At Least They Have Volume!

Yesterday’s dramatic Face-Ripper™ comeback was a very important development for the bulls and even the neutrals (like myself) as it brought almost everything back from the depths.  This certainly doesn’t mean that the volatility is at an end.

The Fed’s release yesterday was hilarious.  They actually put a date on when they’d remove the zero interest rate as if they were talking about a blockbuster summer movie release (Men in Black IV, Memorial Day 2013!).  Anyway, since zero interest rates have been working so well so far, why not continue it?

The bulls have very little to be excited about, yesterday’s rally aside.  Nothing in the charts is fixed at all and the economic data will continue to roll in weaker-than-expected barring some sort of miraculous, coordinated about-face.  GDP estimates are being ratcheted down on a daily basis by Wall Street economists and the decrease in government spending (25% of the economy) simply cannot be answered for by the private sector right now, we know this for a fact.  The result of all this is an almost inevitable compression in price to earnings ratios as well as downside risk to analyst earnings estimates.

And Europe simply cannot unfuck itself, each day the situation grows worse.

In other words, snapback rallies are the norm in distributive tapes, accept them and enjoy them – but know them for what they are.

Anyway, one major positive on the side of the US stock market bull is Volume.  Over at MarketBeat, Jonathan Cheng has collected some intersting data about yesterday’s historic activity:

Nyse composite volume — 8.93 billion shares traded today.

• Second biggest volume day this year.
• The last four day’s trading volume averaged at 8.69 billion shares
• Today’s volume rank as the 12^th largest in its history.
• The average daily volume this year (excluding today) is 4.21 billion

If you’re being honest, then you can’t simply say that that’s all short-covering…there are still big buyers out there and levels that bring them off the sidelines and into the fray.  Bond money can become stock money very easily which is what prevents things from getting completely out of hand.  This will make for a very choppy tape throughout August in my view, and I see very little reason to play aggressively on either side of that.