Monday, February 11, 2013

Congestive Market Failure

[Updated February 12th, 2013]
Recently I showed that stock market volumes have fallen in half since 2008. Seventy percent of the remaining volume is now accounted for by HFT Bots churning on millisecond boundaries. Now, just in the past couple of days, volumes on the most actively traded market ETFs (SPY, QQQ), have fallen in half again, relative to their 90 day moving averages.  Yesterday, I showed that SPY volume was lower (on an hourly basis) than Christmas Eve which was a half day of trading. Today's volume was even lower at 64 million, which is 57% lower than Dec. 24th volume, on an hourly basis. 

Contrast these collapsing volumes with the daily pollyanna bullshit being spewed by the lamestream business media. Conviction, in market terms, is measured by volume, and by that objective standard this Central Bank levitated market has a quarter of the conviction towards this bogus economy as it did at the prior top in 2007. In what will be history's largest pump and dump, these prices we see now on ludicrously low and manipulated volumes are merely an illusion. These will not be the prices obtained by motivated sellers all trying to get out the same door at the same time as HFT Bots conveniently decide they don't want to be on the other side of the market anymore...

SPY (S&P 500 ETF, Volumes):

Total NYSE Market Volume, Multi-year Trend

"Don't Fight The Fed"
Wall Street can't beat the Central Banks, so they have joined them. Short interest and hedging has collapsed...

S&P 500 (ETF) short interest (blue line). Two year low:
(This chart and the one below from

Nasdaq 100 (ETF) put/call open interest ratio (blue line): Two year low

Agricultural commodities, not feeling the Central Banker love...

In summary, global economic risks at this juncture make 2008 look like a picnic. Policy-makers are ignoring the economic health of the middle class consumer and instead taking their indications of economic health from the very same asset prices they levitated. It's a self-delusional circle jerk. Massively compounding risks, unlike 2008, investors are now highly motivated to ignore all of the macroeconomic risks and abandon hedging. We know how it turned out last time when investors were hedged going into the debacle, let's see how it turns out this time when investors are not hedged going into the debacle...