Well I don't know if it is the return of the Summer Doldrums which was a long standing market phase that lost its place during the 2009-2011 period when the F_E_D was so active in intervention, or perhaps it's Knight Capital's absence from the market or just the market running on fumes, no more demand for higher prices here, but the market did it again, ES, the S&P E-Mini Futures put in a new multi-year record low for volume yesterday, the NYSE's volume which I talked about Monday as being the lowest volume ever (not including holiday/abbreviated sessions) was just as bad as Monday; and there's our explanation for the "mushy signals" from yesterday. If there's not a lot of volume there's also likely not a lot of institutional activity; one thing you must understand when looking at 3C is not every move means something, institutional money isn't active every minute of the day in every stock (HFT activity is different, but that doesn't tend to show up on our longer timeframes as they are flipping in seconds or even a second).
Still, quiet markets, and yesterday qualified, are dangerous markets; they lull you in to complacency and then wallop you over the head with a big surprise move; this is why I was so focussed on the market yesterday, looking for the clues.
According to historic records, the 8-day range of ES has been this low only a handful of times over the last several years and in EVERY case except one, it marked a significant top.
The opening ramp was the classic, "bad news is good news" which also sent GLD higher, but not by much as the bad news doesn't seem to be enough to justify a new round of QE, which has been the only thing holding this market together, HOPE.
According to our Risk Asset layout, the risk on High Yield Credit saw an ugly close, this isn't good for equities.
High Yield Corp. Credit was in line intraday with the SPX until the afternoon mini-ramp in the SPX, credit diverged and sold off badly.
While the VIX is off the recent multi-year lows, it is still in major complacency territory, but implied volatility is heading higher, similar to the signals seen in the short term futures for the VIX via 3C.
Just like the short term VIX futures ETFs have seen big moves in 3C accumulation recently, the VIX implied volatility is diverging significantly away from the VIX, basically there's a big bet out there that volatility is about to explode and considering the VIX trades opposite the market, that would mean an explosive move down for the market.
Additional information is coming, but I want to again, keep a very close eye on the market.
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