Interdum stultus opportuna loquitur...

Monday, October 25, 2004

Lunchtime to the Rescue

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

Before We Kick Off... I thought I should mention something I just read. The cable TV kiddies' channel Nickelodeon holds a poll (of kiddies) assessing preferences for President. Why they do that, I don't know - but they do it.

Kerry won that poll by 57% to 43% (you don't get a lot of "undecided" in kiddie polls).

I'm only mentioning it because the Nickelodeon poll has been on the money for the last four Presidential elections in a row. Perhaps it's because kiddies reflect the views of their parents like so many little psychological mirrors; this election strikes me as one in which an awful lot of people who normally sit at home on polling day, are going to get off their flabby asses and go vote. that will mean a change of government unless the GOP's dirty tricks brigade can undermine it.

Back to normal viewing...

Economic Statistics

A report on Existing Home Sales numbers was the only data of any significance released last night (released at 10 a.m. NY time), and it exceeded expectations. The number of existing homes sold rose by 3.1% for the month to an annualised 6.75 million units (the consensus guess was 6.55 million - i.e., unchanged from the previous month).

Recall what I said about "low ball" expectations this week?

Why - when the mortgage market is benefiting from the recent pullback in mortgage rates - would the sales of existing homes remain unchanged? (More accurately, why would you write down that you expect the rate to remain unchanged).

Simple, silly - so that it becomes a data point that BubbleVision and the rest of the echo chamber can shout from the rooftops... "the mortgage market exceeded Wall Street's expectations..."

Don't think for one second that this sort of thing is happening to make mortgage brokers feel good; it is pro-government propaganda, nothing more.

Federal Reserve Open Market Operations

The Fed's open market operations desk opened the sauce bottle last night, with a $9 billion overnight repurchase, with $5.85 billion in Treasury-backed collateral. The repurchase was struck at a rate just under the Fed Funds rate and had a massive bid-to-repo ratio of 4.67 (that is, $28.57 billion was asked for).

And of course, the low for the morning session (actually the low for the day) was set at a little after midnight (our time - 10 a.m. NY time). That actual print low in the futures pit was a single point below the midnight level, and was at 12:04 a.m.; from there the market climbed 5 points in less than 20 minutes.

That little push did not develop into the self-sustaining squeeze that was being aimed for by da Boyz. Less than an hour later the market had given it all back (well, almost all of it), and the whole shebang had to start over again. A 7-point thrust (in just under an hour) during thin lunchtime trade (the cheapest time to goose the market up) propelled the market to its intraday high, and from there the rest of the session - three hours - was spent making sure the thing stayed where it was put.

Major US Indices

By the close, the Dow had recovered from an early 40-point fall, to close just 7.82 points (0.08%) lower, closing out the day at 9749.99 points.

The broader S&P500 slid 0.94 points (0.09%), to end the session at 1094.8.

Over at Times Square, the Nasdaq Composite declined 1.1 points (0.06%), to close at 1914.04, while larger-cap technology issues fared worse with the Nasdaq100 losing 5.68 points (0.39%), to end at 1432.57 points.

NYSE Volume was average, with 1.38 billion shares traded for the session, while Nasdaq Volume was about average, with 1.6 billion shares changing hands.

Nasdaq Composite1914.04-1.1-0.06%
NYSE Volume1.38bn--
Nasdaq Volume1.6bn--
US 30-yr yld4.75%-0.01%-0.15%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1724 to 1564 for a single-day A/D reading of 160; Nasdaq gainers trumped losers by 1660 to 1396.

NYSE volume was pretty evenly split between advancers and decliners, with declining volume just shading unit turnover in the winners. Volume in losers wound up at 698.63 million shares compared with 663.8 million shares in gainers.

likewise the volume breakdown on the Nasdaq was pretty even. Advancing volume was greater than volume in decliners by 468.59 to 391.19 million shares.

76 NYSE-listed stocks rose to new 52-week highs, and 45 posted fresh 52-week lows, while on the Nasdaq there were 53 stocks that hit new 52-week highs, and 76 which fell to fresh 52-week lows

Advancing Volume (m)663.8468.59
Declining Volume (m)698.63391.19
New Highs7653
New Lows4576

Market Sentiment

Call turnover dropped sharply, helping the equity-only Put-Call Ratio rise into the mid-70's - still nowhere near a contrarian signal.

Volatility (as measured by the implied volatility on front-month index options) rose a little, but when you consider that tradable bottoms usually occur with the VIX above 40, there's a long way to go before the options market can be said to be showing any genuine trepidation.

Equity Call Volume2.1m-0.38m-15.41%
Equity Put Volume1.61m-0.15m-8.52%
CBOE Volatility Index16.581.38.51%
CBOE Nasdaq Volatility Index22.71.346.27%
Equity Put-Call Ratio0.760.068.16%
SPX-VIX Ratio66.03-5.68-7.92%


I told you (on Friday) that the options in TLT would sting a little (recall that the vehicle in question is TLTWK - the December04 $89 strike puts). Well, the $70 they're held at wasn't such a bad deal, because they closed last night's session unchanged at that level; the 30-year bond spiked - hard - from its closing level, hitting 114 & 25/32 during the European session, before settling at 114 & 13/32 by the close (recall, I'm notionally short ZBZ04 from 114 & 1/32).

Last night was the standard "equities weak, bonds strong" malarkey that you might expect from a first-year economics student (one who takes the "assume there are only two assets" mantra and runs with it). In the afternoon, as equities sputtered to life, the bond market softened... as the execrable Delta Goodrem might whine, "So Predictable..."

