Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.
Well, you might recall that I was prepared to admit ownership of 2 November expiry $89 puts over the Lehman 20-year Treasury iShares (TLT) - having declared a bid of $70 per option a while back. Likewise (same trade logic, different vehicle) I felt a tad sheepish for not fully declaring the trade management behind a declared short in the December04 30-year bond futures (ZB04Z) from 114 & 1/32.
Last night - with the continued pump in equities - the bond market tanked nicely; the ZB trade is now up a full point (ZB04Z closed at 113 & 1/32) having been as low as 112 & 29/32. That's $1000 profit so far, on initial margin of $1755.
The Lehman iShares - which are supposed to replicate the movement of a 20-year Treasury - also dropped hard, down 88c (0.98%) to $88.74; this saw the put I mentioned (TLTWK) rise to close at $115 for a gain of exactly 50% per option over the $70 bid to acquire them.
And to top it off, the Live Cattle put option (the December04 $89 strike) that I wanted -but missed out on by bidding too low. It rose to close at $3.22, up from $2.85 the previous day and $2.10 the night I tried to acquire it (October 20, our time). December04 Cattle closed at 86.65, down 0.625 (0.72%). Had I taken a short futures position in the Decembers rather than trying to finesse an entry by buying a put option, I would be up $880 per contract - on initial margin of $1620. Still, no use whining; missed is missed as the Guru says.
Economic Statistics
Before the market opened, Durable Goods data were released, and reinforced the fact that the US economy is weaker than a baby.
The "headline" durable goods number was 0.2% rise, well below the 0.5% consensus guess. As you know, I always go straight for the key number in the report, which is (repeat after me...
Non-defence Capital Expenditure, excluding aircraft.
And that stank. Down 1.7% for the month. Non-defence capex ex aircraft is the best measure of actual spending on capital goods (equipment, machinery and so forth).
If you read a line of crap about how "new orders" and "unfilled orders" for this category were strong, ignore it. Stuff like that is written by people who never actually look at the degree of correlation between current "new orders" and actual expenditure in the future (they are almost uncorrelated). And "unfilled orders" is irrelevant except as an indication of lack of manufacturing capacity (which is not a problem with the economy-wide capacity utilisation rqate still below 80%).
Later in the day, data on New Home Sales was released, showing an increase and exceeding the consensus guess. Sales numbers rose 3.5%, as opposed to a consensus guess calling for a decline of about a percent and a bit.
And one final number was trumpeted louder than I have seen any number pimped for a while. The Energy Information Administration announced that crude oil stocks had risen by 4 million barrels (1.4%) for the week. This was cited as one of the catalysts for a decent sized pullback in crude.
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk didn't feel too compelled to grease the wheels last night; the only repurchase was a $4.75 billion overnight, entirely in Treasury-backed collateral. It was undertaken at a 2 basis point discount to Fed Funds, and received a massive $30.75 billion in offers tendered (in other words, da Boyz were clawing over each other trying to get as much of that dough as was possible).
It was close to the $5 billion cutoff required for a midnight moonshot, and sho' nuff the market touched its session low at 12:03 a.m. our time and never looked back.
Major US Indices
If you're a bull, you're probably reading this site by mistake; if you've got any brains you will sell this strength - it is entirely bogus, and will last only so long as some taxpayer-funded clown thinks it will help get Bush re-elected. Driving the market up towards the election was always a likely scenario, but the damage has already been done (to Bush's electoral chances as well as to the technical structure of the market).
Still, short squeezes are fun to watch (unless it's your own nuts in the vice... but I was short bonds, as you're well aware).
The DJIA advanced another 113.55 points (1.15%), closing out the day at 10002.03 points; the broader S&P500 added 14.31 points (1.29%), to 1125.4. So da Boyz managed to get the Dow back to 10k - whoop-de-doo.
Over at Times Square, the Nasdaq Composite gained 41.2 points (2.14%), to close at 1969.99, while larger-cap technology issues fared better with the Nasdaq100 adding 37.89 points (2.63%), to end at 1480.03 points.
