Lowest Volume Of The Year As Stocks Inch Higher

NYSE total volume was the lowest for the year today. Almost 20% below December's average and down 10% from Friday's already low volumes, US equity markets managed to limp higher post the European close. Notably, volume in ES (the e-mini S&P 500 futures contract) was also the lowest of the year (at around 1.43mm cars vs 2.11mm 50-day average) and what volume there was focused on the European trading session (and right at the close). Today saw the average ES trade-size rise to recent peak levels as we note trade-size picked up into the Europe close (considerably higher average trade size around the European close than normal) and then again at the close. Peaks in average trade-size have often pre-empted turning points in the market and we note that while markets closed quietly unchanged (practically), high yield credit lost ground on the day and broad risk assets (while mostly showing small net changes) did not as a whole rally off the European close lows as enthusiastically as stocks. VIX futures and implied correlation continue to diverge as we note that VIX actually closed higher for the first time in five days.

NYSE total volume today was -10.27% from Friday's abysmal performance and is almost 20% below December's non-holiday average.

ES average trade size (the lower pane) was its highest of the year today (in the face of dreadful overall volumes). As is evident from the chart - these surges in average trade size have tended to coincide with turning points in the market.

VIX futures (red) slid lower as implied correlation (green - the relative demand for macro protection over micro fair-value) continued to diverge bearishly higher. Note that the S&P (black) has largely trod water for the last two days as vol has leaked off. Short-dated VIX rose today (orange) for the first time in five days.

In credit and equities, HYG (high yield bond ETF) sold off into the close (green) quite aggressively on relatively high volume (considering the day it had). [It seems HYG was once again used as a battering ram to try and drag risk higher but was then collapsed into the close - as is evident here]. HY17 (the high yield credit spread index) leaked lower all day - diverging from IG (investment grade) credit - not exactly a positive risk-on perspective.

In order to better compare the relative performance of stocks (SPY) to the rest of the macro capital structure (Volatility, credit, and interest rates), we look at the above chart of Capital Context's SPY Arb model (as opposed to CONTEXT which tracks ES against other global risk assets). While there are days when one market will trend away from the others, the green line is a vol-credit-rate-based (VXX-HYG-TLT) proxy for where SPY should trade. It is clear that non-SPY elements were ramped in the late afternoon (this was mostly HYG up and VXX down) but SPY was not playing and hence the more significant sell-off in HYG and VXX into the close. Perhaps this 'manipulation' was to enable the heavier volume professionals to lay out shorts into the close?

High yield and Investment grade corporate bond advance-decline lines have rolled over and are heading lower - off some dazzling peaks in high yield. Interestingly, investment grade corporate bonds saw their first day of notable net-selling today (perhaps on the back of some new issue switches as energy, utilities, and consumer cyclicals were most net-sold) while high-yield saw net-buying, perhaps reflective of the recent rise in creation units (shares outstanding).

Industrials outperformed and Tech and Discretionary underperformed (unusually) amid the S&P sectors with financials managing to gain 0.5% more today (though well off their best levels of the day).

In commodities, Oil staged a late day surge back over $101 to end only modestly lower from Friday's close. Copper and Gold limped lower though the latter held above $1610 but found resistance near the 200DMA hard to get up to for now. Silver was the winner in spot as it rose 0.75% from Friday's close and the PSLV premium rose further too.

In FX, DXY (the USD index) closed back under 81 as EURUSD ended the day at its best (up around 0.38% from Friday) at 1.2765. The USD was weak against all the majors with SEK outperforming and AUD underperforming from Friday's close.

Treasuries yields whipped up-down-up today as we saw buying pressure into Europe's close and selling pressure thereafter. 30Y swung from +3bps to -4bps to close at unchanged on the day as the curve very modestly flattened.

Charts: Bloomberg


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