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Why Volume Matters - The UnBearable Lightness Of Bear Market Rallies

Tyler Durden's picture


It is often said a picture paints a thousand words; in the case of this chart, it paints more. Day in and day out, there is one inimitable indicator that if looked at will tell you everything you need to know about the day's market performance - volume. The last few weeks - post-Draghi, Post-Knight, stunned many with just how low volume can get; and implicitly just how much the battle-bots remain in charge. Clarifying this picture of low volume strength and high volume weakness, John Lohman has created the following chart - summarized thus: YTD, low volume days have seen the S&P 500 rise around 15% in aggregate, while high volume days have seen the S&P lose around 5% in aggregate. The linear nature of the low-volume move is simply remarkable - perhaps September will bring some real volume back, and now we know what that means for market direction.



Charts: Bloomberg


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Fri, 08/24/2012 - 09:55 | Link to Comment Todd Horlbeck
Todd Horlbeck's picture

What is amazing is the lack of discounting the market is doing

Fri, 08/24/2012 - 10:01 | Link to Comment veyron
veyron's picture

Honestly this is a good thing.  If there was heavy volume on up days, one could conclude that more money is entering the markets.  The fact that it isn't happening means more people are getting out of the equities scam ...

Fri, 08/24/2012 - 10:09 | Link to Comment MillionDollarBonus_
MillionDollarBonus_'s picture

Well volume is of no concern to smart traders and investors who are profiting from the global recovery. Those who had the courage to buy the S&P this summer have been rewarded handsomely. The doomer day traders that shorted the S&P, bought puts or the VIX, have been completely destroyed.

Fri, 08/24/2012 - 10:10 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Heck of a job MDB.

Fri, 08/24/2012 - 14:20 | Link to Comment Precious
Precious's picture

Tastes great, less filling.

Fri, 08/24/2012 - 10:22 | Link to Comment SafelyGraze
SafelyGraze's picture

What is amazing is the lack of discounting the algos are doing

Fri, 08/24/2012 - 10:12 | Link to Comment LongSoupLine
LongSoupLine's picture

like Facebook, right MDB?

Fri, 08/24/2012 - 10:16 | Link to Comment Hayek FA
Hayek FA's picture

Smart traders or investors are not playing this market long or short, just you and the Fed by proxy.

Fri, 08/24/2012 - 10:17 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

I have not been destroyed. My medium term short went positive for me recently, now minus again but will stay short. The whole fucking world is currently going off the cliff. Speak you later you moron.

Fri, 08/24/2012 - 12:54 | Link to Comment redstuffer
redstuffer's picture

Smart money is not as short as you would like to believe

Fri, 08/24/2012 - 10:17 | Link to Comment OldE_Ant
OldE_Ant's picture

Nope, no concern to IDIOTS, with MONEY TO BURN.  Not one care in the world those people have throwing money around these casinos (ahem) markets like it's candy to be given to children or HFT algo bots with infinitely deep pay you tuesday for stocks today pockets.

Not one concern in the world.  Tell me again why the governments are training for full fledged disasters, buying plastic coffins like they are going out of style, and why police are stepping up their stop and pop activities again and why oh why is Ben still buying everything that isn't nailed down.

Nah, no concerns here.  Move along to your cells ahem pens ahem offices sheeple.  Make sure to drool over the new grizzled/boney supermodel hires before you check in.

Baaaaaahhh. Drool.  Baaaaah.

End of Line

Fri, 08/24/2012 - 10:20 | Link to Comment Schmuck Raker
Schmuck Raker's picture

No mention of Libertarians?


Fri, 08/24/2012 - 10:24 | Link to Comment tocointhephrase
tocointhephrase's picture


Fri, 08/24/2012 - 10:24 | Link to Comment Keegan11
Keegan11's picture

MDB -- Oh toolbag!!

Fri, 08/24/2012 - 10:26 | Link to Comment Keegan11
Keegan11's picture

MDB -- You just getting in this morning? Those late nights and back to the desk with a red face and a egg and cheese sandy are making you're brains into mush. Global recovery, eh? Righto

Fri, 08/24/2012 - 10:36 | Link to Comment jcia
jcia's picture

Thanks for the laugh. Had to login to upvote you!

Keep buying those FB shares for the legendary wealth you are going to give to your grandchildren.

