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Vanishing Volume

This note was originally published at 8am on April 22, 2014 for Hedgeye subscribers.

“Nothing entirely disappears in history.”

-T.J. Stiles

 

But the US stock market’s volume in the last 5 trading days almost has…

 

#History, as eloquently defined by T.J. Stiles in The First TycoonThe Epic Life of Cornelius Vanderbilt, is “threads of tattered old fabric – especially social fabric – ever woven into new tapestries.” (pg 79)

 

Especially on the Old Wall, what’s stale to you and I eventually becomes the new. More commonly called consensus, it’s the art of front-running storytelling that makes us money. No pattern of predictable market behavior entirely disappears; especially with the benefit of looking in the rear-view mirror.

 

Back to the Global Macro Grind

 

So let me tell you a story this morning about Vanishing Volume. As with any good story, you need a good headline. After I effectively failed my first creative writing course in New Haven, a nice young professor taught me alliteration. Two v’s. Yep, so easy a Mucker can do it.

 

Vanishing Volume - vol1

 

What’s not easy for the financial media to tell you are original content stories that require a basic level of algebra and a contextual overlay (you know, something like, say, a time series… so that you can see something meaningful, like the rate of change).

 

Usually, it’s easier to show these historical matters in pictures. So, instead of reading my rant, you can just skip to Christian Drake’s Chart of The Day and get the point. What we’re showing you here is the lack of buying conviction (i.e. total US equity market volume, across all exchanges):

  1. Volume on DOWN DAYS = +8% versus the 1 month average
  2. Volume on UP DAYS = -5% versus the 1 month average
  3. Yesterday’s volume (an UP DAY) was -18% versus the 1 month average

Fair enough. Since it feels like half of America took the day off again yesterday, you can accuse me of cherry picking that one nasty day of no-volume. So I’ll broaden my horizons to the last 5-days. UP day volume was -14% versus the average.

 

Now, if you only use a Moving-Monkey (more commonly called a simple 50 or 200 day moving average), you don’t care about risk factors like this. Single-factor (price only) models are point and click. My 6yr old can do it on Yahoo Finance. No underneath the hood analysis of volume or volatility required.

 

Vanishing Volume - Volume Total Mkt

In my process (studying fractal patterns, returns, draw-downs, etc. of US stocks), using a multi-factor model is critical. And to be clear, it’s not that I have anything against monkeys… I used to use those things too (newsflash: they don’t work).

 

What’s the alternative? As a basic predictive signal, what works?

  1. Price UP, Volume ACCELERATING, and Implied Volatility FALLING = bullish
  2. Price DOWN, Volume ACCELERATING, and Implied Volatility RISING = bearish
  3. PRICE UP on DOWN VOLUME and Implied Volatility unchanged = bad

And really bad if you go all multi-duration and cross-asset-class (more factors) in your analysis!

 

So let’s go there.

  1. SP500 broke out (on no volume) above its intermediate-term TREND support of 1834, but failed at immediate-term TRADE resistance of 1887
  2. Nasdaq didn’t breakout above either my TRADE or TREND lines (bearish TREND with no support to fresh YTD lows)
  3. Russell2000 didn’t breakout above my TRADE or TREND lines of resistance either
  4. US Dollar Index bounced to lower-highs but remains below my TAIL risk line of $81.17 resistance
  5. US Bond Yield (10yr US Treasury) bounced to lower-highs but remains below my intermediate-term TREND resistance of 2.81%
  6. Nikkei (which is the upside down of the UP Yen vs USD move) failed at 14,835 TRADE resistance overnight = bearish TREND (-11% YTD)

I can keep going deeper and delve into the depths (more alliteration – see, I can do this without Janet – Yes I Can!) of the non-linear ecosystem that is the Global Macro Market – but I will not… because every good line of storytelling needs to simplify the complex.

 

What will be extra complex is seeing how Goldman and Credit Suisse explain their “buy Facebook (FB)” call from yesterday if my WhatsApp! man Zuck doesn’t deliver the 14x revenue bacon tomorrow. As for the buy Apple (AAPL) ahead of the quarter thing, that’s not how I roll.

