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Volume Crashes As Stocks End Unchanged

Tyler Durden's picture


Amid the lowest NYSE volume of the year (-24% from Friday - OPEX) and pretty much the lowest non-holiday-period volume in 9 years based on Bloomberg's NYSEVOL data, ES (the e-mini S&P 500 futures contract) ended the day almost perfectly unchanged underperforming 5Y investment grade and high-yield credit indices on the day as both moved to contract tights (their best levels since early August last year) even as their curves flattened. There has been lots of chatter about how the steepening of the short-end of the European sovereign bond markets (Italian 2s10s for instance) is a sign that all-is-well in the world again, well unfortunately the flattening of the short-end of US IG and HY credit markets sends a rather less positive signal than headlines might care to admit (as jump risk in the short-term remains 'high' relative to bullish momentum in the medium-term). At the same time, vol markets are showing extreme levels of short-term complacency as 1m VIX is almost at record low levels relative to 3m VIX (and diverging today from implied correlation). Broadly speaking , risk assets rallied into the US day session open only to sell off into the European close (with Sovereigns leaking back the most). The afternoon saw risk rallying as the path of least resistance appears to be up all the time there is no news. Stocks ended well off their highs of the day, in line with broad risk assets, as TSY yields rose 3-4bps higher, Oil and Copper 1.5-1.75% higher (outperformed) while Silver and Gold hugged USD weakness at around a 0.5% gain from Friday's close.

With a third of the quarter already done, this is shaping up to be an even worse quarter for banks that Q4. With trading volumes so far this year 18% lower than the Q4 (ex-Xmas), we can only assume that what they lose in volume they make up for in margin so expect your bid-offer spreads to widen (viciously exaggerating the decline in trading volume we suspect). The chart above shows the mind-blowingly bad NYSE stock volume appears to be the lowest non-holiday period trading volume we have seen in 9 years (or the data that we have from Bloomberg).


After tracking closely for the last few days, ES limped off into the close today as IG (investment grade) and HY (high yield) credit rallied on to close at five-month tights. HYG (the high yield bond ETF) gave some back at the close. ES downward reversion at the close pulled it to close at its VWAP suggesting very little aggressive positioning today though volume was heaviest as we sold off (from 10ET to 12ET) after which (the EU close) we leaked higher.

Under the surface, the bullish moves in credit spreads (which are undoubtedly positive) have the IG (above) and HY (below) credit indices trading at multi-month 'flat' levels. Typically we would expect a credit rally to be led by the front-end as default risk (liquidity-aided) dries up and we see jump risk removed from the market (also these shorter-dated maturities have lower durations and some risk control - though technicals can make them less liquid). In this rally we have seen the curve flatten (a more bearish move) suggesting that the exuberance that 5Y spreads have enjoyed (purple), both now trading extremely rich (tight) to where their underlying portfolio would suggest is fair (lower pane shows just how rich IG and HY are in 5Y and not in 3Y), is yet another reflection of complacency.

The skews will help understand: 5Y HY is 34bps rich (expensive to its portfolio's value) while 3Y HY is about 10bps cheap (wide) and in IG it was even more interesting with 5Y around 11bps rich ( a huge difference at around 10% of the index - equivalent to the S&P 500 trading at 1400 while the underlying stocks of the S&P 500 imply a fair-value of only 1260) while the 3Y IG is trading 4bps cheap (wide) of its fair-value.

The point is that understanding what is going on across the credit curve and indices relative to their underlying value suggests that professionals are positioning far less bullishly than 'opticals' would suggest (just as we noted last week in equity options skews, implied skewness, and kurtosis) and also below in volatility term structure steepness.

The chart shows the steepness of 1m implied vol over 3m implied vol. The lower the chart, the steeper the term structure and the more complacent short-dated volatility becomes relative to medium-term vol. The option expiration on Friday has an impact but we see almost record levels of relative complacency in short-term options vs medium-term. We find it fascinating that Goldman publishes a paper to push buy-write strategies at the same time as short-term vol is so low (if we were a suspicious, we would guess that GS got loaded with hedgies selling vol - covered calls - and were looking to unload some of that exposure to others). Of course, we could also be seeing event risk hedging across the Greek bond maturities in March by selling short-term vol to pay for vol that is the other side of this huge event.

