Interdum stultus opportuna loquitur...

Tuesday, August 31, 2004

Eeeek! Oh... wait... Yaaaaay!

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

Gee things looked shaky mid-session: the Fed had done sod-all to help as far as repurchase funds are concerned (an overnight, $4 billion repo with only $2.85 billion in T-backed collateral).

The economic news had been worse than expected: the August reading on consumer confidence fell to 98.2 from July's 105.7; the consensus estimate was for August to come in at 103.5.

The Chicago Purchasing Management Index - which is supposed to be a guage of manufacturing activity - was softer than expected, too. It posted a reading of 57.3 (consensus called for 60), considerably lower than the July report (which came in at 64.7).

The Nasdaq in particular was looking set for an absolute rout after every Penguin on the planet came out and twittered mindlessly about Intel's mid-quarter update (which comes out tonight). Every penguin and his egg downgraded Intel revenue forecasts; most lowered their target price for the chip bellwether. And for some reason, people still care what the Penguin Parade says.

Why everybody waited until the session before the update to twitter about it, is beyond me. The market is supposed to be a bit more "forward looking" than that (what a crock that "forward looking" malarkey is). Maybe Intel management made a few phone calls recently... naaaah.

At 2:15 p.m. NY time (4:15 a.m. when measured in proper Aussie time) the market turned on a dime and "flagpoled" up from there. A 10-point advance in the S&P futures over the next two hours was primarily an intraday, low-volume short squeeze. The 5-minute chart below shows the speed of the rampjob.

The recent tendency of the market to have these little "rescues" in the afternoon, ought to be very disconcerting. If the entire day's gain is due to a thin-volume short squeeze starting at lunchtime, what happens when the shorts are all squeezed out?

This reinforces the "market is there to inflict the Maximum Pain" hypothesis. Basically, it says that markets don't stop falling until the last bull has been tuned into hamburger patties, and they don't stop rising until the last bear is a rug in front of someone's fireplace. We have had nowhere near enough fear in the markets to indicate a bull washout (and therefore a stable basis for an advance). And bears in the advisory community are rarer than honest analysts.

This sort of price action is faker than Jessica Simpson's blondeness, and until we get past the Republican Bullscheisen Convention, it will be impossible to get a sensible "read" from the markets. My bet is still that we're headed lower, these fake bull runs notwithstanding.

After being down as much as 48 points during the session, the late-day surge helped the Dow Jones Industrial Average gain 51.4 points (0.51%), closing out the day at 10173.92 points; the broader S&P500 Index gained 5.09 points (0.46%), finishing the session at 1104.24.

Over at Times Square, the Nasdaq Composite gained 1.61 points (0.09%), to close at 1838.1, while the Nasdaq100 Index added just 0.74 points (0.05%), ending at 1368.68 points.

The broader stock market measures rose: the NYSE Composite Index gained 39.68 points (0.62%), closing at 6454.22, while the broadest measure of US equities, the Wilshire 5000, gained 53.23 points (0.5%), finishing the session at 10719.15

NYSE Volume was up on yesterday's year-low, but still weak: 1.14 billion shares were traded. Nasdaq Volume was modest, with 1.29 billion shares crossing the tape.

Nasdaq Composite1838.11.610.09%
Nasdaq100 Index1368.680.740.05%
NYSE Composite6454.2239.680.62%
Wilshire 500010719.1553.230.5%
NYSE Volume1.14bn--
Nasdaq Volume1.29bn--
US 30-yr yld4.94%-0.05%-1.02%

On the NYSE Advancing Issues outpaced decliners by 2326 to 1006, sor yet another single-day A/D reading over 1200 (the "rally stopping" level); the session fiished to the sound of thundering hooves. That should always make you think; "I can see the wildebeest... where are the crocodiles?"

Meanwhile the raft of bearish commentary in advance of Intel's mid-quarter update made the Nasdaq go squishy; Nasdaq gainers outpaced losers by 1777 to 1237.

NYSE advancing volume outpaced volume in decliners by over 2:1, 765.83 million shares to to 364.74. On the Nasdaq declining volume outpaced volume in advancing issues - but only just - by 292.3 to 264.68 million shares.

On the NYSE, 75 stocks posted new 52-week highs, and 16 hit new 52-week lows. On the Nasdaq 41 stocks hit new 52-week highs, and 47 plumbed 52-week lows.

Advancing Volume (m)765.83264.68
Declining Volume (m)364.74292.3
New Highs7541
New Lows1647

There was yet another spike in call buying, pushing the single-day Equity Put-Call ratio down to 0.69. Both the Nasdaq100 and the S&P100 (OEX) implied option volatilities fell, which is strange considering the weakness in technology. This reinforces any potential "conspiracy theory" view of the adverse Penguin Parade on INTC: short it yesterday, talk it down, and load up on it today. And if the SEC investigates, it will take them two years to prosecute, and the eventual fine will be less than your annual postage bill. Naaaah...

