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Houston, We Have a Problem
We have already highlighted the breakout in the PowerShares QQQ Trust Series (symbol: QQQ), and it is has been clear from the market action over the past 3 weeks that nothing else really matters except, well, the market action. As long as prices are going higher all must be right in the world. Right? It must mean something. Why else would prices be breaking out?
But you really don't have to go too far to see that something is really, really wrong with this rally. It is volume. Where is it? How bad is it? Well, Houston, there is a problem. See figure 1, a weekly chart of the QQQ going back to March, 2009.
Figure 1. QQQ/ weekly
The breakout above the 58.46 key pivot level is noted. Volume bars are in the lower panel. The pink dots on the price bars are those times when the QQQ traded less than 200, 000, 000 shares in a week. Excluding the last 4 weeks in the markets, all but one of those times were holiday weeks like Thanksgiving or Christmas. In other words, the volume that we have seen in the past 3 weeks is on par to holiday trading.
So while we can debate the state of the economy and the importance of valuations, we cannot debate the shrinking and absent volume. It is an un-arguable fact. So is price and right now that is all that matters and all that investors see. But the volume will matter some day. It usually does when you least expect it.
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its not HFTs driving up stocks, they are just supporting the market. its big plays marking up distribution and creating a bull trap/bubble/overbought market. The Jan run is really stretched. they will be dying to sell, we get a hard default looming for Greece. they will sell hard. Obama's mini credit crack up boom should fade out by Feb/March. market will drift lower.
anyone buying in now missed the rally and will be slaughtered. yes volume becoming nothing is a big warning sign and the VIX collpased lower is frightening.
the problem is all commerce and no industry.
http://expose2.wordpress.com
boy do I disagree with you, in fact you can easily tell when the market is more hft than people and it has been all hft lately. when 70% of tradig is hft based in the united states, maybe more at omse times, it's only the hft except when you have the bigger volumes that overwhelm them. lets be clear of what hft's do. they ramp up well beyond the base trend line only to come chrashing back. there are more uhmans in treasuries and currencies (although that is rapidly changing and you can see it as well).
for example, the hft hits where a person would put their stop loss, those are triggered and the hft buys, adfter triggering that loss. humans trigger and drop to the lower low. also if you are trading the hft's follow the lines to perfection. not humans, and that's hw you know it's hft.
you can tell the hft's by the huge number of stick saves to bring the market back in line. humans don't do that.
orry you are wrong, this is a pure hft rally. and what makes it worse is these hft people know people follow technicals, so they often push it beyond a certain point to trigger buy signals as if it qwas a break out, then they kill it.
I will add we had the same bs hft ramp in october with the best onth in something like 70 years only to come crashing back. please, you just don't know what you are talking about.
Griffin (Creature from Jekyll Island) gave the Fed an out from this hyperinflation mess. He said, and I paraphrase loosely, that you could recapitalize the banks and end fractionalized bnaking and hardly any of the public would notice. So the money Bernanke is printing is going to the banks, and they're socking it away at the Treasury/Fed at a very low interest rate. My prediction is that you will never see most of it appear in the real economy because it won't be loaned out.
The treasuries are the worst performing ever which makes me see that the economy is in a big mess, when Bill gross dumped his treasuries in march the yields dropped lower, also when the S&P downgrade happened, they forced the TBTF to buy US treasuries through the ESF! I think America is broke.
The only way though is going through a QE3 which will cause a hyperinflation, because if they inject the money into the banks, this time not for Stress Test SCAP (Supervisory Capital Assessment Program)(or bailout money) but to buy the MBS (The Feds are already up to their necks & Dicks with those toxic stuff) which will cause gold prices and equities to rise, but i think we should see a crash in the coming week or the one after so we can have a pretext for it. If they announce a QE3 and the stocks are on those level, THEN THIS IS JUST FUCKING BULLSHIT, and i have to close out my shorts.
I do follow the technical, the technicals are showing a bullish trend, 80% of the investors are bullish, thats where i turn to a raging Bear.
go short wisely.
This lack of volumn is one of the reasons why I took every penny out of the stock market. That scares me, and I have been doing this for a long, long time. Outside of physical, all I have is confetti. Wake me up when something real and truthful happens.
Why not make money when you can? Markets have risen on low volume in the past so why is this different? I try to separate my political beliefs and investment strategies. Just because I think the US is essentially bankrupt does not mean I won't ever invest. Do I think we face financial ruin? Yes. Do I think it will happen tommorow (or the next year)? No. Why not invest, take profits and buy cheap puts on the major indices for downside protection?
To each his own. I was up 22% in 2011 and 38% in 2010. Cummlative returns for the past 9 years is 3,800%.