 

I’m a macro man, so my main focus into and out of earnings events will be how the bubbles (Biotech and Social Media) trade after making lower-highs on lower-volumes. Biotech (IBB) was +2.3% yesterday but remains below @Hedgeye TREND resistance.

 

Oh, and Housing stocks (ITB) made fresh 2014 lows yesterday (-5.3% YTD), but let’s not story-tell about vanishing housing demand (while rates are falling) until tomorrow…

 

Our immediate-term Global Macro Risk Ranges are now (12 Big Macro ranges in our Daily Trading Range product):

 

SPX 1834-1887

VIX 12.39-15.90

USD 79.32-80.15

EUR/USD 1.37-1.39

Pound 1.67-1.69

Gold 1284-1309

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer


SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES...

Mass trends in the market remain disconcerting.  Genting outperforms in VIP.

 

 

Market trends

  • Thanks to better hold, Singapore gross gaming revenues increased 11% YoY  and 28% QoQ in Q1 2014 to S$2.2 billion.  Adjusting for hold (based on average since inception for both properties) for both periods, GGR fell for the 2nd consecutive quarter, -6% YoY. 
  • Despite Genting's growth, market VIP rolling chip volume shrank 9% YoY to S$39.8 billion in 1Q 2014 - the 2nd consecutive quarterly drop.  It is worth noting that comp were very difficult at S43.8 billion last 1Q
  • Mass revenue dropped another 6% YoY in Q1, the 3rd consecutive quarterly decline 
  • Net non-gaming revenue fell 1% YoY in Q1 the 2nd consecutive quarterly decline 
  • Market hold was 3.15%
  • Market historical hold since inception for both properties was 2.82%

Market shares

  • MBS GGR share is in-line with the 3 year average but below recent trends 
  • On a hold-adjusted basis, MBS lost 4% share to Genting this quarter
  • MBS lost volume share on both the VIP and Mass side with 41% of VIP rolling chip share and an estimated 55% of mass table volume share

* Blue trend lines in the charts below are from MBS's perspective

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - S1

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - S2

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - S3

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - S2.5

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - S4

 

SINGAPORE Q1 2014: GOOD HOLD FINALLY BUT VOLUMES... - s5



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Ironic Inflation?

“Irony is just honesty with the volume cranked up.”

-George Saunders

 

Since I won’t see any of our competitors on the Old Wall write about anemic stock market volume or US #ConsumerSlowing today, I stretched and cited an American short story writer from Texas. Since you don’t have a lot of time this morning, I’ll keep it tight.

 

“When I’m explaining something to you, if I’m being long-winded, and twisty… I could make you feel vaguely insulted. And you’d have a right to be.”

-George Saunders

 

Back to the Global Macro Grind

Ironic Inflation? - Sell in May 05.05.2014

The irony in talking about the truth on Wall Street today is that more and more people agree with it. If they didn’t, there wouldn’t be a net short position in the SP500 (Index + Emini futures and options contracts = net short position of 10,057 contracts coming into the open yesterday).

 

If buy-side pros weren’t getting real on #InflationAccelerating slowing US growth, you wouldn’t be seeing every hedge fund in America that was running +60-80% net long on January 1 tightening up their net exposures to the growth side of the US stock market either.

 

Yesterday’s no-volume +0.19% bounce to lower-highs on the SP500 (Russell2000 was -0.3% on the day) had the following volume readings:

  1. Total US Equity Volume was DOWN -26% versus the 1-month average yesterday
  2. Total US Equity Volume was DOWN -40% versus the 3-months average yesterday

In other words, next to Easter Monday, it was the lowest volume Monday we have witnessed all year (and it wasn’t Easter Monday!). So what was it? Was it the weather? When the weather is nice on the East Coast, does everyone take Monday’s off?

 

You’d be hard pressed to convince me that as a country socializes its downside (and in doing so limits its upside) that its people don’t get lazier. Before you know it, it’ll be cool to work less than they do in France. Ah, la belle Providence, RI!

 

Enough of my opinion on this no-trust-no-volume-rally-to-all-time-bubble-highs. I’m sure everyone will be able to get out, at the same time. Here’s what else was happening in the real-world of #InflationAccelerating yesterday:

  1. Wheat prices up another +1.9% to +18% YTD
  2. Corn prices up another +1.9% to +16% YTD
  3. Coffee prices up another +0.9% to +77% YTD

I know, I know. If you back all this stuff out, there’s no inflation. Got it. If you can find me an employer who dynamically adjusts your paycheck to real-time food, shelter, and energy, let me know. I’ll short his stock.

 

BREAKING:Ruble Plunge Hitting Russians” –Bloomberg

 

Unlike some of Mike’s inflationary Big Government Intervention policies in NYC, that headline from his mother ship of market storytelling is economically accurate. When a government burns the purchasing power of its people (its currency), its poor people get hit, hard.

 

BREAKING: “US Dollar Hits Fresh YTD Lows, Hammering Americans” –NY Times


#kidding

 

The NY Times, CNBC, and/or any of its government access offspring wouldn’t dare put what helped JFK get elected (“Strong Dollar, Strong America” on the cover of the NY Times #1960s). That would incriminate Obama for having a Down Dollar policy that is pulverizing America’s poor.

 

With the US Dollar Down for the 3rd consecutive week:

  1. The Euro is punching a fresh YTD high up at $1.39 (vs USD)
  2. The British Pound continues to crush it (+6% vs USD in the last 6 months) to a fresh YTD high of $1.69
  3. The Yen continues to signal bullish TREND in our model (vs USD) at +3% YTD

And that’s with these Japanese dudes printing what, 60-70 TRILLION Yens a year? Hooowah! Gotta love the irony in America’s domestic currency policy when compared to that.

 

In our government PIG model (our GIP – Growth, Inflation, Policy model, bass-ackwards), using the weapon of mass inflation (P – Policy) there are 2 big things the government can use to drive the value of your hard earned currency:

  1. FISCAL policy (to spend moarrr, or not, remains the question)
  2. MONETARY policy (to print, print, print, or to tighten, remains the question)

On the fiscal side, as US growth slows, you can bet your Madoff that Obama is going to spend. On the monetary side, as Janet realizes it’s not just the weather that the US Consumer is eating this summer, I think she’ll get easier (or rhetorically un-taper).

 

That’s Dollar Bearish, Rates Bearish, and real US Growth Bearish. Since the Policy To Inflate cranks up your cost of living. There’s no irony in that.

 

Ironic Inflation? - Chart of the Day

 

Our immediate-term Global Macro Risk Ranges are now as follows:

 

UST 10yr Yield 2.56-2.67%

SPX 1

RUT 1099-1140

USD 79.05-79.74

EUR/USD 1.37-1.39

Pound 1.67-1.69

Natural Gas 4.59-4.85

Gold 1

Corn 5.01-5.31

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer


April 6, 2014

April 6, 2014 - 1

 

BULLISH TRENDS

April 6, 2014 - Slide2

April 6, 2014 - Slide3

April 6, 2014 - Slide4

April 6, 2014 - Slide5

April 6, 2014 - Slide6

April 6, 2014 - Slide7

April 6, 2014 - Slide8

April 6, 2014 - Slide9

 

 

BEARISH TRENDS

 

 

April 6, 2014 - Slide10

April 6, 2014 - Slide11
April 6, 2014 - Slide12


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – May 6, 2014


As we look at today's setup for the S&P 500, the range is 34 points or 1.52% downside to 1856 and 0.28% upside to 1890.                                                       

                                                                        

SECTOR PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:

 

THE HEDGEYE DAILY OUTLOOK - 10

 

CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.20 from 2.19
  • VIX closed at 13.29 1 day percent change of 2.94%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7:45am: ICSC weekly sales
  • 8:30am: Trade Balance, March, est. -$40b (prior -$42.3b)
  • 8:55am: Redbook weekly sales
  • 10am: IBD/TIPP Economic Optimism, May, est. 47.9 (prior 48)
  • 11:30am: U.S. to sell $35b 4W bills
  • Noon: DOE short-term energy outlook
  • 1:00pm: U.S. to sell $29b 3Y notes
  • 4:30pm: API inventories
  • 7pm: Discussion with Fed in St. Louis

GOVERNMENT:

    • Primaries today in Indiana, North Carolina, Ohio
    • 9:30am: Attorney General Eric Holder delivers remarks at Correctional Workers Week Memorial Service
    • 9:30am: Senate Armed Services Cmte hears from Joint Chiefs Chairman Martin Dempsey and services’ chiefs of staff on military pay
    • 10am: Senate Finance Cmte holds hearing on highway trust fund
    • 10am: Hillary Clinton speaks at Nat’l Council Behavioral Health
    • 1pm: Statoil CEO Helge Lund discusses his strategy at CSIS
    • 3pm: Senate Foreign Relations Cmte hears from Asst. Sec. of State Victoria Nuland on Russia
    • 7pm: Federal Reserve Gov. Jeremy Stein speaks at dinner held by Money Marketeers of New York Univ.
    • U.S. ELECTION WRAP: May Primaries; Buffett on Hillary

WHAT TO WATCH:

  • French President Hollande says GE bid undervalues Alstom
  • Barclays 1Q profit declines more than est. on fixed income
  • Ukraine unrest intensifies as toll rises from East offensive
  • Google to ask U.S. appeals court to throw out $30m Vringo jury verdict
  • Samsung says will challenge Apple patent infringement verdict
  • AstraZeneca chairman asks Cameron to stay bid-neutral: FT
  • Pfizer CEO willing to walk away from AstraZeneca bid: WSJ
  • Investors pushing U.S. banks for cash returns, special divs.
  • Credit Suisse put business probed by U.S. into separate unit
  • Fiat said to start Alfa Romeo model expansion with own funds
  • Sprint matches T-Mobile’s prepaid plan in Son’s price war
  • Coke, Pepsi to remove vegetable oil derivative from drinks
  • N.D. Sen. Hoeven says 3 votes short of Keystone cloture
  • Senate Foreign Relations Cmte meets on Russia, Ukraine
  • Fed Gov. Jeremy Stein speaks at 7pm NYU dinner

AM EARNS:

    • Akorn (AKRX) 6:00am, $0.15
    • AMETEK (AME) 7am, $0.56 - Preview
    • Arcos Dorados Holdings (ARCO)  8am, $0.02
    • Ares Capital (ARCC) 8am, $0.39
    • Arrow Electronics (ARW) 8am, $1.21
    • BCE (BCE CN) 7am, C$0.76 - Preview
    • Carrizo Oil & Gas (CRZO) 6:30am, $0.40
    • CBOE Holdings (CBOE) 7:30am, $0.56
    • Denbury Resources (DNR) 7:30am, $0.25
    • Dentsply International (XRAY) 7am, $0.56
    • Discovery Communications (DISCA) 7am, $0.71
    • Emerson Electric Co (EMR) 6:30am, $0.81 -Preview
    • FirstEnergy (FE) 8:30am, $0.42
    • George Weston (WN CN) 8am, $0.76
    • GNC Holdings (GNC) 8am, $0.76
    • Henry Schein (HSIC) 7am, $1.13
    • Hillshire Brands (HSH) 7:30am, $0.36
    • HollyFrontier (HFC) 7am, $0.77
    • Intl. Flavors & Fragrances (IFF) 7am, $1.25
    • Isis Pharmaceuticals (ISIS) 8:30am, ($0.24)
    • Magellan Midstream Partners LP (MMP)  8:30am, $0.68
    • Mosaic (MOS) 7am, $0.59  - Preview
    • NRG Energy (NRG) 6:49am, ($0.13)
    • Nu Skin Enterprises (NUS) 7:30am, $0.94
    • Office Depot (ODP) 7am, $0.03
    • Quicksilver Resources (KWK) 7:30am, ($0.07)
    • Radian Group (RDN) 7am, $0.22
    • Rowan Cos Plc (RDC) 8:00am, $0.20
    • Semafo (SMF CN) 8:23am, ($0.02)
    • Towers Watson & Co (TW) 6:00am, $1.48
    • Vantage Drilling Co (VTG) 7am, $0.08
    • Vishay Intertechnology (VSH) 7:30am, $0.18
    • Vulcan Materials (VMC)  8am, ($0.33)
    • Western Refining (WNR) 6:00am, $0.40
    • WestJet Airlines (WJA CN) 6:30am, C$0.63 -Preview
    • Zoetis (ZTS) 7am, $0.37 - Preview

