive, who in their right mind would take the other side of those traders? Could the ramp in the derivatives on the Fed's book - pure speculation - be subsidized insurance hedge laid out "in case of emergency"

Sat, 08/22/2009 - 20:37 | 45029 Project Mayhem
Project Mayhem's picture

wow

 

brilliant Tyler -- as usual

 

 

Sat, 08/22/2009 - 21:51 | 45083 Anonymous
Anonymous's picture

Awesome stuff Tyler, the market is a ponzi scheme waiting to burst at the seams!

Sat, 08/22/2009 - 23:09 | 45149 JohnKing
JohnKing's picture

Government ramp job on the banks. The bailout simply can't fail, the peasants would go bonkers.

Sun, 08/23/2009 - 02:44 | 45241 Sqworl
Sqworl's picture

TD: Just returned from a very Social 1% EE party.  Several central bankers and IB were quietly discussing ZH. They are crapping themselves...Bravo...Bravo.  Vampire Squid HFT is the new Zietgeist!

Sun, 08/23/2009 - 18:21 | 45685 rhinotrader
rhinotrader's picture

Face it, This mkt is going to rip another 20%. ( I am short as well as everyone I know) It's whatver you want to call it. Ramadan or whatever Art Cashin never happened, nothing can bring this thing in, I am going long at 10am tomorrow. I am capitulating. Fuck my life.

Sun, 08/23/2009 - 18:50 | 45702 Anonymous
Anonymous's picture

Hi I am new here what is Vampire Squid HFT? Is it a video? Thanks for all this insight. I am going to register here.

Sun, 08/23/2009 - 19:35 | 45730 defender
defender's picture

If anyone is able to find the buyers and sellers of those stocks, I think that we would have ourselves a stick big enough to get something done.  Can someone make this magic happen?

Mon, 08/24/2009 - 17:13 | 46530 Anonymous
Anonymous's picture

Why would you measure relative volume in number of shares? Relative volume should be measured in market value.

Thu, 06/09/2011 - 16:57 | 1355707 sun1
sun1's picture

Its one of the good platform for awareness of people. Keep sharing such stuff in the future too. xbox 360 slim

Sun, 06/26/2011 - 21:09 | 1404225 sun
sun's picture

I found
lots of interesting information here. The post was professionally written and
I feel like the author has extensive knowledge in the subject. Keep it that
way 

 

sports
administration degree
Do NOT follow this link or you will be banned from the site!