Volume Only Underperformer As Euphoria Catches On

Tyler Durden's picture

The slippery slope of lower volume continued today in the NYSE (cash/stock trading markets) despite ES (the e-mini S&P futures market) seeing its 2nd highest volume since 12/16 as that futures market has only seen 1 day of the last 11 with a negative close-to-close change. Driven seemingly by yet another rumor that the Greek PSI deal is close (yet GGBs are lower?), risk assets broadly went into overdrive and while ES held 1300 (on very large average trade size and volume as broke that stop-heavy level), the shifts in commodities, FX, and Treasuiries all helped sustain the euphoria into the close where we stabilized at yesterday's pre-market highs. Copper, Silver, Gold, EURUSD (and all FX majors aside from JPY), Treasury yields (and 2s10s30s) all closed at their highs of the day and while oil dropped early (around the Keytsone news?) it also limped back higher to $101 by the close. Equity markets were slight leaders on the day but credit caught up into the close. We do note that while the high-yield credit index has rallied dramatically but worry that the optical compression of spreads (bullish) is hiding the bear flattener in 3s5s that is seemingly dominating flow for now (relative to underlying credit).

NYSE volumes have trended down since the USA downgrade - today was average for the weakness of the year to date (even as euphoric behavior was evident everywhere).

As far as ES volume, it was solid right at its 50DMA but under the surface there was a huge surge in average trade size around the break of 1300 as well as into the close - these peaks have been increasing recently as have tended to occur at broader turning points (exhaustion buying is the term that comes to mind). What should also be notable from the chart above is the proximity of the crossover between the 50DMA and 200DMA (blue and purple lines above) which have the feel of a trap given these spikes in average trade size but standing in front of that crossover may be hard (smaller unit size maybe?).

Equities (blue) lead credit (light/dark red) most of the day but into the close ES stabilized as credit pushed on to new multi-month highs (low spreads). HYG maintained its composure with ES as a late day surge helped it not underperform.

The rally in HY credit 5-year risk is impressive (green) and we note that it is now very rich to its intrinsic (or fair-value). The lower pane shows that since very early January when the skews (the difference between the index and the value that the underlying names in the index would suggest is correct) compressed to zero (black dotted oval) - after blowing out as managers reached for index protection en masse into the holidays rather than sell into an illiquid market. Since then we have seen 5Y spreads compress (and stay in sync with - or even support - equity's performance), while 3Y (purple lines) has underperformed (becoming 'cheap' or wide relative to its fair value). The point is that this flow (which is seemingly much more index-driven given the shifts relative to fair-values) is a 3s5s flattener - a position that is quite frankly much more bearish-biased. While optically 5Y has been compressing, the front-end of the credit curve has become more concerned with risk.

Financials went from biggest loser to almost winner today as GS results (and a belief in the IIF's 99th press release) sent them from -0.6% to +1.53% by the close helped by the majors all ripping, especially MS and GS (though BAC did not let the side down). Interestingly Energy outperformed on the day despite oil being well off overnight highs.Utilities were the only underperforming sector of the day managing a marginal -0.03% close to close.

Broadly speaking, the ES rally was well supported by risk assets (as medium-term CONTEXT above and short-term here indicates) and correlation held up rather well into the close. It is evident though that ES is a little  rich to CONTEXT overall but there is no specific driver that stands out as a factor to watch for give-back (except perhaps AUDJPY or 10Y TSY).

Away from all that excitement EURUSD rallied up to over 1.2850 (near its highs of 1/13) though we note that JPY is still underperforming (only major down against the USD this week). AUD strength continues to help fund carry which makes us smirk a little as the huge compression in AUS bond yields (and rise in AUD) seem much more about safe-haven flows seeking AAA refuge and yet the AUD rally is implicitly helping to drive (via carry correlations) the rise in risk assets overall.

Commodities rallied as the USD sold off with Copper now up 3.5% YTD and Gold and Silver inching towards the highs of the week once again as the former held above $1660 into the close. Oil surged back from earlier lows as risk took off and as we write is over $101 once again.

Treasuries did what they are supposed to and sold off as stocks rallied. 2s10s30s rallied and the curve steepened with 30Y now 4.5bps higher on the week (7bps off this morning's low yields).

Charts: Bloomberg

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LawsofPhysics's picture

Volume, the new leading indicator.  Awesome.

LawsofPhysics's picture

Perhaps that should be "inverse indicator".

The Deleuzian's picture

You only see high volume on big down days...Yet the market continues to defy gravity...Do we need to review and rethink Newton as well!!


Pump up the volume, pump up the volume.....

ebworthen's picture



"Pump it up - until you can't feel it!  Pump it up - when you don't really need it!"

