Interdum stultus opportuna loquitur...

Wednesday, November 10, 2004

Love's Labour's Lost...

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

Oh.. .actually I meant "Much Ado About Nothing".

Note to self... find a sensible place to put these stupid PIVOTS... they aren't sensible as an opening act.

Tonight's Pivots (US Market)

R2104791173.871540.83112 10/32
R1104441169.531531.67111 29/32
Pivot104131166.171523.83111 19/32
S1103781161.831514.67111 6/32
S2103471158.471506.83110 28/32

Economic Statistics

There was a veritable flurry of data last night, much of which reinforces the heavy reliance of the United States on other people - particularly their capital, which the US now consumes at a rate approaching $3 billion a day.

That' dear folks, is not the sign of an economic superpower - it is a sign of the world's greatest moocher.

It reminds me of the US military - useless in any fight that doesn't involve a completely exhausted enemy (think WWI, WWII where the US showed up after three-quarter time) or an enemy that was nothing much to begin with (think Grenada, Iraq I, and the "crowed too early" bits of Iraq II). Give the US a committed enemy and they are done for (VietNam, Korea, Somalia).

What I am getting at, is the requirement to look past the slogans. Simply saying that you're the worlds most dynamic economy shouldn't cut it - particularly not if you're borrowing like mad just to buy imported gimcracks. Likewise, simply saying you're the world's mightiest military doesn't cut it when you get your ass kicked every time you take on anything above a fourth-rate enemy.

Goebells may have been right - simply keep saying the same crap and eventually people believe you - but it shouldn't work if our species is as bright as we claim...

The twin deficits made their presence felt last night -

  • the Trade Balance was a deficit of $51.5 billion, which was slightly narrower than the consensus guess (-53.5); and
  • the Treasury Budget was also in deficit to the tune of %57.3billion (the consensus was for a deficit of 58billion)... that's for a month, and doesn't include costs associated with Iraq);

MBA Purchase Applications were reported as falling -2.8% for the month - not surprising since the bond market has performed consistent with my expectations so far (i.e., has fallen) and has pushed mortgage rates up.

Within the trade Balance report, some interesting signs on the terms of trade, which are actually worsening at a time when the currency is depreciating (not what I would expect this late in a currency's decline)

  • Import Prices were reported as rising 1.7%, which is fasster than the consensus guess (1.5%);
  • Export Prices rose 0.7% (the guessers don't even bother with this one).

New Jobless Claims were reported 333,000, was better than expected by the market's guessers (they guessed 340,000).

Crude Oil Inventories rose by 1.8 million barrels. Recently that would have put a crimp on crude oil prices - but not last night (see the "Oil" section for an explanation).

All things considered, it is not a picture of an economy is the sort of health that the mindless dolts at the Fed claim to be seeing.

Still, it has to beborne in mind that we are in a world where

  • the (now former) Attorney General puts a drape over the (naked, but STONE) breast of the statue of Justice;
  • political leaders can say "there can be no doubt that..." and the weapons jsut aren't there; and
  • the president thinks the little voice being transmitted into his ear is God.

So maybe the Fed is on the same hallucinogens as the rest ofthe Administration.

Oh, yes... the Fed raised the benchmark rate by 25 basis points. Surprised? Apparently in the suburbs that they frequent, everything is going just dandy.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations last night:

  • a $12.5billion, 2-day repurchase with $5.55billion in T-backed collateral ; and
  • a $9billion, 14-day repurchase entirely transacted in T-backed collateral.

This is the second straight day where large repos didn't give the market any genuine guts. In other words, most short-covering has already been done. That said, taking the bet (buying at 10 a.m. NY time) wouldn't have hurt anyone - but bear in mind that the "core" bet at the moment is for a decline (because I've got an open position in the QQQ $38 November put).

Major US Indices

The DJIA was again flat for the session, closing with a teensy fall of 0.89 points (0.01%), closing out the day at 10385.48 points; that was largely thanks to a bounce in Merck, which has been tennelled lately as a result of the frisson surrounding Vioxx (which, it turns out, will kill you or something).

