Interdum stultus opportuna loquitur...

Tuesday, November 09, 2004

Another "Nowhere Day"

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

After the Bell...

Cisco Systems (CSCO) reported its earnings for Q1/2004. Despite being one of the biggest "earnings managers" ever listed, it could still only manage to meet the consensus guess $0.21 per share.

Revenues were light - at $5.97 billion compared with a Street guess that was looking for $6.02 billion.

Since so many of the company's executives have options which were seriously underwater, the company did the typical thing - announced another buyback, boosting their existing insider-options-support scheme by $10 billion. (Like there is no better use that they could put that $10 billion to?).

Anyway, nobody was buying it (moreto the point, nobody was buying CSCO and a few people were selling it) in the Instinet aftermarket-market. CSCO fell as low as $19.17 (from its closing price of $19.75)... but Chambers hasn't started his usual quarterly "blue skies" mantra so maybe the thing could bounce...

Tonight's Pivots (US Market)

R2104571172.91543.5112 13/32
R1104231168.61535.5112 6/32
Pivot103951165.71529112 1/32
S1103611161.41521111 26/32
S2103331158.51514.5111 21/32

Economic Statistics

There was no data of any note released last night; the Chain Store Sales numbers showed a bit of an improvement (growth as compared with the declines registered in the last few weeks).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation last night:

  • a $7.25billion, Overnight repurchase with $2.75billion in T-backed collateral.

Last time I checked, $2.75billion was less than $5billion (but I was never schooled in "New Math" so things might have changed). Anyhow... if $2.75b is still less than $5bill, it means no upside action at 10 a.m. NY time ... and lo it came to pass.

Major US Indices

Another relatively narrow-range day; after yet another attempt to spurt upwards at the open, the indices set their highs at about 9:50 a.m. NY time (1:50 a.m. Oz time) and drifted lower until a spurt of buying at the end of lunchtime... that faded too, and by the close all the indices were below the midpoint of the day's range.

The DJIA ended the session pretty much unchanged, dropping 4.94 points (0.05%), closing out the day at 10386.37 points; the broader S&P500 shed 0.81 points (0.07%), closing at 1164.08.

Over at Times Square, the Nasdaq Composite managed a gain of 4.08 points (0.2%), to close at 2043.33, while larger-cap technology issues couldn't close in the green with the Nasdaq100 losing 0.13 points (0.01%), to end at 1527 points.

NYSE Volume was reasonably chunky, with 1.46 billion shares traded, whileNasdaq Volume was close to average, with 1.69 billion shares changing hands.

Nasdaq Composite2043.334.080.2%
NYSE Volume1.46bn--
Nasdaq Volume1.69bn--
US 30-yr yld4.94%0.01%0.18%

Market Breadth & Internals

On the NYSE advancing issues exceeded decliners by 1938 to 1371 for a single-day A/D reading of 567 [Blast! forgot to include 10-day average]; Nasdaq gainers trumped losers by 1724 to 1352.

NYSE advancing volume exceeded volume in decliners by 782.42 to 643.97 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 500.03 to 458.41 million shares. All in all, a pretty even split between winners and losers, despite the slight tilt in the advance-decline line.

203 NYSE-listed stocks rose to new 52-week highs, and 6 posted fresh 52-week lows, while on the Nasdaq there were 141 stocks that hit new 52-week highs, and 24 which fell to fresh 52-week lows

Advancing Volume (m)782.42458.41
Declining Volume (m)643.97500.03
New Highs203141
New Lows624

Market Sentiment

Journalists everywhere in the financial world are writing about the end of the VIX as a contrarian indicator... oh dear. That means that right about now is when volatility ought to pick up pretty dramatically.

Folks might recall that I am a contrarian - I posted in one of the first instalments of this blog, that when politicians start having big important "summits" about how terrible the drought is, you should be thinking of building an ark (especially if your name is Noah).

And so it is with journalistic prognostications; when they all get the sniff of the same idea, the idea is over. Only banks and find managers have worse market timing than journalists.

The sentiment indicators are all showing levels of bullishness associated with market tops. Everyone might be euphoric that the US has reinstalled its little Monkey King, but nobody has given the slightest thought to what that means for the budget (and therefore bond supply). Everybody is excited about the myth of SociSec partial-privatisation, thinking it will underwrite a new bull market... bollocks to that.

I will show - at some stage when I've got the time - that valuation excessesare always worked off primarily by falls in price, not improvements in other metrics. We are now at a PE on the broad market of over 20, which is strongly associated with long run negative real returns. And as for other metrics (price to book, price to sles, and dividend yield) forget any upside.