Fri, 08/24/2012 - 10:58 | Link to Comment azzhatter
azzhatter's picture

Thanks MDB, I've been following your trading advice for a while now. I've been dollar cost averaging FB and several others. The kids will need shoes soon and hopefully I have enough left for some cheap sneakers

Fri, 08/24/2012 - 11:01 | Link to Comment tocointhephrase
tocointhephrase's picture

Follow that advise and you will be lucky to afford a pair of flipflops

Fri, 08/24/2012 - 11:19 | Link to Comment southerncomfort
southerncomfort's picture

have to agree w/ mdb.  until people start posting "i have ceased to use toilet paper" or "i do not eat any longer" or "driving? not me dammit" or "teeth? just say no to brushing"...i'll probably stay invested in holdings that will (in fact) be bot, sold & consumed until that end of days (fable) occurs. 

Fri, 08/24/2012 - 11:51 | Link to Comment One World Mafia
One World Mafia's picture

Just wait till after the Furor is reelected (with the aid of electronic voting).

Fri, 08/24/2012 - 15:05 | Link to Comment InjuredThales
InjuredThales's picture

MDB is the only troll on this site I actually enjoy. 

Much better than Max Fischer or Robotrader!

Fri, 08/24/2012 - 15:05 | Link to Comment PAWNMAN
PAWNMAN's picture

Just like how much money everyone made in the previous stock market bubble, and the housing bubble. You look like a genius on the way up and a monkey when it crashes on your head. I guess your hoping you'll be able to time the exit perfectly before the next train wreck. Good luck my friend!

Fri, 08/24/2012 - 10:45 | Link to Comment franzpick
franzpick's picture

Staying with these low volume markets for the past 2 years has you up 20-40%.  The old adage, never sell a quiet market after a rise, may still be in effect. Big volume up here at these tops, to some, will be a sell sign.

Fri, 08/24/2012 - 10:55 | Link to Comment azzhatter
azzhatter's picture

Good title from a great book and movie. The Unbearable lightness of being by Milan Kundera

Fri, 08/24/2012 - 09:56 | Link to Comment ekm
ekm's picture

I'm still baffled.

Why is i so difficult for people to understand? Expensive tomatos, people buy few tomators. Cheap tomatos, people buy a lot of tomatos. Close to rotten tomatos, people buy1 ton for a dollar.

That's the same for stocks. Expensive stocks, low volume or zero volume (primary dealer to primary dealer). Cheap stocks (S&P at 600 or 400), boy you are going to see the volume explose.

Conclusion: Do they they want volume or do they want NYSE to go out of business? Solution: S&P at 600-800, you get volume.

Why is this so difficult to understand?

Fri, 08/24/2012 - 10:01 | Link to Comment LongSoupLine
LongSoupLine's picture

oh boy, let's get as basic as possible so you understand...


Crooked fucking piece of shit market that has repeatedly fleeced retail investors and taxpayers of their wealth = low volume. period.

There will be a quiz later.

Fri, 08/24/2012 - 11:14 | Link to Comment Spaceman Spiff
Spaceman Spiff's picture

Are you sure? The pretty financial tv people with a world of experience at their young ages as journalists said hft provides liquidity. Hft probably has electrolytes as well.

Fri, 08/24/2012 - 15:12 | Link to Comment ekm
ekm's picture

Thx for the remarks. See my comment to Diogenes.

Fri, 08/24/2012 - 10:41 | Link to Comment Gadocat99
Gadocat99's picture

Wow.  Where to start? Market volume is not based on stock price.  In fact, when stocks are very overvalued the market should have high volumes.  Low volumes are signals that folks don't want to trade -- either because they want to hold their portfolio or they don't want to get into the market.  In this case, everyone has left the market due to pervasive fraud and theft.

Fri, 08/24/2012 - 15:13 | Link to Comment ekm
ekm's picture

Thx for the remarks. See my comment to Diogenes above.

Fri, 08/24/2012 - 10:41 | Link to Comment Diogenes
Diogenes's picture

Investments are the only market where everyone flocks to buy when prices are high and runs away when you hold a bargain sale.

Fri, 08/24/2012 - 15:14 | Link to Comment ekm
ekm's picture

Correct...but only when people have money to invest. It's called a Pyramid Scheme or more recently a Madoff Scheme. It works as long as people keep putting their money back in until..................they run out of money and the pyramid collapses.

Now people are withdrawing money hence your interpretation does not hold, IMO.

Fri, 08/24/2012 - 15:25 | Link to Comment InjuredThales
InjuredThales's picture

+1 for name.

Diogenes was walking backwards across the Agora, affecting a studied indifference to all who laughed at him. Finally, when he had collected a large following he stopped and announced, "You are laughing at me walking just a little distance backwards while you all lead your entire lives arse-about."

"And what's more," he asked, "can you change your way of living as easily as this?" Whereupon, he turned on his heel and walked off in normal fashion.

Fri, 08/24/2012 - 15:38 | Link to Comment ekm
ekm's picture

I am impressed.