My recommendation: stay clear of stocks untill they are massively overbought, then short the.
I think you utilize the word "investing" to loosely. This market is not investible. Sure you can scalp and yes you can make some money at times. But it has been my experience that low volume markets can easily whipsaw and reverse in either direction on any dribble from the media or the inmates. If you are at your screen every day and all the time then maybe for you it is worth it. Way too much risk and chance of a major change in just moments for me. But I will agree there can be money to be made.
I guess i am just tired of trading a broken market. Will just stand aside and let you guys play.
There is still a place to invest. The bond market.j
How ironic. Low volume in the markets (decreasing liquidity) caused by too much money printing (increasing liquidity) leading to a stock melt up insolvency. Perfect.
The very fact that you morons are still in the game is astounding.
Houston, we can kick the can down the road so long as we're the reserve currency of the world!
http://www.aintmymedia.com/
I'm no expert but I've been in the 'dear school' of experience long enough to know, or at least strongly suspect, that most of the vehicles used to short the market are highly inappropriate for most investors. It's cost me quite dearly to learn that it's better to simply not play the game in order to win (ie. have something left when honest price discovery reasserts itself). I also have my suspicions that, in true MF Global style, a lot of these short plays may just not work in a major waterfall decline where counter parties are annihilated left right and centre. The conspiracy nut in me says they are just part of a grand plan to extract even more resources from the rubes (I mean investors) who cut their teeth on CNBC and the like. You know, the ones' who think they know everything from watching the scroll and some bubble headed bleached blonde with a gleam in her eye. Or from indiscriminate reading of a lot of trash that passes for financial 'advice' on the internet. I'm out but I've got a nice window seat and plenty of popcorn (and seed corn) for when this mess finishes circling the bowl.
Timing shorts is definately an art in this market. To top -time, you have to almost look for a new ovebought extreme before hitting it with all you got. Definitely rewarding though and we are getting close.
I was up over 30% in July last year until I started messing with FAZ and TZA. I was doing fine and was up close to 60% by October and then got smacked. I stopped trading in late November when I was still up around 14% for the year and had been sitting on cash and gold since.
I may tip toe back in only if the S&P volume stay in the low range 600M - 700M. The moment the volume goes pass 900M - 1B range, I think that will be time to go back into cash.
Looking at volume on the QQQ's over this period is a ridiculous way to try and make this point. The proliferation of ETF's and other ways to play market beta means it's ditributed over more instruments now. Trust in and use of leveraged ETF's means they were employed to a much greater degree after the August/October low than they were after the cyclical low put in March '09.
Looking at this chart, if you had used volume as an indicator to short over the last three years, you'd be broke. Price is the final arbiter.
The author may be right, but this is a lazy analysis.
"Little to no volume" to be expected on up days given our economy is total shit. More interesting...or "newsworthy" as it were..would be a discussion of volume when the markets suddenly get jittery. One pattern from last fall that has emerged is sudden and massive volume spikes on down days. And of course this is a great improvement over last summers swoon. There is nothing more terrifying than a low volume meltdown! (And of course 2008 was MASSIVE in terms of a volume SPIKE: hence "confidence" not being broken as it was in the 70's when "the market would sell off for no apparent reason.") There's much to be..."demanded" in this marketplace. Tech and energy were simply not very diversified back in the 70's. Not so now. Moreover we still had a draft and totally out of control government back then...all which fell by the wayside with the end of Vietnam, Watergate, the Church Commission, the loss of "American prestige"--but nothing more really--and the rise of "Ronald Reagan." The rest is Wall Street financial history: the greatest boom that will probably ever be known on the Street. "This time is definitely different"...fer sure. Now government is RAMPING UP. Wall Street is so overleveraged it is for all intents and purposes truly bankrupt. Most of the problems of the 70's (the twin towers of trade and budget deficits, a massive entitlement culture, stranded capital on a GRAND scale) remain. But even though the macro "shit" is still largely intact...so much has changed at the micro level...and continues to change i might add...that the equity plays power higher. With interest rates "Stuck on Zero" there's great room for an emergergence of "winners and losers." Right now it looks like Wells Fargo and the energy/tech rich West...along with the transportation space in general. If this shale oil is for real...look out above.
The article also fails to not a distinctive change in stock investing that has occurred over the recent past. That is, companies are issuing fewer and fewer shares of stock but are instead buying back their own stock - a potentially good sign of trust for the non-financial world. Back in the "old" days (I was a day trader) the QQQ was far more indicative than it is today with (as you pointed out) the proliferation of other instruments.
