from Zero Hedge
While stocks have soared to new all time highs, there has been one aspect about this latest meltup that suggests the rally is built on nothing but hot air (and trillions in Fed liquidity injections of course): the complete lack of volume, prompting some to wonder if the Fed has finally succeeded in ‘killing’ the market. And sure enough, as Morgan Stanley’s Rob Cronin writes in an overnight note, “this is NOT a typical August lull in liquidity.”
The Market Has Died
The MS team points out that volumes across almost all products are way below historic seasonal averages. Which is bizarre because this is on the back of the highest volume Jan-to-July we have seen since 2010 (except single name options where volumes were the worst Jan-July since 2010). As the bank explains, the exaggerated August drop in liquidity (leading to higher impact costs) is driven by: