I just wanted to add some color to my recent post regarding why the NYSE TRIN indicator might be broken

Reader Brian adds a very interesting perspective, indicating that he’s watched TRIN and C side by side and has seen a very strong correlation. When C flips from up to down (or vice versa), there is a corresponding huge move in TRIN. This could only be the case if a stock like C comprised a large share of total NYSE volume, which indeed seems to be the case, as noted by The Big Picture blog.

Above I took C, FNM, and FRE and expressed their *composite* volumes (e.g., the volumes transacted across all exchanges) as a fraction of NYSE volume. What we see is that, early in 2007, those three stocks accounted for only 1-3% of NYSE volume. During the financial crisis of late 2008 and again as the market was bottoming in early 2009, that ratio skyrocked to well over 50%.

Recently, however, the volume in these three stocks has hit astronomical levels relative to total NYSE trading, as all three have made phenomenal percentage gains during August. Indeed, the composite volume of these three stocks alone has recently doubled total NYSE volume. If we look at just the NYSE trading of these firms, they are accounting for about 40% of NYSE volume. It is not surprising that Brian would notice TRIN flipping up and down as these stocks change direction.

Again, the question is what all this means. There is no way that mom and pop trader and investor are involved in any meaningful way in generating these kind of daily trading volumes. Nor are proprietary trading shops capable of generating volumes that exceed those of the entire New York Stock Exchange. While I have no doubt that the algorithmic trade close to the market is participating in this movement, the directionality of the involvement suggests that large financial institutions are systematically buying the beaten-up shares of the poster children for TARP: C, FNM, FRE, AIG, and the like.

It is worth noting in this regard that other major (healthy) financial firms, such as GS and JPM, have seen no such surge in their volume or their trading prices.

My best guess? We’re seeing a massive infusion of capital into very troubled financial institutions, no doubt aided by short covering and the participation of program traders and proprietary daytrading firms. Where is the capital coming from? Why has it poured in so suddenly (the really large infusions began in early August)? Why is it coming in at such a pace that it is dominating NYSE volume? Zero Hedge rightly wonders why this hasn’t triggered alarms at the exchange. And why is it happening with only the weakest financial institutions?

If you were the government and you saw that these institutions were on the verge of a major fail, with billions of taxpayer dollars at risk, I’m not sure you’d announce that to the world. Nor, at this point politically, could you ask for yet another bailout package. But you would only pour money into those stocks at a frantic pace (capable of detection) if you perceived a dire need for the capital.

I’m not inclined toward conspiracy theories, but it’s difficult to imagine a scenario in which this is not a (frighteningly necessary) coordinated capital infusion, with taxpayer dollars ultimately at work in financial markets.

Category: Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

70 Responses to “Recent Concentration of Volume in Financial Stocks: Coordinated Capital Infusion?”

  1. JohnnyVee says:

    I am missing something quite basis to the premise of the above, which is: How does trading stocks equal capital infusion to the corporation itself? Please help.

  2. wjhpc says:

    Beat me to that JohnnyVee. the author seems to conflate pouring money into buying stocks in the open market with recapitalizing a company – a very different thing.

  3. karen says:

    It’s another form of QE if you ask me. : )

  4. dead hobo says:

    ZH would probably say that the SEC would explain it all away with a memo about the efficiency of capital markets and rhapsodize about the value of the added liquidity.

    From what I have read about HFT, you are just describing churning that is probably intended to get 1/3 cent commissions for bringing business to the exchanges and maybe a few cents from some hapless day traders.

    From what I surmise about the UST, Fed, and SEC: an active market is a good market because it makes people less likely to ask important question. It provides a credible distraction.

  5. skysurfer says:

    It may also be interesting to note that C has the largest exposure to off balance sheet entities that may need to come back on the balance sheet due to FAS 140. I am not sure about FRE and FNM, but I believe that C has almost $1,000 billion. Somebody correct me if I am wrong on this as it has been a couple of months since I looked into it. I thought it would matter about 30% ago on the S&P. Silly me.

