Though it won't come as a surprise to too many who have seen us point to US equity outflows and the dreadfully declining volume on the NYSE, we leave it to UBS' Art Cashin to uncover where the real action is - and more importantly where it really is not. The experienced Cashin points to the early excitement as Asia and Europe remain active and the dramatic ebb as both of these markets head off to supper, leaving just US traders (and investors we assume) sitting on their hands, twiddling their thumbs, and generally not playing the game (aside from the general rumor-mongery that appears to be rising day by day).
Art Cashin - UBS: China Flyby And Successful European Auctions Produce Rally That Falters
Art Cashin - UBS: China Flyby And Successful European Auctions Produce Rally That Falters
For months now traders have debated whether China was headed for a soft landing or a hard landing. Yesterday, they released their GDP at 8.9%. While that was a sign of some slowing in China, it was far from a hard or even a soft landing. The wheels never hit the ground.
The solid Chinese data seemed to confirm that the world wasn’t coming to an end, at least not this week. That put a bid under various commodities as the Chinese economic engine would still have to be fed.
Then came a couple of European auctions that went off without a catch and some improved data out of Europe. With that backdrop, European stocks rallied and U.S. futures followed suit.
That, plus better than expected New York Fed data, allowed U.S. stocks to open with a roar. Within the first 20 minutes of trading, the Dow was up over 150 points and the S&P was above 1300. Would the shorts be pushed into a panic?
Instead, the sense of urgency that came with the rally began to dissipate.
Over the course of the session, I projected the markets run rate to squawkbox adherents as well as several trading associates and friends. As I noted in yesterday’s Comments, the market on close orders are a bit of a wild card in the final volume count. So, I cautioned the friends that the run rate projection should use a target of what’s on the tape exactly at 4:00, just as the bell is ringing. Those calculations then give you a true sense of the intraday activity.
With that caveat, here were some of the projections that the market gave yesterday. At 10:00, the run rate was 1.2 billion, a lot more interest and intensity than we’ve seen recently. By 11:00, it had slacked off to 862 million and by 12:00, it was 690 million. At 1:45, the projection was for 650 million. (Luckily, at 4:00, as the bell was ringing, the volume was 651 million. When the “on close” volume was added in, the final count was 806 million.)
So, we see the most intense interest and activity in the first 30 minutes of trading when Asian and European players are involved. Then between 10:00 and 11:00, volume falls off as Asians decouple and depart. Europe still has a half hour to go and remains an influence. By noon, with Europe closed, the run rate falls to near its final count. From noon to mid-afternoon, the rate slows marginally to its final constant level.
That process tells us a good deal about who is playing and how intently.
Another factor in Tuesday’s trading was the rumormongers.
On Tuesday, they left their familiar recent subjects of broken Greek deals and rating changes to go domestic. There were rumors that Sears might be taken private. That rumor cleverly built on the fact that Eddie Lampert had recently, and noticeably, bought more stock personally. The rumormongers also took a run at a RIMM takeover.
A late session slump in the financials weighed on the rally and the Dow struggled to close up 60. Traders wondered if it was napkin resistance that stopped them or was it further concerns and uncertainty out of Europe. Either way - it was a disappointment.
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