NYSE Volume was chunky, with 1.75 billion shares crossing the tape, whileNasdaq Volume was super-chunky (over 2 bill), with 2.07 billion shares traded.
| Index | Close | Gain(Loss) | % |
| DJIA | 10002.03 | 113.55 | 1.15% |
| S&P500 | 1125.4 | 14.31 | 1.29% |
| Nasdaq Composite | 1969.99 | 41.2 | 2.14% |
| Nasdaq100 | 1480.03 | 37.89 | 2.63% |
| NYSE Volume | 1.75bn | - | - |
| Nasdaq Volume | 2.07bn | - | - |
| US 30-yr yld | 4.84% | 0.08% | 1.72% |
Market Breadth & Internals
On the NYSE advancing issues exceeded decliners by 2299 to 1003 for a single-day A/D reading of 1296 - another breach of the "idiotic optimism" alert level; Nasdaq gainers trumped losers by 2120 to 920, showing that technology stocks also joined in the born-again levels of wild-eyed juilation.
NYSE advancing volume exceeded volume in decliners by 1271.37 to 455.42 million shares; Nasdaq advancing volume was greater than volume in decliners by 885.6 to 227.44 million shares.
197 NYSE-listed stocks rose to new 52-week highs, and 13 posted fresh 52-week lows, while on the Nasdaq there were 146 stocks that hit new 52-week highs, and 45 which fell to fresh 52-week lows.
| NYSE | Nasdaq | |
| Advancers | 2299 | 2120 |
| Decliners | 1003 | 920 |
| Advancing Volume (m) | 1271.37 | 885.6 |
| Declining Volume (m) | 455.42 | 227.44 |
| New Highs | 197 | 146 |
| New Lows | 13 | 45 |
Market Sentiment
There was truly massive call buying last night - and the top turnover call options were in an odd group of stocks: Washington Mutual, ConocoPhilips, HCA Inc and Delta Airlines.A financial services company, an oil company, a healthcare company and an airline. Go figure.
Equity call volume was at its highest level since January 15th, and at 0.58 the Put-Call ratio is now at a level where a contrarian would start looking for one-level down puts over QQQ.
The ducks are lining up for a swing at the fences on the short side - but they're not there yet. There's massively tilted volume and advance-decline stats, low volatility, a low level for the put-call ratio... all good. The last remaining plank is for bears to give up - for put volume to dry up and drive the put-call ratio to a more extreme low (in the mid-0.40's would be an absolute sweet spot).
| Index | Close | Gain(Loss) | % |
| Equity Call Volume | 3.58m | 1.22m | 51.57% |
| Equity Put Volume | 2.08m | 0.57m | 38.17% |
| CBOE Volatility Index | 15.72 | -0.67 | -4.09% |
| CBOE Nasdaq Volatility Index | 21.52 | -0.95 | -4.23% |
| Equity Put-Call Ratio | 0.58 | -0.06 | -8.84% |
| SPX-VIX Ratio | 71.59 | 3.7996 | 5.6% |
Bonds
Bonds fell along the curve, with the yield on the benchmark US 30-yr bond rising 8.2 basis points to 4.844%. The 10-year bond yield was also up 8 ticks, and is now above 4%. Basically, the bond market is playing out as I thought it would this week - which is why I was talking about short bond futures and/or put options over the bond-market iShares.
| Index | Close | Gain(Loss) | % |
| UST 2Y (yld) | 2.583 | 0.07 | 2.83% |
| UST 5Y (yld) | 3.347 | 0.087 | 2.67% |
| UST 10Y (yld) | 4.083 | 0.08 | 2.1% |
| UST 30Y (yld) | 4.845 | 0.074 | 1.55% |
The Banks Index posted a rise of 1.19 points (1.22%), closing at 98.56; within the index,
- the Derivative King - JPMorganChase gained $0.53 (1.41%) ending the day at $38.02; and
- Citigroup added $0.56 (1.29%) ending the day at $43.90
The Broker-dealer Index posted a rise of 5.05 points (3.86%), to 135.94; the ticket clippers lined up as follows -
- Merrill Lynch posted a rise of $1.38 (2.61%) to $54.30
- Morgan Stanley Dean Witter posted a rise of $1.97 (4%) ending the day at $51.22
- Goldman Sachs advanced $2.34 (2.5%) at $96.10
- Lehman Brothers gained $1.10 (1.36%) to end the session at $81.70
The Philadelphia SOX (Semiconductor) index added 14.13 points (3.56%), at 410.9
- Triquint added $0.18 (5.19%) at $3.65
- Micron Technology advanced $0.45 (3.85%) closing at $12.14
- Intel added $0.60 (2.8%) closing at $22.00
- Altera gained $1.06 (4.9%) to $22.71
- JDS Uniphase gained $0.12 (3.54%) to $3.51
Gold & Silver
Anyone who doesn't believe that all markets are being massaged to help the electoral chances of George Bush, has probably left this site by now.