Bonds rose along the curve, even as the US Dollar cratered against all comers. The benchmark yield on the benchmark US 30-yr bond shed 0.7 basis points to 4.754%.

UST 2Y (yld)2.491-0.01-0.48%
UST 5Y (yld)3.231-0.015-0.46%
UST 10Y (yld)3.966-0.01-0.2%
UST 30Y (yld)4.752-0.001-0.02%
The Banks Index lost 0.05 points (0.05%), to 95.86; within the index,
  • the Derivative King - JPMorganChase declined $0.45 (1.2%) to $37.02; and
  • Citigroup advanced $0.02 (0.05%) at $42.58

The Broker-dealer Index lost 0.7 points (0.54%), closing at 129.26; the ticket clippers lined up as follows -

  • Merrill Lynch shed $0.45 (0.86%) at $51.80
  • Morgan Stanley Dean Witter lost $0.24 (0.5%) closing at $48.08
  • Goldman Sachs lost $0.28 (0.3%) ending the day at $92.42
  • Lehman Brothers rose $0.25 (0.32%) at $78.91

The Philadelphia SOX (Semiconductor) index advanced 2.71 points (0.69%), to 397.87

  • Triquint was unchanged (by the close) at $3.68
  • Micron Technology gained $0.18 (1.56%) closing at $11.71
  • Intel gained a penny (0.05%) to end the session at $21.31
  • Altera advanced $0.19 (0.87%) ending the day at $21.96
  • JDS Uniphase advanced $0.02 (0.59%) to $3.41

Gold & Silver

Gold strengthened by $3.80 (0.89%) to $429.40 per ounce; at one stage the gold futures were above $432, which casts my pullback into real doubt - because the prior peak (which I took to be wave 5 of a minor degree) has been exceeded.

There's a bit of stuff in Elliott Wave Theory about "orthodox" tops compared with the actual high print for an instrument, but I would not rely on that to validate a short position.

For the moment it looks like the pullback hypothesis for Gold might have reached its use-by date, but as I said previously, I can't see any alternative structure that gives a short-term target that's higher by enough to make it tradable.

The Gold Bugs Index gained 9 points (3.9%), at 239.55 points.

Silver rose $0.04 (0.48%) to close at $7.37 per ounce. The Gold and Silver Index (XAU) gained 3.62 points (3.54%), closing at 105.98 points.

PHLX Gold and Silver Index105.983.623.54%
AMEX Gold BUGS Index239.5593.9%


Oil made a new all time high last night, peaking at $55.67 during early European trade (in fact it was at about 5:30 p.m. Australian time, which is half an hour into the European session).

Once the NYMEX day session opened, it fell like a rock - falling a dollar in the first 45 minutes of NYMEX day session trade. No prizes for guessing that somebody stuck their government-sponsored foot on the neck of the market and pushed.

By the close, oil had lost ground, shedding $0.83 per barrel, closing at $54.32 per barrel.

The Oil and Gas Index (XOI) posted a rise of 0.13 points (0.02%), to end the session at 707.66, and the Oil service stocks (OSX) Index lost 0.35 points (0.29%), to end the session at 121.42

Reuters CRB287.50.50.17%
Crude Oil Light Sweet54.32-0.83-1.5%
AMEX Oil Index707.660.130.02%
Oil Service Index121.42-0.35-0.29%


Another day, another barrage of bad news for the US dollar. Around the traps I've seen stories about how nations as diverse as India, Russia, and China are starting to accumulate non-dollar balances in preference to further accumulation of US dollars and US debt instruments.

Notice the stark difference between those three nations and the nation that was first to price its oil in Euros?

(Hint: that nation was Iraq, and Hussein made the decision on the day of the all-time low in the Euro... he may have been a despot - I don't know, and I sure as hell ain't gonna believe the Yanks - but he woulda made one hell of a currency trader!!)

Well, in case you can't see it: the difference is that them three's actually got "nookular" weapons rather than just "neocon fantasy weapons", so even Bush isn't dumb enough to try anything too pushy.

The US Dollar index hit a 12-month closing low last night, and came within 0.08 points of an outright 1-year low - the low print last night was 84.85 and the 12-month intraday low is 84.77. It wasn't that long ago that I indicated just how close to its low the dollar had fallen...

The Euro and the Swiss Franc were the major beneficiaries - perhaps people have finally worked out that every single percentage point of difference between the so called "stagnant" euro-zone and the "robust" US economies is accounted for by hedonic adjustment (the Yanks use it far more than the Europeans).

I note with some interest that the USD is still 3% above its one-year low against the Yen - and only a little over 0.8% above its low against the Euro. (It's over 6% from its low against the Australian dollar).

But it has cracked mightily against that ultimate "safe haven" currency - the Swissie - dropping below 1.20 for the first time to a level not seen since August 30th 1996.

US Dollar Index85.07-0.88-1.02%
Australian Dollar0.74590.00570.77%
Swiss Franc1.196-0.0147-1.21%

European Markets

Follow the "leader" - again. Blind-sided by the "drop and pop" - again.

This is the same place that gave us Voltaire, Descartes, Wittgenstein, Neitzsche, Schopenhauer, Wagner... and Pepys, Newton, Ashmole, Dee... and the Enlightenment and the Industrial Revolution. They would be retching violently to see their intellectual heritage being represented (in financial markets) by the current crop of screen-watching "what are the Yanks doing" wide boys.

France's benchmark CAC-40 Index shed 78.11 points (2.12%), closing at 3609.06; the German DAX-30 Index lost 80.73 points (2.05%), to end the session at 3854.41; and in the UK, the FTSE-100 Index dipped 50.9 points (1.1%), ending the day at 4564.5.