FX markets were typically more active during the European day session and were relatively calm as Europeans and Asians left the market. EURUSD held above 1.30, Cable underperformed (the only major weaker against the USD) as JPY was very quiet. GBP and JPY's underperformance helped DXY outperform EUR for a change as the USD proxy only lost 0.5% from Friday.

Commodities separate this afternoon into 'fiat-related' and 'economic' as it were with Gold and Silver outperforming in line with USD's weakness (after some early exuberance in Silver) while Copper and Oil stayed together and outperformed as the latter toyed with $100 once again.


Charts: Bloomberg


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Mon, 01/23/2012 - 18:25 | Link to Comment slaughterer
slaughterer's picture

Have to admit, it got kind of boring today for us daytraders for a good 4 hours.   Had to whip out my "Best of Mountain" vinyl to keep awake.  

Mon, 01/23/2012 - 18:25 | Link to Comment economics1996
economics1996's picture

So what happens if it crashes before Uncle Ben prints?

Mon, 01/23/2012 - 19:01 | Link to Comment RiverRoad
RiverRoad's picture

That's the recipe right there.

Mon, 01/23/2012 - 19:49 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Interesting.  O'bummer appears to be hastening the demise of the USD's Reserve Currency status.


India to pay gold instead of dollars for Iranian oil. Oil and gold markets stunned  

DEBKAfile Exclusive Report January 23, 2012, 5:57 PM (GMT+02:00)


India is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile's intelligence and Iranian sources report exclusively.  Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran's total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.

By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets and the oil embargo which the European Union's foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran's oil exports.

The vast sums involved in these transactions are expected, furthermore, to boost the price of gold and depress the value of the dollar on world markets.

Iran's second largest customer after China, India purchases around $12 billion a year's worth of Iranian crude, or about 12 percent of its consumption. Delhi is to execute its transactions, according to our sources, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of Indian government and Reserve Bank of India representatives; and Halk Bankasi (Peoples Bank), Turkey's seventh largest bank which is owned by the government.

An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept dark.

India thus joins China in opting out of the US-led European sanctions against Iran's international oil and financial business. Turkey announced publicly last week that it would not adhere to any sanctions against Iran's nuclear program unless they were imposed by the United Nations Security Council.

The EU decision of Monday banned the signing of new oil contracts with Iran at once, while phasing out existing transactions by July 1, 2012, when the European embargo, like the measure enforced by the United States, becomes total. The European foreign ministers also approved a freeze on the assets of the Central Bank of Iran which handles all the country's oil transactions.

However, the damage those sanctions cause the Iranian economy will be substantially cushioned by the oil deals to be channeled through Turkish and Indian state banks.  China for its part has declared its opposition to sanctions against Iran.

debkafile's intelligence sources disclose that Tehran has set up alternative financial mechanisms with China and Russia for getting paid for its oil in currencies other than US dollars. Both Beijing and Moscow are keeping the workings of those mechanisms top secret.  

Mon, 01/23/2012 - 20:20 | Link to Comment French Frog
French Frog's picture

"(if we were a suspicious, we would guess that GS got loaded with hedgies selling vol - covered calls - and were looking to unload some of that exposure to others)."

No need to be suspicious, it's not a well-garded secret anymore that GS does the opposite of its published research lol

Mon, 01/23/2012 - 21:17 | Link to Comment SelfGov
SelfGov's picture

The EU sanctions (That came out the same day as your news) seem to prohibit trade in gold and precious metals.

This doesn't sound suspicious at all.

Mon, 01/23/2012 - 23:55 | Link to Comment SAT 800
SAT 800's picture

Perfect; talk back to the bully. What an idiot government we have.

Tue, 01/24/2012 - 01:09 | Link to Comment ltsgt1
ltsgt1's picture

This means war.

