SPY

Recently, the Pragmatic Capitalist questioned who the mysterious large buyer of eMini S&P 500 futures (ES) was, when there has not been a corresponding large buyer of SPY ETF shares over the same short periods. We decided this warranted a further investigation to assess whether it is SPY or the ES that has historically had the greatest impact on the S&P 500 cash index. The results were surprising.

The sense of market urgency can be seen when comparing yesterday's and today's market volume. All of yesterday's SPY volume was surpassed by 1:30pm. Today's key support level is 105.59 which is the September 31 closing price, and which has already been taken out: the next support is 104 (which was tested once already), with 102 next below it.

All those who have had a fishy feeling about this whole volumeless rally may be curious to take a look at the following graphic which indicates that unprecedented divergence between the VWAP on the SPY, which since the beginning of the rally in March has hit just over 91, and the actual SPY which as of last night was at 107. The difference between the two data series is now roughly 15 points, or about 150 on the S&P, or just under 1,500 DJIA points. This differential is entirely due to the low volume aggregation on the way up, in essence the entire run up has been a lite version of a 6 months long gap move up. What the chart also explains is the propensity by the market to see every potential sell off have a dramatically broader volume participation than the computer driven trickle higher, as all market participants realize there is insufficient accumulation interest to justify this 3 Sigma divergence.

• Lowest volume day of the year? Check
• Pattern matching and heatmapping? Check
• Time to ramp market to YTD highs? Check
• Does anyone care or trade anymore with Mr. Simons soon to be derelict cores? Not so much...

You didn't expect a spike in volume on the puke, did you. Keep an eye on the real action, better known as AH.

The question: is "The client" buying or selling today.

Vicis Capital, a $2.9 billion hedge fund started by Lehman trader John Succo has halt client withdrawals after it received $550 million in September redemption request. The firm has already paid down $2.7 billion in comparable redemptions since October. The asset manager's Vicis Capital Fund, a $2.5 billion volatility fund, has been the primary culprit for LP dissatisfaction after losing 12% YTD, having returned 14% in the last year.

After a failed breakout early, today's SPY was bounded entirely by two key VWAP levels: the support was yesterday's closing VWAP, while the resistance was both yesterday's close, which just happened to coincide with today's VWAP. The low volume VWAP algos continue to rule the universe.... Until such time as we see a high volume breakout.

Data Explorers, via Alphaville, is demonstrating a rapid pick up in SPY shares on loan, a proxy for Short Interest. Of course, with periodic short recalls such as the one in IYR by UBS, it is only a matter of time before the banks create an artificial end to any such comparable bearish momentum trend in any of the highly trafficked ETFs. Stay tuned as we find out where the first SPY recall of the day will occur.

As the market shoots up once more, there is absolutely no volume breadth participation aside from the traditional program traders who now enjoy complete domination over daily market moves. The SPY intraday volume is plunging relative to average, and at last check 62 million shares were traded compared to a 105 million average by this point in the day: a 40% drop! This should account for all those on the "sidelines" who have taken the Wall Street equivalent of the Main Street revolt to heart, and refuse to participate in what everyone realizes is a market that has no connection to any underlying fundamental reality. We wish the computers all the best as they gun the S&P to 1,600 on 20% real unemployment, $9 trillion in budget deficits, a CRE collapse, waning stimulus effects, and a fast approaching 10% savings rate.

A comprehensive market profile chart for the SPY since August 3.

With At The Money vol dropping markedly over the past 4 days, and the VIX plunging, the green light to buy stocks ahead of OpEx was given by those who traded 25% of the market volume in just 5 financial stocks purely as a result of yet another massive squeeze, dragging the balance of the market. Yet observing the wings indicates a significant steepening of the skew, especially in the last day. On the other hand, it could be simply churn moving away from stocks and into options. However, with today's bleak jobs data, offset by optimism out of Philadelphia, at this point there is no question that fundamentals have no bearing whatsoever in this market and momentum drives all. Every trade is merely a coin toss.

Is there any reason why markets are still open between 10am and 3:30pm?

The SPY just hit a 2009 low in volume, and markedly below the comparable period last year.

Not much commentary needed. Last night open interest was 28,197. Volume so far: 122,017. 122,000 lots = 12,200,000 shares - at around $95 each - that is a $1,159,000,000 notional trade