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What Volume Tells Us About The (Lack Of) Conviction In The U.S. Stock Market

Takeaway: The lack of conviction in each up day in stocks is clear with U.S. total equity volume down -12% yesterday versus its three month average.

What Volume Tells Us About The (Lack Of) Conviction In The U.S. Stock Market - Volume cartoon 08.12.2014 

 

Upon closer inspection, each up day in U.S. equity markets reveals a telling lack of conviction. 

 

Investors express confidence in the direction the market is headed via the amount of trading volume on U.S. exchanges. Lately, volume has all-but disappeared.

 

Total U.S. equity volume was down -12% yesterday versus its three month average. This trend, of declining volume on rising prices, has continued for some time now. Interestingly, volume has been accelerating on down days. 

 

 

Understanding the intimate relationship between price, volume and volatility (how we manage risk here at Hedgeye) is essential for any investor. In the video below, Hedgeye CEO Keith McCullough gives a brief tutorial on the different permutations of price, volume and volatility with insights about what the current environment is telling us.

 

Spoiler Alert!

 

Today's U.S. stock setup isn't good.

 


Daily Market Data Dump: Tuesday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Tuesday - equity markets 6 7

 

Daily Market Data Dump: Tuesday - sector performance 6 7

 

Daily Market Data Dump: Tuesday - volume 6 7

 

Daily Market Data Dump: Tuesday - rates and spreads 6 7

 

Daily Market Data Dump: Tuesday - currencies 6 7


The Repercussions Of Yellen Fed Burning The Buck & How To Trade It

The Repercussions Of Yellen Fed Burning The Buck & How To Trade It - burn buck

 

With the Yellen Fed intent on burning the buck, the U.S. dollar continues to drive asset reflation.

 

Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier today:

 

"Not surprisingly, USD oversold signal registers overbought signals in CRB Index, Gold, and Copper – WTI’s overbought level right around $49.99/barrel (CRB Index overbought level = 193); Copper backing off 1st, as it’s the weakest of the reflation hands short-term traders are willing to hold."

 


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CHART OF THE DAY: Breaking Down The Cycle's Toughest Earnings Growth Comps

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... And that’s really the point on raising Cash. I have no problem buying stocks when they are on sale. But when they are at the top-end of my current SP500 risk range (2049-2116) AND the latest bull case is one of the easiest yet to refute, I get out.

 

As you can see in today’s Chart of The Day (slide 35 in our Q2 Macro Themes Deck) the toughest comps (comparative period) for #LateCycle Sector Earnings Growth is the 2nd quarter. That’s because Q2 of 2015 was the peak."

 

CHART OF THE DAY: Breaking Down The Cycle's Toughest Earnings Growth Comps - 06.07.16 Chart


Cartoon of the Day: Yellen & Screamin'

Cartoon of the Day: Yellen & Screamin' - Hawk dove cartoon 06.06.2016

 

The mercurial Fed has pivoted from Hawkish (in December) to Dovish (March/April) to Hawkish (May). With today's speech, market consensus now perceives Yellen & Co. as flipping back to Dovish here in June. Clearly, the Fed is perpetuating a massive amount of volatility in macro markets.


Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump?

Takeaway: Clinton's Conundrum, Trusting Trump?, Procrastination Nation

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - capital brief

 

Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email sales@hedgeye.com.

CLINTON'S CONUNDRUM

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - hillary another

 

Hillary Clinton needs less than 30 delegates to secure the nomination – a sure bet after looking to amass a large chunk of delegates in tomorrow’s primaries in NJ, CA, MT, NJ, NM, ND, and SD. All in, CA remains the biggest prize as Clinton and Bernie Sanders remain neck and neck.

 

If she’s able to edge it out, she’ll hand Sanders a lethal blow – but then what’s in it for Sanders? Sure – he’s corralled and electrified the masses, but his future steps are immensely important. Clinton’s lead in the general election polls over Donald Trump remains slim and when Sanders decides to hang it up – expect Clinton’s numbers to climb – but she’ll need his help getting there.

TRUSTING TRUMP?

Capital Brief: Clinton's Conundrum ... & Will The GOP Trust Trump? - trump pic

 

The Donald Trump trust factor may be the biggest issue facing the Republican party this year and though many Republican leaders have taken their seats aboard the Trump train they know there will be many opportunities for a derailment or two.

 

Senior Republicans are calling Trump’s recent criticism of a Hispanic judge the last straw after promising to make an effort to “lighten” his choice of words when speaking of minorities as Goldwater flashbacks keep them up at nights. If Republicans believe they have a fighting chance this November,  they’ll need to mitigate their trust in Trump to do the right thing – and fast.

PROCRASTINATION NATION

With summer recess nearing and an unfinished budget still looming, Congress returns this week to a full plate. Zika funding has been sitting before Congress for more than three months – House and Senate bills are yet to combine due to political reasons. Puerto Rico is still sinking but sees a glimmer of hope as legislation will hit the Rules Committee later this week, followed by a vote in the House later in the week. With this hanging over Congress’ head, remember – it’s also Appropriations season and we’ve only got five weeks until Congress skips town for a loonnnngg summer recess.


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