Just a minor point, or, if you're an English major such as myself, an indication of the success of the 'dumbing down' movement. The term "to try and" is incorrect usage, despite being widely prevalent even among the so-called 'educated' crowd. You don't 'try and" do something. You "try to" do something. Every time I see that misuse a huge mass of despair congeals in my stomach and then spreads throughout my body, eventually invading my soul, convincing me that the apocalypse is indeed upon us. Please spare my tender sensibilities and at the very least stop destroying the language any further than the dumbing down crowd has already done. You may not succeed, but if you 'try to' use the term correctly, you'll brighten up my day.
Your first sentence should read:
"...English major such as I..."
Illiterate douchebag.
Whan that Aprille, with hise shoures soote, The droghte of March hath perced to the roote And bathed every veyne in swich licour, Of which vertu engendred is the flour; Whan Zephirus eek with his swete breeth Inspired hath in every holt and heeth The tendre croppes, and the yonge sonne Hath in the Ram his halfe cours yronne, And smale foweles maken melodye, That slepen al the nyght with open eye- So priketh hem Nature in hir corages- Thanne longen folk to goon on pilgrimages And palmeres for to seken straunge strondes To ferne halwes, kowthe in sondry londes; And specially, from every shires ende so there! ebear
an effete mr. priss came to say,
"to try and" has stolen my gay!
Banana responded, "As we've never bonded...
fuck you and your day SuperRay"
God, I love this site. This shit's so funny that I showed my wife who is a well paid copywriter and she was impressed and cracking up. "Who are these guys? This is great writing." It's just ZeroHedge, honey - Go back to work.
Perhaps, as an English major, you might research the difference between formal and informal speech. No one is writing a dissertation here, we're "speaking" to one another. In your gilded brilliance, you appear to have missed learning that essential difference.
And, if you expect the world to "spare your tender sensibilities" you're living in the wrong world. Your arrogance in expecting us to come to heel is astounding, but then, again, you're an academic, being an "English major" and all, and ignorant arrogance bespeaks the modern academic.
I imagine people quietly flee when you enter a party.
Volume analysis is soooooo last century. Do bots know anything about volume?
What's the bad news?
You blew up.
Well then, what's the good news?
It was on low volume.
The best indicator for entering short positions this week and early next for me was bloomberg radio. Almost every "guest" or "expert" they invited had a positive spin. Even clearly negative data flow was spun as "its priced in to the market already"...? Shitty data that was just released 2 minutes ago was already priced in?. When a guest started to actually start talking about all the negatives they would always be cut off for a commercial break. Desperate attempts to rope in anyone at this point. Clearly Equity fund flows is demonstrating retail is selling into this rally. I personally started shorting once the SPX hit 1305 and will add to various short positions up to spx 1330. Time will tell. Good luck to everyone.
Okay, so I long my shorts, and short my longs on the euro... while the opposite for the US$ and Treasuries...
Got it... but losing my shirt and my shorts!
I got burn shorting the markets via DXD in September 2009. I got burn again shorting via FAZ in October 2011. I think I am not going to do that again in 2012.
Considering that a much higher percentage of the volume these days is phony market-making and liquidity churning, the picture gets even more dire. I bet if you could isolate true investor volume you would see it dropping like a rock off a cliff.
I closed all my shorts Friday. I should have seen this earlier.
LTRO is a great success (no sarcasm!) because it lets any bank in deep shit simply buy short-term goverment bonds (used as colatteral) and make a free arbitrage. If the goverment doesn't pay the bonds, the bank is doomed anyway and/or its the ECB's problem. Basically, LTRO *is* just IQE (indirect QE). This will continue until Germany feels enough is enough. Nothing else will stop it.
Expect all european yields to come down, and as long as they're coming down - the markets will continue to go up.
The markets sense this, and will go up for a relatively long time (think months). Volume will come up, when everyone realize this.
Yes, we've just kicked the can again. Yes, everyone in control (banks, Fed, ECB, goverments) will do anything in their power to keep kicking cans, because the alternative is, well ... not a reasoable alternative.
Next leg down? Only if either Germany say "stop", or civil unrest gets out of control, or US goverment is replaced and change direction, or inflation is out of control (unlikely with high unemployment, for now).
Rest assure, I don't think the situation is "savable". I'm only interested in near time market direction for my own speculation, and besides, it has been "horrible unsavable" for the past 12 years or more.
Hey Amazon,
if you follow the historical trends, then you would have realized that we are in the start of the year and we are already at the peak, look, we are humans and we are controlled by fear, but the U.S economy is not really bright so that we see those levels of high prices... maybe the markets were trying to show that the GS oracle (the old sage) was right about his prediction.
how can the volume come up? If you reach the peaks of 2008 do you think investors will come in? I would be really careful to buy a stock and hold on it at those current levels when i can buy it cheaper, people awaits the sales and the discount, no one buys an expensive stock, i wouldnt buy a stock at 52 weeks high and hold?!
