Interdum stultus opportuna loquitur...

Friday, October 08, 2004

Another Down Day...

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I feel it in my bones... Labor. (Makes no difference either way)...

Option Update

Well, that option I mentioned the other day (buy a "one level down" QQQ October put ten minutes after Monday's open) is doing nicely...

As I mentioned last Rant, they (QQQ VJ) ought to have been bought for $25 - but to be scrupulous we'll claim them for $30 (which was the offer at the time)... and of course being a sound sleeper I missed the boat altogether.

Still, the call was made - ahead of time - so I'm going to take credit for the call even if I can't trouser the gain.

Last night the little darling closed at $60, having been as high as $70 during the session.

Yee haa. It's still my opinion that it's got further to go, but from now on I'm going to assume that any sane person takes half the position off the table when the gain on the position reaches 100% - thus rendering the remaining position free.

Again - being scrupulous about making calls ahead of time - I'm only going to be able to claim this for this particular call if thse options can be sold for $60 or more at the open on Monday night. If so, from then on I will be assuming that the position carried is half the original size, but has already been "covered" as far as costs are concerned.

The aggregate gain - the gain as measured over the entire position - will still be based on the original purchase prices, but so long as half can be offloaded on Monday the gain is guaranteed to be more than zero.

Federal Reserve Open Market Operations

The Fed did a really big repurchase - $7.75 billion over-the-weekend - and yet the market was only able to crawl up 1.5 points between 12 midnight and 12:30; it never made it back above its 11:55 p.m. morning session high, formed a little double top, and sank into the mire from there.

The reason: simple - the economic data stank.

Economic Statistics

The big number out last night was the Employment Situation Report. It contains things like new non-farm payrolls numebrs - which are usually bulked-out by a deceptive piece of chicanery called the "net birth death model". You wil hear very few "mainstream" pundits talking about this feature - which is being used to sex up numbers in ways not dreamed of since Enron's accountatns got caught.

Trust me - the "net birth-death" model is being used to fix bad numbers in the labour market, just as hedonics are being used to "fix" bad numbers in the goods market. Anyhow - even with a healthy 39,000 "new payrolls" thanks to the net birth-death model - the overall employment situation is getting worse just when congenital one-termer George W Bush - fresh from a debate shellacking - needs them toget better.

Last night the insterstices of the report were as follows:

  • New non-farm payrolls were just 90,000 - well short of the consensus guess of 140,000;
  • average hourly earnings rose 0.2%, below the consensus guess of 0.3%;
  • average hours worked rose to 33.8 per week, above the consensus guess of 33.7; and
  • the unemployment rate remained static at 5.4%.

Note this: there was - in addition to the 39,000 mythical numbers as a result of the net birth death model - a 20,000 increase in non-farm payrolls which occurred solely as the result of an adjustment to the March 04 numbers - which is the reference month for seasonal adjustment...

Without that "adjustment" and the make-believe birth-death numbers, payrolls would have been less than 50,000 at a time when - during a real life economic expansion - they would be hitting 250,00 a month.

At present jobs growth is slower than population growth, and wages growth is slower than inflation... welcome to GWB's "Greenspan recovery" (brought to you by Halliburton, Enron and anyone who donates money to Tom de Lay).

Major US Indices

The DJIA lost 70.2 points (0.69%), closing out the day at 10055.2 points; the broader S&P500 lost 8.51 points (0.75%), finishing the session at 1122.14.

Over at Times Square, the Nasdaq Composite lost 28.55 points (1.47%), to close at 1919.97, while larger-cap tech stocks fared worse with the Nasdaq100 losing 24.81 points (1.7%), to end at 1430.96 points.

The broader stock market measures also fell: the NYSE Composite Index lost 17.8 points (0.27%), closing at 6636.42.

NYSE Volume was about average, with 1.3 billion shares traded, as was Nasdaq Volume with 1.67 billion shares crossing the tape.

Nasdaq Composite1919.97-28.55-1.47%
NYSE Composite6636.42-17.8-0.27%
Wilshire 500011058.700%
NYSE Volume1.3bn--
Nasdaq Volume1.67bn--
US 30-yr yld4.9%-0.1%-1.92%

Market Breadth & Internals

On the NYSE declining Issues outpaced advancers by 1678 to 1615, for a single-day A/D reading of -63; and Nasdaq losers outpaced gainers by 2089 to 921. Note that despite a couple of pretty bad days, the NYSE advance-decline line is not really that bad.

On the NYSE, volume numbers were more reflective of the market move than the "issues" A/D numbers. Declining volume outpaced volume in advancing issues by over 2:1, 912.52 million shares traded in losers compared with just 362.94 million shares in stocks that gained for the session.

On the Nasdaq declining volume trounced volume in advancing issues by a little under 5:1 - 745.91 to 171.12 million shares.

