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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. 


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

Testing... my pic.

Sat, 08/22/2009 - 17:29 | Link to Comment Anonymous
Sat, 08/22/2009 - 13:39 | Link to Comment Lothar the Rott...
Lothar the Rottweiler's picture

Argh.  Nevermind.  Nice work as always, TD.

Sat, 08/22/2009 - 13:50 | Link to Comment Eduardo
Eduardo's picture

I just want to say: Thank You!

Sat, 08/22/2009 - 13:56 | Link to Comment 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 | Link to Comment Anonymous
Sat, 08/22/2009 - 14:03 | Link to Comment 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 | Link to Comment 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 | Link to Comment Anonymous
Sun, 08/23/2009 - 11:34 | Link to Comment Blunt
Blunt's picture

there's at least one such lawsuit going already:

Sat, 08/22/2009 - 14:08 | Link to Comment Anonymous
Sat, 08/22/2009 - 14:27 | Link to Comment 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 | Link to Comment Anonymous
Sat, 08/22/2009 - 22:05 | Link to Comment 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 | Link to Comment Anonymous
Sat, 08/22/2009 - 14:47 | Link to Comment 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 | Link to Comment 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 | Link to Comment Anonymous
Sat, 08/22/2009 - 20:07 | Link to Comment Anonymous
Sat, 08/22/2009 - 20:14 | Link to Comment Anonymous
Sat, 08/22/2009 - 22:31 | Link to Comment 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 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 | Link to Comment Blunt
Blunt's picture

he isn't that savvy, merely hedging himself

Sat, 08/22/2009 - 15:11 | Link to Comment Anonymous
Sat, 08/22/2009 - 15:13 | Link to Comment Anonymous
Sat, 08/22/2009 - 15:13 | Link to Comment Anonymous
Sat, 08/22/2009 - 15:20 | Link to Comment Anonymous
Sat, 08/22/2009 - 21:46 | Link to Comment Icarus
Icarus's picture

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


Sat, 08/22/2009 - 15:27 | Link to Comment Anonymous
Sat, 08/22/2009 - 17:44 | Link to Comment Anonymous
Sat, 08/22/2009 - 21:35 | Link to Comment Icarus
Icarus's picture

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

For example:

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 | Link to Comment 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 | Link to Comment 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 | Link to Comment Apocalypse Now
Apocalypse Now's picture


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 | Link to Comment Anonymous
Sat, 08/22/2009 - 21:00 | Link to Comment 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 | Link to Comment Anonymous
Sat, 08/22/2009 - 15:47 | Link to Comment Anonymous
Sat, 08/22/2009 - 15:57 | Link to Comment BM (not verified)
Sat, 08/22/2009 - 16:05 | Link to Comment Anonymous
Sat, 08/22/2009 - 16:18 | Link to Comment AnonymousMonetarist
AnonymousMonetarist's picture

That is some serious jello stirring.

Sat, 08/22/2009 - 16:26 | Link to Comment Anonymous
Sat, 08/22/2009 - 21:09 | Link to Comment Icarus
Icarus's picture

And if they ban shorts on the financials again?

Sat, 08/22/2009 - 23:27 | Link to Comment Ghettomedic
Ghettomedic's picture

Until you are forced to liquidate by your brokerage.

Sat, 08/22/2009 - 20:31 | Link to Comment Anonymous
Sat, 08/22/2009 - 20:34 | Link to Comment SDRII
SDRII's picture


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 | Link to Comment Project Mayhem
Project Mayhem's picture



brilliant Tyler -- as usual



Sat, 08/22/2009 - 21:51 | Link to Comment Anonymous
Sat, 08/22/2009 - 23:09 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment Anonymous
Sun, 08/23/2009 - 19:35 | Link to Comment 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 | Link to Comment Anonymous
Thu, 06/09/2011 - 16:57 | Link to Comment sun1
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