If the U.S economy is bright and fixed, do we need a catalyst like QE3? well there have been multibillions QE's the last was operation twist?!
When Europe markets are down by 3% for 3 days in a row, dont expect everything will be ok, and remember the Rich makes money on the shorts.
Have you thought of this scenario "The Fed raises the debt celing by 8 trillon" and raises the short term interest rates to 3%
The big question is when will the drop occur. I gave up trying to short the market last year.
It seems have the posters to Z-Hedge have been burned by the market not dropping "when it should".
My grand theory is to try and buy solid companies on large drops (20%) and try and ride out the mess. Even if the Euro and dollare implode, most major corporations and infrastructure companies will survive and ultimately retain/recover their value.
That said I am still at 50% cash.
"because the alternative is, well ... not a reasoable alternative."
FAIL. I see a lot of opportunity for honest hardworking folks who's labor adds real value in those "alternative scenarios".
But you are probably right, irresponsible behavior will probably continue to be rewarded. Hedge accordingly.
volume is only in the eye of the beholder ...is the glass half empty or half full? Everyone with a brain knows it a rigged game but its the only game in town. so play on.
absolutely not. volume is a "confidence indicator." you can never have too much volume when the market is moving higher. and as above "there is nothing more terrifying to a market bull than a no-volume sell off." we had that last summer...the last of my "freak out" sessions i believe. (i was full on bi-polar during the ramp up phases of 2009/10. It's all good now. If i iive of course.) No the article is right to raise the issue...but as above volume does not seem to be THE issue it was in the recent past. HOUSING on the other hand...
In other words, buy low and sell high. Everything else is simply bullshit used-car salesmen crap and noise. Same as it ever was.
Agreed!
Now to find a workable formula for selling high determination. Bespoke states that a 5% move over the 50-day moving average creates an oversold condition. Granted, we will not retire on moves 5% over the 50-day MA but something sure as hell beats the alternative.
Perhaps far more practical solutions exist and will be subsequently posted. Group wisdom is a good thing and perhaps our only defense vs. the evil empire and best to all!
One more thing, extremely low volume rallies like this, the hallmark of a sucker's rally, have a trap door effect when selling begins in earnest. Lack of liquidity means prices can move big fast (when the time comes). In an ordinary market, there would be a bid waiting without too much spread and the magnitude of the decline would be mitigated.
The illiquid condition means you get an unusual spike in volatility. US treasury yields typically decline when the VIX surges. So a relatively safe way to short a major top is to load up on US treasuries when the rally hits the wall. Don't think we're there yet, but getting close.
There is only one exit small door out of this theater.
i would agree "low volume can create wide divergences between bid AND ASK." in essence that's all that "volume" is: suddenly "a trader can buy Goldman Sachs for 80 bucks a share even though the market quote says 90." That's why volume SPIKES matter. The buyer panics...will sell at any price...that price is..."discovered"...and more often than not "discovered to be ridiculous low...yet unpublished." That's why the COMPANY buys its stock back: wide divergences in the bid to ask are egg on the face of corporate.
It's more than half empty. To ignore volume is wishful thinking.
Very thin volume accompanied Japan's rallies, but each has turned out to be a bear market fake for 20 years running.
AND their sell-off's. True with Europe now as well. Which get's us into the category of "what precisely is risk?" At it's simplest level "it's nothing more than putting the sweaty wad of dough right on the table with a go for it attitude." Most people are NOT this way, btw. Yet the USA has been this way going on 40 decades now. Of course most people look at risk in all the WRONG ways when interest rates are at or near zero. That's my big point. "They go runing to yield" EVERY TIME. Here's my view of what that means:
http://www.youtube.com/watch?v=0E3zUyGzq2k&feature=player_detailpage
kinda looks like fun. i'd fasten my seat belt of course.
I think we are riding the same Bi*tch now
Price and volume going in opposite directions for a almost three years; someone will want to sell here before long, eh?
absolutely. but will you be a buyer when it does? "that's all a market is" ebworthen: "a place where buyers and sellers meet." amazingly how complicated it get's though. something about..."repayment risk" and "lending" so i hear. and yes "people kill over it." perhaps if we went back to a gold standard where people would argue at the fruit and vegetable stand instead? Nahhh. that would be so boring!
Isn't the most important question, 'who owns all the shares, that are not being traded?'
For nearly a year I've been reading that insiders were predominantly selling. Are they 'all out' now?
Who did they sell to? Joe Public? Or the Fed via its minions?
The DTC.
Who did they sell to? That's easy. Your retirement plan.