98 NYSE-listed stocks rose to new 52-week highs, and 15 posted fresh 52-week lows, while on the Nasdaq there were 52 stocks that hit new 52-week highs, and 37 which fell to fresh 52-week lows.

Advancing Volume (m)362.94171.12
Declining Volume (m)912.52745.91
New Highs9852
New Lows1537

Market Sentiment

The Equity put-call ratio is rising a little too fast for my liking; at 0.93 it is getting pretty close to a position from which the market could generate an oversold rally. And look at the put volume - you seldom get more than 2 million puts traded on a single day.

The VIX and SPX-VIX ratios are finally moving away from their silly levels of recent sessions, but still have a long long long way to go before they generate bullish contrarian indications.

Equity Call Volume2.18m-0.11m-4.74%
Equity Put Volume2.03m0.12m6.18%
CBOE Volatility Index15.050.553.79%
CBOE Nasdaq Volatility Index20.690.10.49%
Equity Put-Call Ratio0.930.111.47%
SPX-VIX Ratio74.56-3.4151-4.38%


In the first-year-Uni "assume there are only two assets in the world" model employed by most US "investors", if data is bad it means bonds have to go up. And go up they did...

Bonds rose along the curve, with the benchmark US 30-yr bond rising over a point in price and shedding 9.6 basis points in yield to 4.902%.

UST 2Y (yld)2.57-0.11-4%
UST 5Y (yld)3.39-0.15-4.24%
UST 10Y (yld)4.129-0.11-2.69%
UST 30Y (yld)4.905-0.092-1.84%
The Banks Index lost 0.17 points (0.17%), finishing the session at 99.16; within the index,
  • the Derivative King - JPMorganChase gained $0.12 (0.3%) to close at $39.65; and
  • Citigroup lost $0.20 (0.45%) to close at $44.56

The Broker-dealer Index lost 1.58 points (1.24%), finishing the session at 125.71; the ticket clippers lined up as follows -

  • Merrill Lynch lost $0.08 (0.16%) to close at $51.12
  • Morgan Stanley Dean Witter lost $0.57 (1.17%) to close at $48.30
  • Goldman Sachs lost $0.61 (0.64%) to close at $94.24
  • Lehman Brothers lost $0.13 (0.16%) to close at $80.99

The Philadelphia SOX (Semiconductor) index lost 13.84 points (3.43%), finishing the session at 389.52

  • Triquint lost $0.13 (3.2%) to close at $3.93
  • Micron Technology lost $0.42 (3.38%) to close at $12.01
  • Intel lost $0.69 (3.25%) to close at $20.55
  • Altera lost $0.73 (3.58%) to close at $19.65
  • JDS Uniphase lost $0.09 (2.7%) to close at $3.24

Gold & Silver

Gold strengthened by $4.60 (1.1%), and closed above $420 for the first time since April 13th. (Wow.. is it that long ago? My data thinks so).

The Gold Bugs Index added 5.93 points (2.56%), finishing the session at 237.44.

Silver rose $0.07 (0.92%) to close at $7.26 per ounce - it has been on a screaming tear skywards recently. On May 11th it closed at $5.25 an ounce, and it's risen $1.08 an ounce in the last month alone.

The Gold and Silver Index (XAU) gained 2.13 points (2.09%), closing at 104.26 points.

PHLX Gold and Silver Index104.262.132.09%
AMEX Gold BUGS Index237.445.932.56%


Remember how snippy I got when some dill at some conference called for oil to fallby 30%? I'm feeling a little better now, as I hope that the aforementioned dill won't show his face in public for some time.

Oil was firmer yet again, rising by $0.79 per barrel, closing at $53.39 per barrel.

The Oil and Gas Index (XOI) gained 1.73 points (0.24%), to close at 719.18 while the Oil service stocks (OSX) Index gained 0.3 points (0.24%), finishing the session at 123.66 points.

Its' now getting to the stage where the US media (and the "follow the leader" dills in the Australian media - try to "pin" the rising oil price on a specific factor which is external to US foreign policy.

So Oil isn't rising because Iraq is in chaos, or because Iran is dealing more with the Russians... no... it's because Nigerian oil workers were going on strike.

As Rove McM-anus would say... What the...?

Reuters CRB287.62.60.91%
Crude Oil Light Sweet53.390.791.5%
AMEX Oil Index719.181.730.24%
Oil Service Index123.660.30.24%


US dollar weaker across the board... no surprise, given the data. The BoJ even gave up on the Yen for a session.

US Dollar Index87.55-0.96-1.08%
Australian Dollar0.73470.011.05%
Swiss Franc1.2507-0.0116-0.92%

European Markets

France's benchmark CAC-40 Index lost 20.83 points (0.55%), to 3737.87 points; the German DAX-30 Index lost 27.82 points (0.69%), closing at 4015.54; and in the UK, the FTSE-100 Index gained 0.2 points (0%), finishing the session at 4698.9 points.