Equity Call Volume1.71m0.37m27.2%
Equity Put Volume1.18m0.15m14.02%
CBOE Volatility Index15.29-0.15-0.97%
CBOE Nasdaq Market Volatility Index22.92-0.22-0.95%

Bonds rose along the yield curve, with the benchmark US 30-year bond yield shedding 0.051 points to 4.938%. The basic shape of the curve was unchanged, with the entire 2yr-30yr strip posting almost-identical falls in yield.

UST 2Y (yld)2.391-0.05-2.01%
UST 5Y (yld)3.307-0.06-1.87%
UST 10Y (yld)4.121-0.05-1.27%
UST 30Y (yld)4.928-0.05-0.98%

The Banks Index gained 0.7 points (0.71%), finishing the session at 99.16; within the index,

  • the Derivative King - JPMorganChase gained $0.48 (1.23%) to close at $39.58; and
  • Citigroup gained $0.17 (0.37%) to close at $46.58

The Broker-dealer Index gained 0.28 points (0.22%), finishing the session at 124.89; the ticket clippers lined up as follows -

  • Merrill Lynch gained $0.42 (0.83%) to $51.07
  • Morgan Stanley Dean Witter gained $0.13 (0.26%) to $50.73
  • Goldman Sachs gained $0.50 (0.56%) to close at $89.65
  • Lehman Brothers gained $0.72 (0.98%) closing at $73.89

The Philadelphia SOX (Semiconductor) index lost 2.62 points (0.7%), finishing the session at 371.02

  • Triquint lost $0.04 (1.04%) to close at $3.80
  • Micron Technology gained $0.03 (0.26%) to $11.51
  • Intel lost $0.31 (1.44%) to $21.29
  • Altera lost $0.16 (0.84%) at $18.92
  • JDS Uniphase gained $0.04 (1.3%) to close at $3.11

At one stage mid-session, INTC was down over 3%.

Other indices popular with the beta-chasers were mixed, with the

  • Biotech Index up 4.58 points (0.93%), to close at 495.67
  • the Hi-Tech Index down 0.37 points (0.09%), to 421.69

Gold strengthened by $3.10 (1.00%) to $410.50 an ounce, which contributed to the Gold Bugs Index adding 5.26 points (2.6%), finishing the session at 207.39. Silver rose $0.07 to close at $6.79 per ounce. The Gold and Silver Index (XAU) gained 1.94 points (2.09%), to 94.79 points.

PHLX Gold and Silver Index94.791.942.09%
AMEX Gold BUGS Index207.395.262.6%

Oil lost ground, shedding $0.09 per barrel, closing at $42.29 per barrel, however the Oil and Gas Index (XOI) gained 9.14 points (1.45%), finishing the session at 639.45, and the Oil service stocks (OSX) Index gained 2.15 points (2%), finishing the session at 109.83.

Both of the oil indices rose for very interesting reasons: the Pemey company of Mexico (an oil company) announced last night that it had detected a new deposit in th Gulf of Mexico which is so large that Mexico's oil output may rival Saudi Arabia.

The fact that Pemey was honest enough to declare that it doesn't have the "readies" to exploit the new-found reserve means that US oil services companies will be salivating like Homer Simpson in the Land of Chocolate. So Halliburton might be able to move back towards building oil derricks if they can't get no-bid defense department contracts (that is, if Cheney and Bush get removed in November).

There was also a story about Canadian tar sands, which now supply over 1 million barrels a day; this is forecast to rise to 2 million a day by the end of the decade.

This news comes as I am struggling to make sense of some interesting work that insists that oil is abiotic - that is, that it is formed by a geological process that does not involve decayed biological material. If true, it means that oil is constantly being renewed, deep in the earth's mantle. If true (and it is an "if", albeit one that has some credibility for me at the moment), the "peak oil" issue is a furphy and the equilibrium price for oil is about $2 a barrel.

I stress that I am always skeptical about this sort of story (unless the story is being told by Ren Hoek, in which case I believe it utterly and without reservation).

Reuters CRB27810.36%
Crude Oil Light Sweet42.29-0.09-0.21%
AMEX Oil Index639.459.141.45%
Oil Service Index109.832.152%

The US dollar got a bit of a towelling last night, particularly against the Euro and the Swiss Franc, both of which appreciated by over 1% against the greenback. The Australian dollar and the Yen also gained more than half a percent, while the Pound languished relative to the others, gaining just a third of a percent.

US Dollar Index88.96-0.78-0.87%
Japanese Yen109.13-0.69-0.63%
Australia Dollar0.70430.00530.76%
Swiss Franc1.2661-0.0129-1.01%

European indices followed the early US movement down... and then closed. won't they feel silly when they open again!

France's benchmark CAC-40 Index lost 42.43 points (1.17%) to 3594.28. The German DAX-30 Index was even more worser, losing 53.64 points (1.4%), finishing the session at 3785.21

The Poms showed a bit more restraint, with the FTSE-100 Index dropping 30.8 points (0.69%), closing at 4459.3.