    As for helping the companies, it helps their capital structure look better, especially if all of these entities go back to the balance sheet.

  6. constantnormal says:

    @JohnnyVee 2:53 pm

    It works like this: corporations use shelf-registered stock sales to the Fed/Treasury/designated agent of the Fedreasury to bring money in-house. The use of shelf-registered stock sales means it can occur somewhat quietly. Also, they can sell shares held by the companies involved. Either way, it amounts to shares of worthless stock being exchanged for cash.

    Another way is for the Fedreasury to buy shares on the open market, pumping up the prices of the shares and boosting the balance sheet valuations of any shares held by the companies in question. But that way is a bit indirect and not nearly as efficient as buying the shares directly from the companies.

  7. leftback says:

    Banks buying banks!!! Seriously, the story we are being told is that these are retail investors buying this stuff.
    The same folks who were flipping houses are flipping C. This will end when they all go back to flipping burgers.

  8. constantnormal says:

    Hot Dog! It’s the Conspiracy Theory World Series! And I’m at bat …

    Ok, let’s try this one … the Fed is printing money and buying shares in the Fantastic Four (nod to Marvel Entertainment, Disney’s newest crown jewel). But but but … you say, why is the government (and regardless of any theoretical nonsense, the Fed IS a part of the government) buying shares in AIG, FRE, FNM, they are already in “government conservatorship”? My answer to that involves how much of their stock and bonds (especially bonds) are held by large parties (China?) that do NOT want to see the companies blown out like candles in a hurricane if the truth about their financial state should become known.

  9. dead hobo says:

    On the other hand, it looks a lot like a pump and dump, only the dump part hasn’t happened yet. Maybe Uncle Stupid is allowing the churn to make his companies look good, but the churners just might have an oops moment up their sleeves later.

    We all know that Uncle Stupid won’t be able to stay mad at his favorite conspiratorial iBanks for long.

  10. JohnnyVee says:

    Constantn: Thanks.

  11. wjhpc says:

    @constantnormal 3:06 pm

    Is there any shred of evidence that this volume in C and its cohorts is a result of sales of shelf-registered stock, or is that merely speculation? Dr. Steenbarger’s premise is so obviously built on a fundamental misunderstanding of what happens in capital markets that it may not be productive to even continue this discussion absent evidence that the pumped volumes are due in part to sales of stock by the companies themselves (which I consider most unlikely).

  12. leftback says:

    The possibility does exist that this is an attempt to transfer common shares in FNM from SWFs and pension funds to Johnny Retail. But the bonds don’t seem to be moving, and that’s where most foreign investment was directed.

    Personally we like the idea that this is Johnny* buying bargain basement stocks, with encouragement from Brian*.

    *Brian the Broker, our esteemed representative of the Street’s beloved and ever-credible sell-side.
    *John Q. Retail, our eager and ever-credulous inwestor, as ever in thrall of Brian and his yacht.

  13. dead hobo says:

    On a larger scale, look at the S&P today from about 11 am to 2:30pm. It looks like the major brokerage HFT programs are running a ‘prisoners dilemma’ scenario. This is not the same stock market that existed even as recently as 3 years ago. On some days, you can almost see the HFT math kids high fiving each other for making the perfect chart that day.

  14. DonRobbie says:

    So the increase in share price increases TCE (The self-same TCE that is Treasury’s current preferred metric of bank capitalization). OK.

    But how does that matter? I thought the “stress tests” were a one time deal. Regulatory forbearance and tolerance of queer accounting is the order of the day (a la Latin American debt crisis and Japan), so the banks have the implied green light to “fake it till you make it” on their statements. All are being funded via the Fed. We’re done with the TARP for everyone charade and their distressed financial condition is now an open secret. There is an implied taxpayer guarantee to debtholders and counterparties, The markets seem to be under a bit less stress. Who do they need to impress and Why? The only thing I can come up with for the motives of Mysterious Dark Forces® is some variant of a pump and dump or the mother of all confidence games.