"Fall into submission, hit-and-run transmission, no use wishin' now for any other sin!"



ttown's picture

AZO making new all time highs, Eddie taking out 7billion of debt and negative 2 billion of sdhareholder equity to finance stockbuys backs all the while Eddie and ESL investments cash out at artificailly high stock prices.  

Dealer's picture

volume, bitchez.

Waterfallsparkles's picture

Finally got out of an underwater positon that I have held for over 1 and a half months at a nice profit.  Thank God.

Now back to trading every day.  I seem to do better by day trading and not holding overnight.

The Deleuzian's picture

Good for you WFS...

Nothing ruins my day more than losses...G. Gekko

Waterfallsparkles's picture

Held and the stock kept going against me for over a month and a half.  Seemed like it would never stop gowning down.  Felt like Financial Terrorism.  Now it is going up I probably was premature in selling but just wanted to take my gains and book the profits.  I am sure that they thought that people like me were out of the stock already.  I think the stock can go higher but better safe than sorry.

I do not know why but when you think it is a sure thing it goes the opposite direction.  Especially, when you think tomorrow will be better and it is not.

Always, try to live to trade another day. 

The Deleuzian's picture

Always a tough call...But Hey, getting out green sure beats the hell out of holding red...That's for sure!

falak pema's picture

well, getting wet is being part of your avatar, but so is sparkling. You've done both on this, got wet and got sparkles. Don't lose your jewels when you least expect the water to fall. It happens too often.

Zero Govt's picture

I'm hanging on a Goldman Sucks 3x levered real estate short

WTF is holding the dead-as-a-diseased-petrified-in-limestone-dinosaur US property market up?!

Is Blankfein blowing bubbles as hard as Blowjob-Ben ?

Boilermaker's picture

Can't you just say that they fucked over the shorts and put holders and be done with it?

Seriously, what else is it other than a concerted effort to push up equities and, primarily, those under the most risk of collapsing.

Come on...really, stop trying to dissect it.  They can do it.  They are doing it.  They'll do it again tomorrow.  They'll do it again the day after tomorrow.

akak's picture

And mindless sheep and nominal-dollar-obsessed momochasers like RobotLemming will be there cheerleading them on every step of the way.

Ned Zeppelin's picture

And the 10YR parked at sub 1.90%.  I am troubled that bonds and equities are both going up, and the 10YR is as low as it is.   Is QE3 jsut around the corner?

fonzannoon's picture

Yeah I don't think so. With the MSM spewing about the economic recovery and the stock market flying there is no way they can justify throwing another qe out there.

StockHut's picture

Nothing like a volumeless ascent. Almost feels as good as QE..

trebuchet's picture

 fund flow into AAA  = LTRO cover thats the carry part of the  trade. 3yr/5yr flattening in HYG  thats the bifurcation part of the LTRO trade 

find the best quality credit, dump the crap euro quality (sell sovbonds); reposition to risk on JUNK with reweighting quality assets while keeping averagr risk the same

 = bifurcation trade : - also known as a barbell strategy with the balls at the end increasingly bulging bigger



Stack Trace's picture

Question of the day...which ball pops! ;-)

Snakeeyes's picture

Well, the Fed's flooding the world with cheap money and lots of it has created euphoria. Just like the housing market "recovery."

What happens when The Fed withdraws its adrenaline needles? 


It’s Time To Withdraw The Massive Stimulus From The Housing And Mortgage Market (Take Down The Lightning Rod And Don’t Revive Clinton’s Monster)


Zero Govt's picture

Lower and lower and lower volume..

Sure sign of massive confidence, we're drowning in euphoria out here don't you know..

'Release the Bulls'

...er sorry, they're just on an 'appointment' with the Glue Factory!

LouisDega's picture

Deep thoughts....Volume. Ode to volume. I turned up the volume on my radio. There was no volume today. Bullshit!!!!  Hair has volume.... Deep thoughts

s2man's picture

Hey, I did my part; bought and sold almost 400 shares today!  I must have caused that spike. ;-)

fonzannoon's picture

where are the deflationary depression guys? They all disappeared? Come on this is a 12 round fight. Look at treasuries...they are still saying you are right.

The Deleuzian's picture

They'll be back............

And it will probably feel like they're right...Impossible market this is!!!

luna_man's picture



"where are the deflationary depression guys?"...I fit that remark.

Today, I'm tending to my wounds...The CRIMINALS had the upper-hand again today.

Like all things humans put up, must come down!

 Patiently, waiting


fonzannoon's picture

Rob Lowe just announced Peyton Manning is retiring. No joke. I hope everyone got out before the bell because this is the news the bears were waiting to punce on.

alien-IQ's picture

I'm going long Irrational Exuberance. Picking up some out of the money puts on Logic. And I'm gonna double down on Unicorns. It's a winning trade. I can see it.