But even outside the Dow it was a slow day.

The broader S&P500 lost 1.17 points (0.1%), to end the session at 1162.91.

Over at Times Square, the Nasdaq Composite lost 8.77 points (0.43%), to close at 2034.56, while larger-cap technology issues fared worse with the Nasdaq100 losing 9.94 points (0.65%), to end at 1517.06 points. and the Semiconductor index dropped over 2% and is now back within gravity's pull.

Looks like a flight from trash, with the brown chips (the semis) performing by far teh worst.

NYSE Volume was above average, with 1.51 billion shares traded, while Nasdaq Volume was very nearly chunky, with 1.85 billion shares crossing the tape.

Nasdaq Composite2034.56-8.77-0.43%
NYSE Volume1.51bn--
Nasdaq Volume1.85bn--
US 30-yr yld4.98%0.04%0.75%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1997 to 1342 for a single-day A/D reading of 655; Nasdaq gainers trumped losers by 1620 to 1443.

NYSE advancing volume exceeded volume in decliners by 834.95 to 636.99 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 673.91 to 365.62 million shares.

226 NYSE-listed stocks rose to new 52-week highs, and 7 posted fresh 52-week lows, while on the Nasdaq there were 169 stocks that hit new 52-week highs, and 31 which fell to fresh 52-week lows.

Advancing Volume (m)834.95365.62
Declining Volume (m)636.99673.91
New Highs226169
New Lows731

Market Sentiment

It's almost as if the market is playing "chicken" - seeing just how far the elastic can stretch before its undies actually fall off.

As Chief Wiggum pointed out on one occasion, getting one's undies snapped is not a pleasant experience. And the market keeps pulling and pulling at the elastic waistband of its own Y-fronts; big call option buying, an eye-popping SPX-VIX ratio, and a VIX near its record low.

Still, everything is playing out pretty much in line with my guess last Friday; the QQQ put purchased Monday (for $50) closed last night at $55 having traded at $60 - the week is still young.

CBOE Equity Call Volume (000)715.31-29.13-3.91%
CBOE Equity Put Volume (000)397.736.811.74%
CBOE Volatility Index13.08-0.53-3.89%
CBOE Nasdaq Volatility Index19.410.221.15%
Equity Put-Call Ratio0.560.035.88%
10-day PCR0.59-0.0028-0.48%
SPX-VIX Ratio88.913.383.95%


The 10-year bond was - as little as 2 weeks ago - yielding below 4%. Last night it was breifly yielding over 4.25%. That above everything has been a key determinant of why the mortgage market (particularly refinancings) has fallen off.

The behaviour of the bond market reinforces my "markets are not forward looking" hypothesis. If they were, the market ought not to have reacted to the fed's announcement - it should have been "priced in". But of course it wasn't. Markets look sideways... expectations are adaptive.

Bonds fell along the curve, with the yield on the benchmark 30-year Treasury bond rising 3.7 basis points to 4.976%.

My put option over the Lehman 20-yr Treasury iShares (the $89 November put - TLT WK) rose again as Treasuries fell. If regained the $15 it lost the previous session, closing at $160 (intraday it traded at $205 - if it hit $210 it ought to have been taken off). Recall that this put is half of a 2-lot purchased at $70, with one lot sold at $140.

UST 2Y (yld)2.8320.031%
UST 5Y (yld)3.5550.0340.97%
UST 10Y (yld)4.2430.020.4%
UST 30Y (yld)4.9630.0170.34%

The Banks Index advanced 0.15 points (0.15%), to end the session at 102.06; within the index,

  • the Derivative King - JPMorganChase lost $0.16 (0.41%) at $38.95; and
  • Citigroup declined $0.22 (0.48%) to $45.99

The Broker-dealer Index posted a rise of 0.42 points (0.3%), closing at 140.6; the ticket clippers lined up as follows -