PM EARNS:

    • Acadia Pharmaceuticals (ACAD) 4:01pm, ($0.13)
    • Activision Blizzard (ATVI) 4:05pm, $0.10
    • Agrium (AGU CN) 6:45pm, C$0.04 - Preview
    • Allstate (ALL) 4:05pm, $1.20
    • Electronic Arts (EA) 4:03pm, $0.11 - Preview
    • FireEye (FEYE) 4:05pm, ($0.53)
    • First Solar (FSLR) 4:05pm, $0.52
    • FMC (FMC) 4:15pm, $0.95
    • Forest Oil (FST) 4:22pm, ($0.02)
    • Frontier Communications (FTR) 4:01pm, $0.06
    • Groupon (GRPN) 4pm, ($0.03) - Preview
    • Iamgold (IMG CN) 5:04pm, $0.02
    • Liberty Global PLC (LBTYA) 5:40pm, ($0.08)
    • Marathon Oil (MRO) 4:03pm, $0.72
    • Matador Resources Co (MTDR) 4:05pm, $0.28
    • Microchip Technology (MCHP) 4:15pm, $0.62
    • Myriad Genetics (MYGN) 4:05pm, $0.45 - Preview
    • Oneok (OKE) 4:05pm, $0.37
    • Pioneer Natural Resources Co (PXD) 4:05pm, $1.06
    • Prospect Capital (PSEC) 4pm, $0.32
    • Qiagen NV (QGEN) 4pm, $0.22
    • Sun Life Financial (SLF CN) 5:10pm, C$0.66 - Preview
    • Trimble Navigation (TRMB) 4:02pm, $0.42
    • TripAdvisor (TRIP) 4:02pm, $0.54
    • Veresen (VSN CN) 4:22pm, C$0.05
    • W&T Offshore (WTI) 5:20pm, $0.21
    • Walt Disney (DIS) 4:15pm, $0.95 - Preview
    • Whole Foods Market (WFM) 4:03pm, $0.41
    • Zulily (ZU) 4:05pm, $0.00

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

 

  • Brent Rises as Russia and Europe Discuss Ukraine; WTI Advances
  • El Nino Alert Signals Drought, Flood Risks for World’s Farmers
  • Crop ETFs See 27% Surge in Assets on Weather Risks: Commodities
  • Nickel Advances as Ukraine Fuels Concern Supply Might Run Short
  • Corn to Soybeans Slip as U.S. Weather Outlook Favors Planting
  • Gold Near Three-Week High as Ukraine Weighed With U.S. Economy
  • Sugar Rises Amid El Nino Alert Update; Arabica Coffee Also Gains
  • Nickel to Rally 20% Further Amid Indonesia Ban, Survey Shows
  • G-7 ‘Determined’ to Cut Russian Energy Dependence, U.K. Says
  • British Coins Pass Test in 800-Year-Old Rite as Osborne Watches
  • Cushing Oil Storage Area May Empty in Weeks: Morgan Stanley
  • Oseberg Crude Exports Said to Jump to Seven Cargoes in June
  • Copper Supply Additions May Peak in 2014, Plunge 79% by 2020
  • No Petroleum No Problem for Pipelines Backed by Private Equity

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES


THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 

 

 


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