Mon, 01/23/2012 - 18:27 | Link to Comment Silver Bug
Silver Bug's picture

Volume continues to drop on average. The well is running dry.

Mon, 01/23/2012 - 20:08 | Link to Comment JPM Hater001
JPM Hater001's picture

So when you are doing backfliPs on the trampoline an that point where you are done moving vertically up and start heading back down. It's callled the apex.

It's also the moment of least movement right before you come down on the ground and really fuck yourself up.

Yeah, the apex...that's where we are.

Mon, 01/23/2012 - 21:22 | Link to Comment Karl von Bahnhof
Karl von Bahnhof's picture

Start to love the slloooowwwwwww motion

Mon, 01/23/2012 - 23:25 | Link to Comment jelyfish
jelyfish's picture

I'm wondering if the French downgrade has sucked some $$ out the whole damn system. Not getting even par for their French paper.  Not a big deal except when you consider that everything is so levered up. Starts to have an exponential effect.

Mon, 01/23/2012 - 23:43 | Link to Comment The Monkey
The Monkey's picture

"Go bulls!"

I'm always cautious with these words, but, it looks like it's time to sell short. Could be 50 points off on the S&P, but good time to start loading up.

Mon, 01/23/2012 - 18:24 | Link to Comment economics1996
economics1996's picture

Waiting for Uncle Ben to service the whore.

Mon, 01/23/2012 - 19:27 | Link to Comment vast-dom
vast-dom's picture

and the whore is insatiable more more more she needs more the bottomless BPD pit and it's never her fault because it's always yours...BenBo pls print just this one last time, until the next time......

Mon, 01/23/2012 - 18:24 | Link to Comment AC_Doctor
AC_Doctor's picture

I guess they need some more ALGO's HF trading to make it look more normal.  PPT is doing a fine job.  Let's see how they do when the Greek PSI rejection comes.

Mon, 01/23/2012 - 18:56 | Link to Comment HarryM
HarryM's picture

Today is Chinese New Years day

Mon, 01/23/2012 - 19:07 | Link to Comment RiverRoad
RiverRoad's picture

Happy New Year and Rots of Ruck everybody!

Mon, 01/23/2012 - 18:25 | Link to Comment LouisDega
LouisDega's picture

Daddy, Whats a volume?

Mon, 01/23/2012 - 18:28 | Link to Comment distopiandreamboy
distopiandreamboy's picture

I wonder how long before we start hearing that volume doesn't matter, just like downgrades and rating agencies.

Mon, 01/23/2012 - 18:30 | Link to Comment walküre
walküre's picture

So maybe they will one day actually agree that these markets don't matter and call it a day, shut down their stations and go find work in the real world?

Mon, 01/23/2012 - 18:54 | Link to Comment Osmium
Osmium's picture

According to Cheney, defecits don't matter, so why would volume?

Mon, 01/23/2012 - 18:31 | Link to Comment Blank Reg
Blank Reg's picture

I've never said this here before but I don't want to be left out, so here goes...

(Ahem,  mi mi mi mi)
Ok, I'm ready:

"Silver Bitchez"

Mon, 01/23/2012 - 23:53 | Link to Comment The Monkey
The Monkey's picture

I'm a buyer at $3.00 / oz. Silver is a beautiful metal & has great industrial uses. It's also very plentiful relative to supply. Not that difficult to get a grade of industrial copper alloy to perform with similiar conductivity.

Mon, 01/23/2012 - 18:35 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

HFT and Weekly Options keep volitility down.  Only time Stocks really trade are on Tue and Wed and then it is to the next option strike price for the week.  Plus, who ever pays the most in weekly option premium gets the Stock price they want at the end of the week.

Mon, 01/23/2012 - 18:39 | Link to Comment RiverRoad
RiverRoad's picture

Any idea as to how much of this low volume on the NYSE is due to institutional investors and others using dark pools and alternative markets?

