We don't believe the permabull's "all is good" narrative about the U.S. economy. Our forecast for the 1st half of 2016 represents the slowest pace of US domestic economic growth since the back half of 2012.
In this brief excerpt from The Macro Show, Hedgeye CEO Keith McCullough and Retail analyst Alec Richards respond to a subscriber’s question about whether companies like Amazon and Facebook can continue to prop up equity markets.
Takeaway: Exchange activity remains positive year-over-year to start 2Q and any market draw down historically benefits volume.
Weekly Activity Wrap Up
Cash equity volume held steady at 7.0 billion shares traded per day this week, keeping the 2Q16TD average daily volume (ADV) in line at 7.0 billion, +10% higher than the year ago period in 2Q15. The volume of futures traded through CME and ICE contracted week-over-week to 18.6 million contracts traded per day, but still pushed 2Q16TD ADV to 18.4 million, +4% higher year-over-year. Furthermore, CME's open interest currently tallies 110.0 million contracts, +20% higher than the 91.3 million pending at the end of 2015. This compares to ICE's OI growth of just +4% since the beginning of the year. Lastly, options volume came in at 15.5 million, lower week-over-week but consistent with the 2Q16TD ADV, which is +1% higher against 2Q15.
U.S. Cash Equity Detail
U.S. cash equities trading came in at 7.0 billion shares per day this week, keeping the 2Q16TD ADV at 7.0 billion. That marks +10% Y/Y growth. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 25% share of second-quarter volume, which is +81 bps higher Y/Y, while NASDAQ is taking a 17% share, -166 bps lower than one year ago.
U.S. Options Detail
U.S. options activity came in at a 15.5 million ADV this week, keeping the 2Q16TD average at 15.5 million, a +1% Y/Y expansion. In the market share battle amongst venues, NYSE/ICE is taking a 17% share of 2Q16TD volume. Although that 17% is +61 bps higher than NYSE's year-ago share, it has been trending downwards. Additionally, CBOE's 25% market share of 2Q16TD is down -242 bps Y/Y. Meanwhile, NASDAQ is doing well in 2Q16TD, taking a 23% share, +95 bps higher than one year ago. BATS has also been taking share from the competing exchanges, up to an 11% share from 10% a year ago. Finally, although ISE/Deutsche's share expanded through 1Q16, it has been falling recently; at 14%, its share is -119 bps lower than 2Q15.
U.S. Futures Detail
13.9 million futures contracts per day traded through CME Group this week, bringing the 2Q16TD ADV to 13.8 million, +3% higher Y/Y. Additionally, CME open interest, the most important beacon of forward activity, currently sits at 110.0 million CME contracts pending, good for +20% growth over the 91.3 million pending at the end of 4Q15, although a contraction from last week's +21%.
Contracts traded through ICE came in at 4.6 million per day this week, bringing the 2Q16TD ADV to 4.6 million, a +7% Y/Y expansion. ICE open interest this week tallied 65.9 million contracts, a +4% expansion versus the 63.7 million contracts open at the end of 4Q15, consistent with last week's +4%.
Monthly Historical View
Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.
Please let us know of any questions,
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
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Takeaway: Caribbean tailwinds abate somewhat for the rest of 2016 - soft guidance stemming from Europe & China matters
Here are our takeaways from today's release and conf call:
Takeaway: The muted chase off a largely flawless print suggests 4Q15 is still top of mind; LNKD may need to over-deliver just to stay afloat this year
Let us know if you have any questions or would like to discuss in more detail.
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