  15. Steenbarger says:

    @JohnnyVee 2:53 PM

    Legit question; thanks. As I tried to clarify in my follow up to this piece, lifting the shares of these companies would provide capital infusion to the extent that the rally (and story regarding the companies’ viability) enabled the firms to raise additional capital. It’s tough to raise capital as a zombie languishing at two bucks a share, and the political will for additional bailout is nil.



  16. constantnormal says:

    Conspiracy Theory #2

    SkyNet has failed in its attempt to gain control of the nuclear launch codes, and is taking an economic approach, using HFT to pump the markets up using “vacuum energy” and high-speed check kiting, and will, on “Judgement Day”, apply its store of profits to shorting the markets and crashing the global economy, leaving digital fingerprints that will implicate nation X as the perpetrator, along with some recently “discovered” incriminating emails, which in turn leads to raised voices, threats, and ultimately nuclear war.

  17. aupanner says:

    @Constantnormal re: Johnny Vee:
    So you’re saying that these banks are actually selling shares to investors (in this case, theorized to be USG) and that “trade” is shopping up as trading volume on the chart?

  18. constantnormal says:

    If this was real money, these companies would be issuing bonuses entirely in stock options.

  19. constantnormal says:

    @ Brett

    Sir, no disrespect intended by the Conspiracy Theory World Series — I’m just having some fun with your well-reasoned analysis and question. Hope you do not take offense.

  20. dead hobo says:

    constantnormal Says:
    August 31st, 2009 at 3:43 pm

    SkyNet has failed in its attempt to gain control of the nuclear launch codes, and is taking an economic approach …

    No, but the Chinese are in a position to win a war (WW 4?) that was never declared without a shot ever being fired. And Uncle Stupid is still thinking ‘terrorists’ rather than ‘opportunists’. The Chinese have practically all the money in the world and they are not afraid to use it. Given the weakened condition of the rest of the world, all they need is a plan and time.

  21. ben22 says:

    From Brett’s follow up:

    On the surface, this makes sense. The S.E.C. has been toying with the idea of reinstated curbs on short selling, and this could spark short covering among financial firms. Indeed, according to the ShortSqueeze site, C, AIG, FNM, and FRE have large short positions as of the most recent report, amounting to approximately 11%, 20%, 6%, and 10% of their total floats respectively.

    Once we look at the magnitude of the recent activity in these stocks, however, the idea that this rise is largely a function of short covering becomes implausible.

    That would only make way too much sense that the SEC tries to curb short selling again, you know, b/c that worked out so well for the banks last year. I know I’m only stating the obvious here but the SEC is still completely clueless for all to see. It would be a fitting change by them just before another huge leg down.

  22. constantnormal says:

    @aupanner 3:44 pm

    I’m just having fun here. All I intended by that answer was to show a way that the government could inject capital into these companies without any sort of public disclosure that they are doing so.

    I have no idea what is going on here. But if you line up all the players that are large enough to be able to accomplish this, it is a fairly small lineup — USG, large hedge funds, GS, MS, JPM, certain national interests …

    I doubt very much that retail investors have enough capital remaining to accomplish this.

    I also believe that this is too big a deal to be kept secret indefinitely. Sooner or later, it will all become clear.

  23. constantnormal says:

    I meant to add PIMCO to my lineup of suspects ….

  24. yoleven says:

    With stock prices dropping 90%, wouldn’t you expect to see volumes increase 10x?

  25. ben22 says:


    I agree that first option you laid out is possible, who knows. It’s really no so hard to imagine these things anymore. I actually posted your response above on the thread below this. At the very least, having $2 stocks go way up should help them raise their own capital as Brett suggests.

  26. constantnormal says:

    @DonRobbie 3:41 pm

    I thought the “stress tests” were a one time deal.

    Yeah, but when the folks that passed with flying colors come back to the bailout trough for a refill, there will clearly be a need for “improved stress tests”.

    That cycle can be repeated many times, by many different political administrations. Just look at Japan.

  27. Onlooker from Troy says:

    “”It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose,” he said.”
    Lou Jiwei, the chairman of the $298 billion China Investment Corp sovereign wealth fund.