Mon, 01/23/2012 - 23:57 | Link to Comment The Monkey
The Monkey's picture

Lots of explanations, but the most obvious one: bear market fake. There is a serious lack of liquidity in the market @ the lowest real interest rates in US history.

Study the technical condition of the Japanese secular bear and countercylical bull markets.

Time to short.

Mon, 01/23/2012 - 18:40 | Link to Comment kito
kito's picture

sorry to comment on the same thing 2x, but felt it was important in light of this zh post on volume dropping:

market chartist joe granville calling for a loss of 4,000 in the dow this year, starting now.  he says its based on low volume. i guess as dreadful as 2011 volume was, its much worse now:

Mon, 01/23/2012 - 18:54 | Link to Comment IndicaTive
IndicaTive's picture

Does this (low vol, possible top) give the Fed a defensible reason to surprise everyone this week with a QE hint?

Mon, 01/23/2012 - 19:22 | Link to Comment a4ln143c2001
a4ln143c2001's picture

i dont think fed use low vol as an excuse to issue QE3. The most likely scenario is they will say economic growth still seem challenged and owuld warrant more stimulus. However, that's still a hard sell to the public/congress given the recent strong numbers.

QE3 when oil is at 100 and spx at 1310? Welcome to hyperfinflation and lack of growth for the next 10 years. 

Oil with QE3 will go to at least 110 or 120, how would that affect the whole world? 


Mon, 01/23/2012 - 19:36 | Link to Comment IndicaTive
IndicaTive's picture

Thanks. Makes sense. But making sense is what's scary these days I guess. I thought maybe with the Iran, Strait of Hormuz and sabre rattling the price of oil could be compartmentalized by TBTB. Learning is fun. Thanks ZH.

Mon, 01/23/2012 - 18:55 | Link to Comment RiverRoad
RiverRoad's picture

Thanks kito.  If we can all agree that economic fundamentals are out the window, so probably is Joe Granville.  Something tells me that the smartest guys in the room are avoiding the NYSE like the plague. 

Mon, 01/23/2012 - 19:51 | Link to Comment Randall Cabot
Randall Cabot's picture



"Volume precedes prices," Granville, 88, a technical analyst who has been publishing the Granville Market Letter fromKansas City, Missouri for about 50 years, said in an interview on "Street Smart" on Bloomberg Television. "You are seeing much lower volume. That tells you that prices are going to go much lower, much lower than most people think possible and very few people have projected."

Granville told newsletter readers to "Sell Everything" on Jan. 6, 1981. The Dow fell 2.4 percent the next day. He correctly forecast the bear market of 1977-78 and the burst of the Internet bubble that began in 2000. In March 2008, Granville said the Dow would end the year near 9,000, more than 27 percent below its level of 12,392.66 at the time. The gauge finished the year at 8,776.39.

Mon, 01/23/2012 - 18:43 | Link to Comment luna_man
luna_man's picture



I believe, that sixth sense, (smell) is at play here...


Mon, 01/23/2012 - 18:46 | Link to Comment ekm
ekm's picture

Nothing matters, until...................................................................................................................................................................................IT ALL DOES.

We will see, we will see!

Mon, 01/23/2012 - 18:46 | Link to Comment Temporalist
Temporalist's picture

Stop with the hyperbole!  Volume didn't crash it just has drifted lower and lower and lower for a really really really long time and now the bottom is in just like in housing.

Mon, 01/23/2012 - 19:56 | Link to Comment Red Raspberry
Red Raspberry's picture

And unemployment

Mon, 01/23/2012 - 18:48 | Link to Comment Traianus Augustus
Traianus Augustus's picture

Looking at the big picture.  This is what happens when all out corruption kills the market.


Ghost town

A town permanently abandoned by its inhabitants, as because of a business decline or because a nearby mine has been worked out.

Mon, 01/23/2012 - 18:50 | Link to Comment ekm
ekm's picture

Volume is very low = low transaction fees

There is only one way left to make money in this market: Pump and Dump. The problem is, it requires suckers. Where are the suckers?