  • Merrill Lynch slid $0.33 (0.59%) ending the day at $55.52
  • Morgan Stanley Dean Witter shed $0.41 (0.79%) to end the session at $51.59
  • Goldman Sachs shed $0.12 (0.12%) to end the session at $100.75
  • Lehman Brothers posted a rise of $0.10 (0.12%) closing at $82.98

The Philadelphia SOX (Semiconductor) index slid 10.04 points (2.41%), ending the day at 405.76

  • Triquint slid $0.00 (0%) to end the session at $3.88
  • Micron Technology dipped $0.35 (2.95%) closing at $11.50
  • Intel dipped $0.22 (0.95%) ending the day at $22.86
  • Altera shed $0.48 (2.15%) to end the session at $21.83
  • JDS Uniphase declined $0.01 (0.32%) to end the session at $3.13

Gold & Silver

Gold is holding up really quite well - although it loks tired. Last night it closed with a fall of just $0.50 (0.11%) to $435.10 per ounce. The Gold Bugs Index lost 0.61 points (0.26%), ending the day at 237.45 points.

Silver fell by a more-tangible $0.08 (1.06%) to close at $7.44 per ounce. The Gold and Silver Index (XAU) lost 0.83 points (0.78%), ending the day at 105.47 points.

PHLX Gold and Silver Index105.47-0.83-0.78%
AMEX Gold BUGS Index237.45-0.61-0.26%


Oil was firmer, rising by $1.63 per barrel, closing at $48.83 per barrel.

OK. Crude Oil inventories rose, but so did the price of a barrel of crude. How come that?

Simple, silly.

Commercial distillate inventories (heating oil and diesel fuel) shrank unexpectedly. Distillate inventories fell 100,000 barrels for the week ended Nov. 5, according the federal Energy Information Administration. The consensus guess expected a build of nearly a million barrels. Oops!

Heating oil stocks fell to 48.4 million barrels - about one month's supplies.

In the past eight weeks, total distillates have fallen nearly 13 million barrels, or 10%, to just above 115 million barrels - while temperatures Northeast (where most heating oil is used) have been falling (note to self: that's called "winter").

After the NYMEX market had closed, news crossed the wire that an gas pipeline in Northern Iraq had been sabotaged. Not an oil pipeline, but it ought to make folks sit up and take note: it shows that the anti-occupation people aren't just in Fallujah (and/or that anti-occupation forces got a HUGE advance notice to disperse, since the war crime now being perpetrated in Fallujah was delayed until after the US election but was made highly public).

The Oil and Gas Index (XOI) posted a rise of 5.65 points (0.81%), to 702.4 points, and the Oil service stocks (OSX) Index added 2.99 points (2.63%), ending the day at 116.79 points.

Reuters CRB284.250.50.18%
Crude Oil Light Sweet48.831.633.45%
AMEX Oil Index702.45.650.81%
Oil Service Index116.792.992.63%


I mentioned the rather-obvious intervention in the Yen cross yesterday - it was even more obvious today.

The USD has absolutely no right to strengthen against the Yen - even if you try to use interest-arb as the excuse. After all, Japan has the largest bilteral trade surplus with the US.

No, the Japanese government (and central bank) have their fingerprints all over this teensy bounce. It is stupid (most things done by bureaucrats ane politicians are stupid) - they should simply write cheques to exporters ratehr than beggaring everybody by keeping the Yen artificially weak.

The Euro traded through 1.30 last night, hitting 1.3030 before pulling back hard (i.e., massacring yet another bunch of newcomer FX punters) to under $1.29.

I still think this is not "the" bounce in the US Dollar index (it hit a new low for the move last night before a good bounce), but it is certainly shaking things up a bit.

US Dollar Index84.520.270.32%
Australian Dollar0.7593-0.0006-0.08%
Swiss Franc1.1815-0.0016-0.14%
Canadian Dollar0.8370.00360.43%

European Markets

France's benchmark CAC-40 Index rose 14.97 points (0.4%), closing at 3784.91 points; the German DAX-30 Index advanced 23.8 points (0.59%), closing at 4089.13; and in the UK, the FTSE-100 Index advanced 16.8 points (0.36%), to 4734.5.