“Price” follows volume… or at least it should in any real world where the markets are left unfettered to discover true and real values. Zero Hedge put out a short piece with a chart which I knew had been occurring but in the midst of all the other disinformation that needs to be filtered out I had forgotten about.
NYSE Matched Volume Drops To New Decade Low In February
Volume on the NYSE is now at 10 year lows and as you can see, volume increased up and into the bust of 2008. It has since then been on a steady downhill slope. The “new highs” last week which were partied to each day on CNBC was lacking in volume which signals the quintessential “non confirmation.”
Think about this for a moment, if volume is low and shrinking is there any “conviction” in the move? Why is there less volume? Is it “healthy” or does this mean that the average Joe is not participating because they just don’t believe their own lying eyes? Does lower and lower volume make it easier or harder to “manipulate” a market if you were so inclined? If you were running a propaganda campaign to show that your “policies” are working would you want a higher or lower stock market to show that “all is well”?
Before I go any further I would like to point out what the “stock market” is all about… or what it WAS about and why we even have one. The “stock market” was originally created to raise capital for new companies to fund themselves to build out operations. It was all about “IPO’s” (initial public offerings) and then, only then did shares change hands and “trade” at various prices determined by bids and offers. As the economy and technology grew so would the amount (number) of issues AND the volume traded. As the economy got larger, volume would increase simply because there was more “money” trying to find the best “invest-able” place. THIS is capitalism at it’s purest and I might say “finest.” Now the stock market is merely a casino where everything is rigged, the fire alarms are disabled and the game of musical chairs being played will end with the exit doors chained shut. In any case, the equity markets don’t even resemble what they once were.
So back to “volume”, where is it today? Of course there is huge, unimaginable and unfathomable volume in the debt markets because sovereign governments need to borrow so much. This I would term as “forced” volume with central banks flushing the banking system with money that “wink wink” needs to go into treasury bonds. But wait, there is another place where “volume” has increased and is increasing at an increasing rate. Yes you guessed correctly, the metals! Let’s look at gold and silver for a moment. Physical purchases are now positive and increasing by central banks where 10 years ago they were sellers. Physical purchases are also increasing by the public, just look at government figures and refinery reporting. Of course in “Dollar” or fiat terms the “amount” is increasing because the metals are now priced 5-6 times higher than they were just 10 years ago. More importantly, the amount of OUNCES being taken off the market is increasing. I am not talking about or even including ETFs here as I view them as merely a “relief valve” to divert demand away from the real thing and into paper traps.
My point to this whole piece is that if you follow the volume you can discern “where” capital is flowing. Yes, “crony capital” is flowing into crony bonds but hard earned capital is flowing into, not out of the precious metals that are otherwise known as “money.” Investors are flocking to “cash” in other words; not trash cash but real money cash. THIS is what volume flows should be telling you and as Jim Sinclair says, “Gold is coming INTO the system…NOT away from it.” Follow the volume to know where price will eventually go. That is what all the greats have done since the beginnings of capitalism… which is what made them the “greats!”