Mon, 01/23/2012 - 19:38 | Link to Comment IndicaTive
IndicaTive's picture

Buying silver :)

Mon, 01/23/2012 - 23:58 | Link to Comment The Monkey
The Monkey's picture


Tue, 01/24/2012 - 05:47 | Link to Comment resurger
resurger's picture

Yesterday i went and bought 1 Kilo of silver and 42grms of Gold

Am not a gold freak, but i asked the guy how was your transaction in the month of Jan 2012, he told me that large amount of people have bought Kilos of Gold and Silver, and guess what there are no more ounces of gold in the market? they were all sold out.

Today am going again and am buying 2 more Kilos of Silver

Silver Bytches

Mon, 01/23/2012 - 18:51 | Link to Comment I am a Man I am...
I am a Man I am Forty's picture

David Stockman was on Dylan Ratigan this afternoon, GREAT interview, can't find it on the web, but post it if you can TD!

Mon, 01/23/2012 - 18:54 | Link to Comment EyeQ
EyeQ's picture

volume of a pyramid = area of the base * height * 1/3,

so if the base is constant, then the height needs to go down if volume is down, so mathematically, prices should head lower (assuming the market is a square based pyramid)

Tue, 01/24/2012 - 01:13 | Link to Comment The Monkey
The Monkey's picture

It is a pyramid of some sort (:

Mon, 01/23/2012 - 19:02 | Link to Comment billybobtx
billybobtx's picture

Celebrations of the Lunar New Year holiday will affect markets in China, Hong Kong, Singapore and South Korea this week.

Mon, 01/23/2012 - 19:24 | Link to Comment chump666
chump666's picture

and USTs

Tue, 01/24/2012 - 00:00 | Link to Comment The Monkey
The Monkey's picture

Time to go long 30 year zero coupons if you can get a decent bid / ask spread.

Mon, 01/23/2012 - 19:03 | Link to Comment -1Delta
-1Delta's picture

ya no volume and retarded skews/ IV term structures do not mean a thing LOL

Mon, 01/23/2012 - 19:19 | Link to Comment death_to_fed_tyranny
death_to_fed_tyranny's picture

They are now eating each other.

Mon, 01/23/2012 - 19:27 | Link to Comment HungrySeagull
HungrySeagull's picture

No volume eh?

Almost like a empty walmart this time of month after all the SNAP is used up.

Mon, 01/23/2012 - 19:36 | Link to Comment Hobbleknee
Hobbleknee's picture


Mon, 01/23/2012 - 19:46 | Link to Comment Conman
Conman's picture

Supplemental Nutrition Assistance Program (SNAP) as in welfare food stamps.

Mon, 01/23/2012 - 19:50 | Link to Comment ActionFive
ActionFive's picture

Volume to price left a LONG time ago-with retail etal.

Do they want you in the "markets"? Probably not. Are you keeping T's up? No!

They make the prices for perception/control, retail/interfering on fundementals only makes it look fake.

Mon, 01/23/2012 - 20:03 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

is this for real?  fantasy?

mama!  i killed a ...

  • dollar down
  • T's down
  • bonds?  [paste]    Under the surface, the bullish moves in credit spreads (which are undoubtedly positive) have the IG (above) and HY (below) credit indices trading at multi-month 'flat' levels. Typically we would expect a credit rally to be led by the front-end as default risk (liquidity-aided) dries up and we see jump risk removed from the market (also these shorter-dated maturities have lower durations and some risk control - though technicals can make them less liquid). In this rally we have seen the curve flatten (a more bearish move) suggesting that the exuberance that 5Y spreads have enjoyed (purple), both now trading extremely rich (tight) to where their underlying portfolio would suggest is fair (lower pane shows just how rich IG and HY are in 5Y and not in 3Y), is yet another reflection of complacency.
  • commodities ^^^ but not too much due to fossil combustables(?) copper^^ PMs ^[with a nice confirmation of last week's clearing the 50DMA, now holding X1 and up, too! 