Stack Trace's picture

Ok Greenspan! Wait, he didn't coin "Irrational Exuberance"... nm.

falak pema's picture

If there is exuberance it means that along with the rest the restructuring of private sector Greek debt is looking positive...Just saying, it seems logical that the market has picked up something positive from this never ending sea serpent...

adr's picture

The higher the market goes the further away retail investors run. Middle America might not have much cash but they do have somewhat rational minds. The only people who believe this market are the ones cashing out stock after they get their friends to participate in corporate buybacks.

No rational person can possibly believe the stock market should hit all time highs with 8 million fewer jobs 25% of the country on Food Stamps and millions dropping off unemployment rolls after 99 weeks of not being able to find a job.

But, here we are. Just a little easing away from Dow 15k. The coolest thing ever would be to chop the head off a guy like Eddie Lampert the day after he cashes out a few hundred million in equity. As the axe comes down you just say, "Awe so sorry Eddie, guess you can't use it now".

Eclipse89's picture

Euphoria is never a good thing, as it ATTRACTS retail investors who are going to be screwed because, as you can see, volume is low as professionals prefer to stay out.

They will probably enter in on a particular fundamental event (which can be a good one) for the sole purpose to short it.

That's why I'm waiting for a bigger volume surge on a wide spread up bar, so that I can abandon this ship before it ends like the Costa Concordia.


Just my 2c

whstlblwr's picture

A higher market should scare the shit out of them if they read Currency Wars.

fonzannoon's picture

Hey ADR I don't know where you are standing but I see it a lot different here. I see people chasing this shit. They are going to get whacked again I am sure.

Waterfallsparkles's picture

I have found that you cannot short during earnings season.  Not sure why that is but I think it is the expectation that stocks will out perform.  Plus, many of the analysis under estimate the earnings so there is generally a pop in the stock.

Schmuck Raker's picture

I'm sure your right, but...

Today I bought some penny GE puts ahead of their earnings tomorrow. Wish this Schmuck good luck.

Waterfallsparkles's picture

The problem with buying Puts or Calls before Earnings is that there is a tremendous decay in value the day of and after Earnings.  There is a TON of premium right before earnings.

GaryNeville's picture

Who actually believes in this ongoing rally? It must be increasingly hard to draw buyers in next in line to this market.. yet everytime the market starts to give up ground it finds support and rallies. Even on Friday when S&P downgraded just about every EU country North of Africa the markets managed a late rally and finished up just 0.5 % down!!


Has anybody considered the FED may have been buying stocks in some dodgy off balance sheet back door accounts over the past few months to crucify any bear who daores to short America?

On a final note, the bears may have been in hiding but pretty soon alot of smart money is going to get short so bulls enjoy your bollox low vol melt up while it lasts!


ucsbcanuck's picture

GaryNeville - that's the million dollar qn - who is buying this BS? Even retail investors are fleeing this nonsense.


Boilermaker's picture

Has anybody considered the FED may have been buying stocks in some dodgy off balance sheet back door accounts over the past few months to crucify any bear who daores to short America?

Golly, it never occurred to me.  Now that you mention it, the stock market does seem a bit artificial, propped up, and propelled daily for no reason.

I never made the connection.


Ungaro's picture

Simple. The "chosen" Primary Dealers (PDs) as well as other TBTF, foreign and domestic, borrow from the Fed (Dr. Ben Shalom Bernake, or The Bernank) at zero percent interest. The PDs buy primary issuances from the Treasury and sell them at a mark-up to the Fed. TBTFs (among them the PDs) also have subsidiaries, affiliates or "desks" to do God's work: helping the free market, capitalist economy by creating and trading instruments which transfer all flavors of risk ("derivatives") from those who do not want it to those who do.

The myriads of flavors of derivatives are hedged in various equity, equity options, futures, futures options, over-the-counter and behind-the-curtain markets. They trade options (a derivative of some underlying asset) on VXX (an index -- derivative -- based on the value of futures -- derivative -- of the VIX index, another derivative, based on the volume of options -- derivative -- outstanding. It moggles the bind.

 To summarize: the annointed banksters get free money from the Fed and use it make some mo'. The billions move markets and if you know in advance which way a market will break, you make serious cash.

Sandy15's picture

The Fed has been propping up the market since March 2009.  Many things have been happening that the MSM has been ignoring.

Dow up over 300 points the day GM announces bankruptcy??  240,000 ES option contracts traded in one minute at the close on a friday afternoon??  Anytime the market starts to go down, someone buys it up??  Usually if it goes up 4 days it pulls back 2, etc, etc.  Now it goes up 10 - 13 days without a pull back.  Then the one day they let it pull back, mid-day it will be down 150 points then they rally it to be down maybe 20-30 points........ NOT healthy at all.