Feb 162012
 
 February 16, 2012  Posted by at 2:12 pm Finance
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.EconGeneral01It is probably unsurprising that, as December saw redemptions of almost $25 billion from U.S. equity and mixed-equity funds (to bring total equity outflows for 2011 to about $140 billion), the volume of shares traded on the S&P has also crashed in 2011. Volume on the SPX index is now far below what it reached during the last recession, as shown by the graph below.

Louise Copper from BGC Partners included the following note to her clients with this graph:

“The chart showing the volume traded in FTSE 100 shares looks very similar to that above, with a huge drop off in volumes in 2012 and less than a quarter of the volumes traded since pre-crisis. Both the DAX and CAC have also experienced light trading year to date suggesting little conviction to the rally.


Volatility in the US and European equity markets has fallen a long way since the fearful times of Autumn last year, but has been increasing recently, suggesting concern is coming back.

 

So what is the conclusion? I think there is a real chance now that Greece does suffer a hard and messy default and that financial markets could suffer a serious wobble if it occurs.”

The increasingly few traders that make up the markets these days are hopelessly addicted to indications of massive government spending and printing. Pan-European austerity, better-than-expected U.S. economic data, the theater of election season and the very real prospects of a “hard and messy” Greek default, to be shortly followed by very similar prospects for Portugal (where unemplyoment just reached a record 14%), do nothing to reassure investors that they will be getting either of those things. At least, it won’t be nearly the quantity and purity of the drugs they were expecting.

Perhaps the markets will avoid rolling over for a few more days or weeks as the tried-and-true rumor mill starts churning, and the Eurocrats reach some sort of last-minute deal with Greece on Monday “at the brink of disaster”. But everyone is quickly becoming aware of the tremendous downside risks if that doesn’t occur, on top of the fact that, even if it does occur, it won’t change a thing for the European periphery which is now contracting at break-neck speed. We can only hope the last remaining “retail investors” extract their money before the bottom gives out (again), but unfortunately a lot of people are destined to lose their “savings” at this point (again).

Home Forums As the No-Volume Market Churns

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February 16, 2012 at 2:12 pm #8625

ashvin

It is probably unsurprising that, as December saw redemptions of almost $25 billion from U.S. equity and mixed-equity funds (to bring total equity out
[See the full post at: As the No-Volume Market Churns]

February 16, 2012 at 6:02 pm #768

Robert 1

“So what is the conclusion? I think there is a real chance now that Greece does suffer a hard and messy default and that financial markets could suffer a serious wobble if it occurs.”

Scuttlebutt on KD’s site suggests the same conclusion:

http://market-ticker.org/akcs-www?post=202112

February 16, 2012 at 10:48 pm #772

NZSanctuary

The link (The Slog) at Market Ticker gives more info – interesting stuff.

February 16, 2012 at 11:17 pm #773

Golden Oxen

Agree the low volume is bearish, wouldn’t the chart strongly suggest however it was about to turn up.?

February 16, 2012 at 11:26 pm #774

ashvin

Golden Oxen post=367 wrote: Agree the low volume is bearish, wouldn’t the chart strongly suggest however it was about to turn up.?

The key thing to note is that volume has been dropping off while the market has rallied, both short-term and over the last 3 years. Volume may very well pick up on the way down.

February 16, 2012 at 11:51 pm #776

JoeP

I thought most trading was dark pool trading these days. I don’t think this is reflected in the chart.

February 17, 2012 at 12:34 am #777

ashvin

JoeP,

That’s a good point, but dark pool trading necessarily involves the biggest institutions out there, and so the point that small to mid-size retail and institutional investors are not participating much is still valid. How long can the big boys churn the markets between each other and manipulate data/prices while the fundamentals become downright revolting and everyone else is rapidly losing confidence in the system? More importantly, who wants to bet their “savings” on their ability to answer that question.

February 17, 2012 at 12:47 am #778

JoeP

Ash,

Those are the same questions I’ve had for a couple of years or so.

February 17, 2012 at 12:57 am #779

ashvin

JoeP,

Indeed, but, a lot more people who manage a lot more money and wield more influence than you and I are also asking those questions now, especially after MF Global.

It tends to get lonely when you’re so far ahead of the pack, huh? ;)

February 17, 2012 at 2:31 am #781

Golden Oxen

No, I do not want to bet my life’s savings. The defender of my currency however assures me that he will make it worthless soon if I don’t. His recent actions have assured me he is not bluffing. What to do, What to do?? Have tried gold and silver stocks as well as some oils, but not working out very well so far. No answers here, just questions???

February 17, 2012 at 3:42 am #784

ashvin

Golden Oxen,

You currency becoming worthless is not the main concern right now (assuming its $). There are no good options, only less bad ones, and cash is the least bad right now for preserving purchasing power, as well as “hard assets” for moving towards self-sufficiency. Almost every situation in which your money is tied up with a second, third, fourth…nth party is a very bad one, and that obviously includes all investments in equities and commodities, as well as most bonds. Physical gold and silver are only good if you can afford to sit on it and keep it secure for at least a few years of very harsh deleveraging.

February 17, 2012 at 6:44 am #786

Mark T

In case anyone is interested the RT television channel has a good business program which runs weekdays from 4:30 to 5:00 PM (Eastern time).

It is called Capital Account. All of the shows which run on television can be accessed from their website, but it sometimes takes a day or two before all of the links to the latest shows are added. The following is the link to their website:

http://rt.com/programs/capital-account/

February 17, 2012 at 11:31 am #787

Robert 1

More on Greek possible default. http://hat4uk.wordpress.com/2012/02/16/greek-default-plan-jp-morgan-also-possesses-it/

February 18, 2012 at 4:01 pm #805

rad

Is this exceptionally low volumn the precursor to a tidal wave? The current “feel good” retoric that the economy is improving without any real changes that would improve the banking system–like a new Glass-Stegal law–is, I think, nothing more than campaign rhetoric. In fact, the bankers have just been given a substanial reprieve visa a vis the mortgage fraud scandle. Is it business as usual, or even worse?

February 18, 2012 at 7:44 pm #814

ashvin

Another interesting chart courtesy of Elliot Wave:

“‘Beware the buyback,’ reported Barron’s over a story about a new study by Rockdale Research. ‘The most unexpected thing…was that corporations tend to buy back stocks at peaks, not troughs.

“[Robert Prechter's Elliott Wave Theorist] made the same observation in 1995…noting, ‘Company officers are part of the market’s psychological fabric just like everyone else, and they tend to become bold when things look good, and that’s usually near a top.’”

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