CBOE Equity Call Volume (000)744.4451.997.51%
CBOE Equity Put Volume (000)390.9348.6114.2%
CBOE Volatility Index13.61-0.19-1.38%
CBOE Nasdaq Volatility Index19.19-0.03-0.16%
Equity Put-Call Ratio0.530.036.23%
10-day PCR0.59-0.0055-0.92%
SPX-VIX Ratio85.531.121.33%


Bonds had a pretty boring session, basically marking time to see what that frothy old trout Greenspan tells them tomorrow (the FOMC meets). For the session they wound up with a miniscule loss, with the December 30-yr T-bond future falling 3/32 (another $90-odd in the profits column for that trade) and the yield on the benchmark 30-year Treasury bond rising 0.009 points to 4.939%.

The squishy bond market didn't help the put on the Lehman20-yr Treasury iShares; last night it dropped $15 to $1.45 (recall the position is now half of the original, bought at $70, with a 100% gain on the other half already locked in). The put dropped principally because it is losing time premium.

UST 2Y (yld)2.80400.18%
UST 5Y (yld)3.51700%
UST 10Y (yld)4.22200.09%
UST 30Y (yld)4.9440.010.2%

The Banks Index declined 0.29 points (0.28%), to end the session at 101.91; within the index,

  • the Derivative King - JPMorganChase shed $0.17 (0.43%) to $39.11; and
  • Citigroup declined $0.04 (0.09%) ending the day at $46.21

The Broker-dealer Index gained 0.34 points (0.24%), to end the session at 140.18; the ticket clippers lined up as follows -

  • Merrill Lynch rose $0.03 (0.05%) closing at $55.85
  • Morgan Stanley Dean Witter lost $0.93 (1.76%) to end the session at $52.00
  • Goldman Sachs gained $0.66 (0.66%) at $100.87
  • Lehman Brothers dipped $0.38 (0.46%) ending the day at $83.04

The Philadelphia SOX (Semiconductor) index slid 2.81 points (0.67%), ending the day at 415.8

  • Triquint advanced $0.11 (2.92%) to end the session at $3.88
  • Micron Technology declined $0.10 (0.84%) closing at $11.85
  • Intel lost $0.15 (0.65%) closing at $23.08
  • Altera shed $0.33 (1.46%) to end the session at $22.31
  • JDS Uniphase lost $0.02 (0.63%) to $3.14

Gold & Silver

Gold strengthened by $2.70 (0.62%) to $435.5 per ounce. Despite my reservations, it looks poised to go higher... although the contrarian in me still pauses for thought. Frankly, too many people are now calling for a breakout .. which means the thing to expect is a bull-trap, where prices tick up just enough to lure in "breakout" traders... then plummet.

No matter - I have no leveraged exposure to gold just yet (but I am picking the next position will be a short one).

The Gold Bugs Index gained 2.99 points (1.27%), ending the day at 238.06 points.

Silver rose $0.04 (0.54%) to close at $7.51 per ounce. The Gold and Silver Index (XAU) lost 0.23 points (0.22%), at 106.3 points.

PHLX Gold and Silver Index106.3-0.23-0.22%
AMEX Gold BUGS Index238.062.991.27%


Oil had another pretty awful session (for the bulls), shedding $1.76 (3.59%) per barrel, closing at $47.27 per barrel. That's the lowest price in about 9 weeks. Obviously everything in the Middle East is just dandy, and Russia and China aren't siding with Iran in the background talks about taking Iran to the UN Security Council.

Actually, both assertions are false; Iraq is a hellpit, and China will not let the US refer Iran's "violation" of nuclear non-proliferation protocols the the UNSC (or will veto it when it gets there). China is not about to let the US ride roughshod over international institutions with bogus claims of "violated resolutions" again.

The Oil and Gas Index (XOI) shed 5.33 points (0.76%), at 696.75 points, and the Oil service stocks (OSX) Index rose 0.35 points (0.31%), ending the day at 113.8 points.

Reuters CRB283.750.250.09%
Crude Oil Light Sweet47.27-1.76-3.59%
AMEX Oil Index696.75-5.33-0.76%
Oil Service Index113.80.350.31%


The US Dollar index can't get its head out of the porridge, despite some pretty obvious signs of intervention (particularly in the Yen cross). For now it appears to have a bit of a reprieve, and as I have said, the next little spurt downward ought to result in a lot of brand new, highly leveraged dollar shorts... like lambs to the slaughter.

US Dollar Index84.250.070.08%
Australian Dollar0.76040.0030.4%
Swiss Franc1.18320.00190.16%
Canadian Dollar0.8345-0.0028-0.33%

European Markets

France's benchmark CAC-40 Index slid 7.05 points (0.19%), ending the day at 3769.94; the German DAX-30 Index shed 3.64 points (0.09%), to end the session at 4065.33 points; and in the UK, the FTSE-100 Index rose 1.1 points (0.02%), at 4717.7.