    So, it’s bubbles is it? And the China sovereign wealth fund is doing their part in the blowing. Maybe they’ve been busy buying these wonderful American “value stocks.”

  28. call me ahab says:

    “It’s tough to raise capital as a zombie languishing at two bucks a share, and the political will for additional bailout is nil.”

    seems plausible then that this would be a way to provide these institutions w/ more capital so they can tread water for a while longer-

    that it is regular schmos causing all the volume seems very unlikely


    i remember a post from you several weeks ago throwing water on conspiracy theories-

    becoming a believer?

  29. DeDude says:

    “skyrocked to well over 50%”

    Actually some of the numbers on that graph seem to be a bit over 100% and that is a little problematic ;-)

  30. leftback says:

    “that it is regular schmos causing all the volume seems very unlikely”

    except that it is the last week of August and volume is incredibly light… the same was true this time last year.

  31. call me ahab says:

    here is a good article- saying w/o the savings of the top 1% of income earners- the saving of the rest of the 99% of earners would be negative-

    so much for the savings myth- hard to save when you are underwater-

    as i said before- better to default and have money to survive than try to do “the right thing” and honor your commitments to the bank if it keeps you in serfdom-

    the new “land reform” = debt default

  32. call me ahab says:

    oh- here is the link from NC-

    “The Savings Rate Has Recovered…if You Ignore the Bottom 99%”


  33. I-Man says:

    @ constant

    And just who is PIMPCO owned by?

    And what have they been up to recently I wonder…

  34. Mannwich says:

    @ahab: “Saving” for “We the Sheeple” = paying off or defaulting on debt. It’s likely not actual “savings” per se, in the bank, for the most part……

  35. Mannwich says:

    Is this “normal” or am I just donning the tinfoil cap today? Is it normal for after hours activity be much higher seemingly day after day and spike immediately upon marketing closing? I’m honestly clueless on this one. Maybe someone here can shed some light.


  36. leftback says:

    “Saving” = “not spending” = debt payments + piggy bank. Makes no sense to feed the pig until you’ve fed the card.

  37. constantnormal says:

    @ben22 4:01 pm

    So long as I get credit for a base hit, I’m ok with that. :-)

    I think that the meme (occurring in many, many forms) that Truth is Stranger than Fiction will ultimately apply here.

    Our system is so broken that it is ludicrous to try and perceive it in any rational, functioning kind of way — things are simply in a slow-motion state of chaotic collapse, with some parts moving up and some moving down, but by the time things stabilize, all the pieces will be at rest on the floor.

  38. call me ahab says:


    i hear you- was just trying to debunk the idea that magically- regular folk are putting 5% of their discretionary income aside-

    there is no discretionary income- unless- as you say- you default- that you reject the obligation- that you take back the land from the “lords”-

    modern day “land reform”

  39. Onlooker from Troy says:


    That’s been my suspicion all along. That most, if not almost all, of the new “savings” was really debt repayment or default. We’ve known for quite some time that most people have been living paycheck to paycheck with almost no savings; or worse in a deficit, sometimes quite large. In order to carve true savings in the form of excess cash flow deposited, there’s going to have to be a serious drop in consumerism. Not a news flash, but still doesn’t seem to have sunk in with many of the V recovery believers.

  40. Mannwich says:

    @constant: Agreed. I’ve said it before and I’ll say it again, we’re in a state of suspended animation waiting for the other shoe(s) to drop or be thrown, if you will……

    Oddly, I’ve very nearly come to terms with it all. Bizarre.

  41. constantnormal says:

    @Mannwich 4:23 pm

    It may interest you to know that I am opening a boutique that markets the most stylish and attractive tin foil hats, with anodized coloration. I’m gearing up for the Next Big Thing, and am even now hiring for a second shift. It’s the new growth industry among those “in the no”.

    But I do not bring this up merely as a matter of novelty. I am also the exclusive agent of the Bank of Nigeria in this regard, and they are major investors in my enterprise. If you will send a small “participation and registration fee” ($1500.73, cash-only), you can sign up to be a participant in the IPO for this thrilling new enterprise.