Let me make this clear: that's what's happening. The increase in oil inventories was nowhere near enough to drive a 5% fall in oil prices; oil prices got a big helping hand downwards.
Likewise the gold & silver markets; bad data continues (with the exception of houses - the next toxic waste) and yet gold gets hammered. How odd.
Gold weakened by $2.50 (0.58%) to $425.20 per ounce. The Gold Bugs Index lost 5.71 points (2.4%), to 232.16 points.
Silver fell by $0.15 (1.97%) to close at $7.21 per ounce. The Gold and Silver Index (XAU) lost 2.45 points (2.32%), at 103.2 points.
| Index | Close | Gain(Loss) | % |
| Gold | 425.2 | -2.5 | -0.58% |
| Silver | 7.205 | -0.145 | -1.97% |
| PHLX Gold and Silver Index | 103.2 | -2.45 | -2.32% |
| AMEX Gold BUGS Index | 232.16 | -5.71 | -2.4% |
Oil
Oil was absolutely shellacked last night, shedding $2.82 per barrel (5.1%), closing at $52.46 per barrel. The Oil and Gas Index (XOI) lost 11.74 points (1.65%), ending the day at 699.51 points.
The Oil service stocks (OSX) Index slid 3.69 points (3%), to end the session at 119.41 points.
As I mentioned last week, the oil market is ripe for a decent-sized correction. I don't think this is the start of that correction - this is just newbies getting handed their tuition fees in a thin, lopsided market. Although I am a big advocate of learning-by-pulling-the-trigger, it has to be done sensibly - and most new participants in commodities markets arrive with little more than a free CD from a brokers and a handbook of phrases like "the trend is your friend". they wouldn't know risk control if it bit their nuts off - which is what the market usually does.
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 286 | -1.5 | -0.52% |
| Crude Oil Light Sweet | 52.46 | -2.82 | -5.1% |
| AMEX Oil Index | 699.51 | -11.74 | -1.65% |
| Oil Service Index | 119.41 | -3.69 | -3% |
Currencies
Folks are warbling across cyberspace about this weensie little bounce in the US Dollar index, as if it's back at 120 already. Just as with commodities markets, the ForEx market is full of people who expect the market to move in a stright line.
As I mentioned the other day, the US Dollar made a multi-year low against the Swiss Franc the other night. Once again, everybody was on the same side of the boat.
I'm certainly not advocating US dollar longs - not by a long shot. There are times to initiate short USD positions, but this ain't one of them: the day I am long US dollars is the day that it trades at 0.40 Euro and/or 55 Yen. there might be long side opportunities on the way to the US debt default (that is coming, sure as eggs is eggs), but I will sit on the sidelines through all of them (I will tell you about them before they arrive though).
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 85.56 | 0.26 | 0.3% |
| Euro | 1.2706 | -0.0055 | -0.43% |
| Yen | 106.42 | -0.27 | -0.25% |
| Sterling | 1.8276 | -0.0067 | -0.37% |
| Australian Dollar | 0.7448 | -0.0011 | -0.15% |
| Swiss Franc | 1.2066 | 0.0055 | 0.46% |
European Markets
France's benchmark CAC-40 Index rose 58.91 points (1.63%), to end the session at 3678.39; the German DAX-30 Index gained 66.77 points (1.73%), closing at 3929.03; and in the UK, the FTSE-100 Index rose 46.7 points (1.02%), closing at 4630.1 points.
| Index | Close | Gain(Loss) | % |
| CAC-40 | 3678.39 | 58.91 | 1.63% |
| DAX-30 | 3929.03 | 66.77 | 1.73% |
| FTSE-100 | 4630.1 | 46.7 | 1.02% |
