Extreme Lack of Volume

by Larry Levin

You wouldn't know it by the result of today's net gains across all indices, but Tuesday's trade was as slow as I can remember.  After the first hour of the day the market went up so leisurely that the following four hours traded within a microscopic 5 point range. Moreover, there was even LESS volume than yesterday’s pathetic excuse for trading size.  At the close, Tuesday’s total volume was 32% LESS than the recent 10-day average.

Despite this awful participation rate - the market soared.

The early news of the day - housing prices - was good but not good enough to send the market up the way it did.  The very next report, consumer confidence, was quite bad.  

June consumer confidence fell significantly for the second consecutive month. Economists pegged the data at 62.0 but it was released early this morning at 58.5.  The headline number wasn't the only one to disappoint; assessment of current jobs, future job prospects, buying plans for homes, cars, and appliances all fell sharply.

Despite this awful news - the market soared.

Next up was the worst 5-YR Note auction in the last many, many, months.  Not to worry though - this part of the “free market” is rigged too.  You see, via the Primary Dealers (PD) the US Treasury (unlike other countries) can never have a failed auction: the unsold inventory must be purchased by the PDs.  For this the PDs get unlimited bailouts, QE, POMO and so much more...funded by your tax dollars, of course.  Isn't the so-called "free market" great?  (Note, that’s complete sarcasm - it's not "free" at all, but managed by our financial overlords.)

Bloomberg said the following after the results of the auction were made public:

Buyer resistance may be appearing for Treasuries, judging by yesterday's soft 2-year note auction and today's even softer 5-year auction. Coverage is 2.59, the lowest of the last ten auctions, all $35 billion in size. In another sign of weakness, the high yield of 1.615 percent is more than two basis points above the one o'clock bid. Dealers ended up taking down 52 percent of the offering for the highest rate of the last four auctions in yet another sign that demand is soft. Demand for Treasuries is falling in reaction to the results which point to trouble for tomorrow's $29 billion 7-year auction.

Despite this awful news - the market soared.

Did I miss something?  Did Greece receive its 99th bailout?

Trade Date: 6/28/11

E-Mini S&P Trades*

(before fees and commissions):

1. No "Secrets" trades filled today.

2. Algorithm positions (0)

3. "Reading the Tape" positions (6) ...combined Secret's, Algo, & "Reading the Tape" total...-0.25 

Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!