  42. Mannwich says:

    @constant. Excellent. Just give me your email address and I will PayPal you immediately. I want in on this can’t-miss investment first. ;-)

  43. Transor Z says:

    As I recall, last fall a number of the major banks, including C, got permission for major new stock issues as a way of shoring up their capitalization.

    So their stock prices are trading significantly higher in spite of dilution. Odd?

  44. aitrader says:

    Interesting read by Robert Kiyosaki co-author of, “Rich Dad, Poor Dad”:

    “Preparing for the Worst”


    Kiyosaki’s thoughts on market manipulation seems to be confirmed by this blog post.

  45. Pat G. says:

    “coordinated capital infusion, with taxpayer dollars ultimately at work in financial markets.”

    And who in the USG would behind this? The FED?

  46. cn,

    w/this–”…the Fed IS a part of the government.” @ 03:12 pm

    and b/c you have sufficient timber, and timbre, to withstand the point, Note: The FedRes is Not part of the ‘government’, they are, at best, and most charitable, equal partners, with the ‘government’, in a Governing duopoly.

    And, in view of “Give me control of a Nation’s money, and I care not who makes its Laws.”, they, the FedRes are, for all practical purposes, the Master string-pullers that use our ‘government’ as little more than Marionettes to entertain/distract us.

  47. Moss says:

    Pardon my ignorance but when an equity is over $5.00 a shares is it marginable and OK for pension and other institutionalized cretants to buy?

  48. FrancoisT says:

    “ifting the shares of these companies would provide capital infusion to the extent that the rally (and story regarding the companies’ viability) enabled the firms to raise additional capital. It’s tough to raise capital as a zombie languishing at two bucks a share, and the political will for additional bailout is nil.”

    Anyone want to bet this is a (very) big reason why the Fed will do whatever it takes to avoid a real audit?
    Making it official that the Fed manipulate markets to that extent (directly or indirectly does not really matter does it?) would be their kiss of death.

  49. jbuch says:

    If the USG,GS, JPM or all three entities are long the market then isn’t buying on the dips the only wise thing to do.

  50. call me ahab says:


    is there anyone out there that does not believe that the markets are being manipulated by the fed?

    my impression is that congress will be forewarned about the slopped up mess the Fed has become and will decline to audit- if only to keep some amount of faith in the system-

    to keep it from imploding in short order- if all was transparent

  51. call me ahab says:

    or if there was an audit- it would be in the same category as the “stress tests”- not credible- designed to only create the impression that things are ok-

    i am wondering if this will all turn into an event where the “masterminds” at the top find themselves in leg irons before the courts-

    for fraud and perpetrating a global ponzi scheme

  52. mcHAPPY says:


    Kiyoski makes some valid (and obvious) points in this link. However what he fails to discuss (and anyone who has ever read his books will not be surprised) is debt. Kiyoski built his wealth orginally through real estate and leverage in an environment of easy money and increasing property values then branched out in to his Rich Dad, Poor Dad enterprise. Unfortunately easy money is a thing of the past and property values, well I thinkwe all know this story. All of Kiyoski’s arguements are valid however he should have mentioned an unwinding of debt as another reason the worst is yet to come. I couldn’t believe the CEO of Douche Bank today on CNBC stating how great his bank was doing as they are now only leveraged 20 or 25:1. Please, what happens if those assets drop in value by 5%? Shish, foolish me I forgot, they’ll get more money from taxpayers – after they fail to acknowledge the loss, of course keeping the assets at purchased value rather than market value. Kiyoski’s number one reason to prepare for the worst should have been the rules of the game haven’t changed and we all know how that worked out last time. This time, same rules except big banks were essentially given a blank cheque endorsed by the FED.

  53. constantnormal says:


    ” … if this will all turn into an event where the “masterminds” at the top find themselves in leg irons before the courts”

    T’will never happen — the “masterminds” would have to be willing to put the leg irons on themselves, as there are no higher (temporal) authorities to bring them to justice.

