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The Market Structure Map is a day late this week, thanks to Monday's holiday. We'll keep to a short read today for that reason.
IROs, two notes on last week's conclusion to the summer season:
1. Short-term traders were in control. Through additions to our ranks, total volume in the sample pool touched nearly two billion shares last week. Size usually matters, but what stood out to us was the wildly fragmented nature of order flow. In fact, Speculative share—volume driven by pure trading systems—ranked second behind Electronic volume and eclipsed total Prime volume (the Morgans, Goldmans, Lehmans, etc.). We've observed such characteristics less than ten times in the past two years combined, though it did happen 8/16-17. LESSON: This is why we contend that real-time traders triumphed recently and real investors have little to no incentive for active effort right now.
2. Program-trading in equity baskets declined. The twilight zone, you ask? Or maybe you're just saying, "Huh?" I'll explain. We run a report designed to measure, by sample group, broad-based basket trading. The report last week showed that only a half-dozen broker-dealers were trading the entire sample group. It's normal to see nearly all the top 25 active. We do not recall seeing the measure come in so low before.
What do these celestial signs mean? Well, we might divine that capital available from institutions to big programs was pretty Spartan at August's end. Now, that could change here in September. We'll see. And both the absence of programs and the presence of short-term trading could be products of a fear that could dissipate as Wall Street commences its annual sellside conference season this month.
It could also mean other, less salubrious things. More next week when we first test September waters
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