there is a ton of bullish stuff, here, but w/ that curve flattening, there is nothing here beyond a random walk around chubbyChecker imo, according to what tyler has done here;  i mean the in the "macro" sense that is gonna goose GRP stocks, trade, all that good stuff.  this isn't "risk on" bull time, at least not yet

except for commodities, or at leeast certain commodities; it looks like farmers are ok against deflationary fears: grains and proteins and OJ seem a bit hysterical.  this is harvest in noCal citrus and these oranges are out in force, so maybe it's just local bias on my part

copper and PMs certainly aren't breaking down!  but we may have a few more TBA moments from here, too.  i haven't called the PMs right since they fell off the 40 branch, so i had been "wishing" them stronger, for sure!

everything still seems to be screwed down tight here

once again, considering the amount of "retail" uncertainty, everything seems high, and there doesn't seem to be a "credit" solution, but who knows except those who plan for such days, assuming they are not completely asleep at the switch, again, at this point

but, they're getting less and less out their pixie dust every time they sprinkle, and that bag is how full? 

those sails look tatty-too!  i wouldn't want to rely on them in a gale

hopefully, it won't blow too bad, up this way


Mon, 01/23/2012 - 20:15 | Link to Comment HungrySeagull
HungrySeagull's picture

If the Markets fall in a Empty Exchange, does it make a sound?


It aint the gale, the barometer has been falling for days now and I have it doubled chains up the mast and only the mizzen tripled reefed whilst the bowspirit is double reefed and all other masts lowered ready for the 100 foot greybeards driving green water fore and aft in a proper hurricane.

Mon, 01/23/2012 - 21:54 | Link to Comment Eally Ucked
Eally Ucked's picture

If you expect "100 foot greybeards" I would not sail into wind.

Mon, 01/23/2012 - 20:10 | Link to Comment kurzdump
kurzdump's picture

Nothing to worry about. These are just common symptoms of an infirm market. Someday volume will eventually drop to zero. Trading machines will be switched off, banks will be closed and fiat money will turn to paper, copper or nickle.

Mon, 01/23/2012 - 20:14 | Link to Comment Hulk
Hulk's picture

I'm out...

Mon, 01/23/2012 - 20:25 | Link to Comment The Deleuzian
The Deleuzian's picture

Sure feels like a rout coming though don't it?

Mon, 01/23/2012 - 20:23 | Link to Comment The Deleuzian
The Deleuzian's picture

Bout' fell asleep today...Definitely felt like 'Holiday trading'...Did see some up movement in the juniors...My whole watch screen was green today except MGN and NEM...

Mon, 01/23/2012 - 20:46 | Link to Comment monopoly
monopoly's picture

Low volume days, up or down can never be trusted for follow thru. Something is up guys and for me it is not worth trying to scalp a few pennies as they throw me into the cauldron.

And I say it again. How can the Fed, hated by many and for sure the Republicans, announce another QE when we are at these lofty levels, short term indicators indicate a false dawn and it appears we are creating jobs. Just not gonna happen.

Mon, 01/23/2012 - 20:55 | Link to Comment The Deleuzian
The Deleuzian's picture

Funny but this melt up was so obvious...I doubt anybody but the mutual funds guys are long...OH!!, and the PPT computers of course...

Mon, 01/23/2012 - 22:29 | Link to Comment RiverRoad
RiverRoad's picture

Something tells me that somewhere money is changing hands......let's hope we're not the patsies at the table.

Mon, 01/23/2012 - 23:19 | Link to Comment RazorForex
RazorForex's picture

The NASDAQ and the SP500 are at very significant pivot zones and have formed reversal patterns. Tomorrow should be very interesting. Watch out!

Tue, 01/24/2012 - 01:16 | Link to Comment The Monkey
The Monkey's picture

Top timing is an art. The top is in. Time to sell short.

Mon, 01/23/2012 - 23:52 | Link to Comment SAT 800
SAT 800's picture

BAC did 339M shares today; very adequate volume. Price rose to $7.25. They are nice pretty charts tho.

Tue, 01/24/2012 - 01:18 | Link to Comment The Monkey
The Monkey's picture

Hey bulls...




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