Fri, 08/24/2012 - 09:57 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

When the cat volume is away the mice HFT/PPT play.

Fri, 08/24/2012 - 10:13 | Link to Comment disabledvet
disabledvet's picture

My personal view is that the problem of low volume..and yes it is a problem...has much more to do with modern media...ahem..."methods"...than anything to do with the basic architecture of the market itself. I do find it interesting that no one in a leadership position at say the NYSE or NASDAQ is demanding the Government start clamping down on the "hacking attacking" that Mark Zuckerberg celebrated on the day FB went public. Quite honestly unless and until the authorities are demanded to clamp down on this and all the illegal "hacker shops" that exist everywhere in the City I really fail to see volume do anything but keep going down. Who knows...maybe even a publicly traded company will say something as well.

Fri, 08/24/2012 - 10:25 | Link to Comment Hype Alert
Hype Alert's picture

I agree, but with so much of the volume being computer/HFT trades, what's really going on in the market is completely distorted.  Basically painting a picture of direction that isn't real.  Throw in Dark Pools (basically a second set of books) and you have a display, being what we see, that has nothing to do with what is really happening.

Fri, 08/24/2012 - 10:00 | Link to Comment piliage
piliage's picture

It's the same four computers, buying and selling to each other over and over and over and over with free ZIRP money.

Ah yes, behold, the perfect market.

Fri, 08/24/2012 - 10:13 | Link to Comment Thomas
Thomas's picture

They can't make money from each other without there being a loser. That is why they need retail, and that is why they are lamenting the absence of retail in the market. There is simply no sucker to scalp. They have all been scalped. Wall Street is like the rabbits introduced to an island: they have eaten every last leaf of vegetaion.

Fri, 08/24/2012 - 10:59 | Link to Comment piliage
piliage's picture

They can sell to each other until the debt bubble burts with higher and higher leverage ratios though to make up for the lack of muppets, which I suspect is what many might be doing.

The odd short clearance against the hedge funds is where a lot of the liquidity may be coming from too, given the horific performance by a lot of the smart money this year.


Fri, 08/24/2012 - 10:01 | Link to Comment the 300000000th...
the 300000000th percent's picture

liquidate, liquidate, liquidate, its time to get out of your positions. Soros is doing it, Buffet is doing it, take a hint. Volume will tick up on sellers. Buy physical hold physical. There arent any killings to be made in 2013 anyway. 

Fri, 08/24/2012 - 10:05 | Link to Comment buzzsaw99
buzzsaw99's picture

there is no spoon (market)

Fri, 08/24/2012 - 10:08 | Link to Comment Dr. Engali
Dr. Engali's picture

My suspicion is if Ben doesn't get to printing soon there is going to be some real volume and it's not going to be accumulation.

Fri, 08/24/2012 - 10:17 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Jackson Hole in 5..........4..........3.........

There's going to be major disappointment if Ben doesn't deliver the goods.

<Come on Ben. Just a peek. Unbutton your blouse a little at least. Jezzz!>

Fri, 08/24/2012 - 10:14 | Link to Comment buzzsaw99
buzzsaw99's picture

i suspect they are planning to sell the news either way it goes

Fri, 08/24/2012 - 10:18 | Link to Comment Dr. Engali
Dr. Engali's picture

That depends on the size of the print. I suspect Ben probably knows that too so he needs to surprise the market by printing more than the market expects.

Fri, 08/24/2012 - 10:20 | Link to Comment buzzsaw99
buzzsaw99's picture

if he does that two months before the election romney will be p.o.ed

Fri, 08/24/2012 - 10:26 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Romney says he wants to fire Ben's ass. If that is the case (admittedly a real question mark) Ben might just do everything he could to avoid someone who wants his ass ejected from his seat.

Fri, 08/24/2012 - 10:28 | Link to Comment buzzsaw99
buzzsaw99's picture

the bernank is a political football, how funny!

Fri, 08/24/2012 - 10:42 | Link to Comment Vince Clortho
Vince Clortho's picture

The American Republic the way it was meant to be.  Two candidates jockeying for the Potus, with the chairman of the Fed and his mad money printing at the center of the process.

Will Wild Ben unleash the counterfeit printing tsunami  before the election to try and sway the outcome?

Will he declare Europe is TBTF and send another tsunami of counterfeit FRNs across the pond?

The founding fathers would be so proud.

Fri, 08/24/2012 - 10:30 | Link to Comment Dr. Engali
Dr. Engali's picture

What's he care? Romney said he is going to fire him anyway. Ben will do it for job security.

Fri, 08/24/2012 - 10:12 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

Low vol = algos

Fri, 08/24/2012 - 10:15 | Link to Comment Dead Canary
Dead Canary's picture

If Ben doesn't print for a while, don't his balls turn blue?