  54. franklin420d says:

    “is there anyone out there that does not believe that the markets are being manipulated by the fed”

    The fed wouldn’t do that, they are our friend.

    Ya, I’ll go smoke another bowl now and eat a fedora or two.

  55. call me ahab says:

    “The fed wouldn’t do that, they are our friend.’

    dude- lay off the magical ‘shrooms-

    speaking of which- i am quite the mushroom hunter- many good varieties in the Shenendoah Mountains- beefsteak, chanterells, hen of the woods, angel wings, oysters, hedgehog- etc.-

    i know there are quite a few “medicinal” ones that grow there as well- but haven’t actively searched for those- yet

  56. Onlooker from Troy says:

    Of course most of the general public would think that manipulating the markets to go up is a good thing. “What could be wrong with having stocks worth more and making more money?”, they’d say. You know the sentiment. If they thought about it for more than 2 seconds and applied any amount of critical thinking they could probably get there (OK, many would have to be led there with hints). Kind of like the shallow thinking that targets short sellers as evil and harmful (and no, I’m not defending naked shorts).

  57. Alan says:

    Since GS and JPM aren’t seeing this infusion, are they the institutions doing the Fed’s bidding on the others?

  58. Alan says:

    Pardon my ignorance. I just don’t know how it would work. Would the Fed debit (or credit?) those institutions accounts and ask them to buy shares? Is this something the Presidential Working Group was designed to do?

  59. Cursive says:

    Concentration in financial stocks? Hell yeah! Look, when the music stops, there will be a massive rush to the exits. I only wish I knew when the fat lady was over.

  60. jc says:

    The Fed/Treasury need to find ways that aren’t subject to public disclosure (Bloomberg case) to pump capital into these big fin firms before somebody starts liquidating the shadow inventory of foreclosed homes. The FDIC which is quickly running out of cash, is going to liquidate some foreclosed banks holdings which will lead to a selloff of shadow foreclosures in certain areas and that will be the run, baby. Like a bad SM without the circuit breaker.

  61. wally says:

    So, really, in addition to the demise of the Five US broker-dealers and 2 of 3 US car manufacturers and millions of US homeowners and a bunch of banks and the world’s largest insurance company and any sense of economic fairness and decency of the US Treasury and Fed, we can now add the US stock market. Apparently it is now simply a fake market, a carny geek show… whatever.

  62. Moss says:

    Leftback.. was it u that liked “The Road”?

    Author Cormac McCarthy’s post-apocalyptic vision of the world in “The Road” makes it to the big screen, with Viggo Mortensen starring with Theron.

  63. Boots or Hearts says:

    So BR, to quote the Book, is this thread part of the “preawareness stage?” I am ready for the next dose of reality, something tells me wash. DC however prefers denial……..

  64. call me ahab says:


    “the road” was heavily talked about by CNBC sucks- good book- give it a read-

    could easily be made into a movie

  65. wunsacon says:

    Nice summation, wally.

  66. Where the New PPT Hides

    This article draws connections between the greatest financial bubble of all time and how the Fed uses names like AIG in a Ponzi scheme to offload U.S. debt. Hopefully it will be so obvious you’ll feel sick. It also explores High Frequency Trading and the myth of savings accounts.


  67. [...] back to good old 9,500.  The movement is getting so aggregious that even conspiracy theory-hating Barry Ritholtz is now saying: “I’m not inclined toward conspiracy theories, but it’s difficult to imagine a scenario [...]

  68. yoganmahew says:

    Does it make sense to wonder what other holders of these shares would benefit from their share prices rising or from being able to cash out at a better price?

    Pension funds, insurance companies etc.?

    Or perhaps what equity derivatives would bust at low levels? Is is possible that ‘someone’ is gaming the prices so they don’t have to pay out?

    I suppose anything’s possible nowadays, so perhaps it is better to ask is it likely?

  69. [...] 2 — From Recent Concentration of Volumes in Financial Stocks: Coordinated Capital Infusion? C = Citigroup, FNM = Fannie Mae, and FRE = Freddie Mac. Trading volumes for these 3 stocks have [...]