Fri, 08/24/2012 - 10:21 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

They're already blue. He's trying to keep them from exploding.



Damn! Too late.

Fri, 08/24/2012 - 10:44 | Link to Comment Rainman
Rainman's picture

gotta hand it to the canucks...they've kept the music playing a long time.

Fri, 08/24/2012 - 11:25 | Link to Comment CloseToTheEdge
CloseToTheEdge's picture

'no bubbles here' will feel this deep an hard

Fri, 08/24/2012 - 10:27 | Link to Comment orangegeek
orangegeek's picture

Bear market rally began in March 2009.


Steady decline in volume can be seen, except the "flash crash" in 2010 and the drop in last 2011 - both were massive sell offs.  Recently daily and hourly volumes are brutally low.


The biggest sell off is yet to come.

Fri, 08/24/2012 - 10:28 | Link to Comment diogeneslaertius
diogeneslaertius's picture

"UnBearable Lightness Of Bear Market Rallies"


oh you :)

Fri, 08/24/2012 - 10:33 | Link to Comment Need More Cowbell
Need More Cowbell's picture

can we please get some units on the x-axis??

Fri, 08/24/2012 - 10:36 | Link to Comment valkir
valkir's picture

DJIA is green again,what a joke.

Fri, 08/24/2012 - 10:40 | Link to Comment ThunderingTurd
ThunderingTurd's picture we go.  Green on no news.  Who cares about production?  Who cares about Chinese data?  Yes, I know it is a Ponzi.  And yes, I am shocked every day at the corruption. 

Fri, 08/24/2012 - 10:40 | Link to Comment Meesohaawnee
Meesohaawnee's picture

you can tell its "algo day" .. the incremental steady pop pop it up ben! do your favor for obama

Fri, 08/24/2012 - 10:43 | Link to Comment DeFeralCat
DeFeralCat's picture

The bots can push this mindlessly higher as they can get out much quicker than us ferals either through HFT or hedging the overnight futures market. If you have neither of these capabilities you are truly the black knight in Monty Python's Holy Grail. 99.9% of the people on the planet could care less about the stock market and simply live dollar to dollar.

Fri, 08/24/2012 - 10:51 | Link to Comment NEOSERF
NEOSERF's picture

These are the kind of days on the market that give it such a bad rep.  Horrible durable goods numbers but of course the media only plays the number with transportation in it and we are off to the races again.  Next week likely to be more of the same.  Day below some threshold should be shut down at 1PM, this is just getting silly.

Fri, 08/24/2012 - 10:54 | Link to Comment Perpetual Burn
Perpetual Burn's picture

Good night sweet liquidity.

Fri, 08/24/2012 - 11:02 | Link to Comment Temporalist
Temporalist's picture

Here is the volume (but not the kind you were looking for):

Zynga Executives Depart as Slowing Growth Drags Stock

"At least four Zynga Inc. (ZNGA) managers have departed this month as the online game maker grapples with slowing growth and a slumping share price that lessens the value of compensation, people with knowledge of the matter said."

Fri, 08/24/2012 - 11:09 | Link to Comment Brother Sebastian
Brother Sebastian's picture

Nowadays, there's little distinction between a "bull" or "bear" market in terms of volume.  What we had between June 4-August 21 was a "bull" market and volume was light.  It appears we're now in the "bear" side of the equation and volume is still light.  The bastards who manipulate the market, vis-a-vis their algos/HFT/computers, are simply skimming for profit, pure and simple.  Old-fashioned investors left the game a long time ago or have their portfolios locked into very conservative, long-range funds.  They're finding out, of course, that there's not much profit in that game, either.  Bottom line, the market manipulators have killed the goose that laid the golden eggs.     

Fri, 08/24/2012 - 12:41 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture


only to a moronic jackass outfitted with the latest media blinders and with a disinfo dildo attached to a nuclear power plant up his little puppet ass

i've personally explained this phenomenon at least 50 times consistently here on these boards as being due to the new FED job description under dodd/frank

and it seems to be the correct explanation;  or at least i can say no one has trumped it, so far

is tyler durden really this fuked up?

no, but he loves that mittens money and that atomic-powered butt-plug don't he?   so fuk zeroHedge!  wheee!  this lying is easy!

Fri, 08/24/2012 - 14:09 | Link to Comment The worst trader
The worst trader's picture

replace debt with debt, repeat

Fri, 08/24/2012 - 15:34 | Link to Comment BotMightFly
BotMightFly's picture

  It's no surprise the barter markets were significantly higher recently, some not accepting cash - craigslist.

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