Interdum stultus opportuna loquitur...

Friday, November 26, 2004


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POETS is an acronym, which stands for "P!$$ Off Early - Tomorrow's Saturday". It was a half day on the stock and bond markets, the gold and oil markets on COMEX were closed all day.

Economic Statistics

There was no economic data during the shortened session - the Money Supply data that is due out today, is not released until 4:30 NY time: by that time I hope to be back to sleep for an hour or so.

Forthcoming US Economic Data Tomorrow's US Economic Data Calendar

Federal Reserve Open Market Operations

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

  • a $6.75billion, 6-day repurchase with $2.6billion in T-backed collateral .

Again, a large repo which is centred more on the Agency market: the Agency market is where the foolhardy trade bonds of the "lenders of last resort" to the US housing bubble - Fannie Mae and Freddie Mac.

Call me a cynic, but I don't think there is any reason for Agency spreads to be stable at this point (although to remain stable last night, yields on the bonds had to tick up anyhow, because Treasuries fell).

Fannie & Freddie bonds only yield between 9 and 21 basis points over similar-duration Treasuries - when in reality they are junk.

These folks are the major part of an industry that will write a mortgage for any client with a pulse, at 95% of property value - when property values are massively inflated in every locality that's worth living in.

They are referred to as "government sponsored" (as it turns out, so was LTCM when it came to the crunch... free market capitalism is great if you've got chums at the Fed). Still that doesn't mean that the government will honor FNM and FRE bonds at 100% of face value in any future bailout.

Major US Indices

A shortened session, but one with an interesting "twist".

Without any repo grease to get the party started, the market's early gains fizzled.

The gains seemed to be partially generated by a small bounce in the dollar - from its low of 81.83 on the USDX - which was in turn mostly due to a nasty, nuffie-slamming drop of over 1c in the Euro (see the "Currencies" below for more information on that).

Anyway... the more interesting thing was how hard the index futures tanked after the phycial market had closed.

Equities closed a little above unchanged - enough people were dumb enough to be prepared to hold stocks over the weekend. Smarter money waited until the equities market couldn't respond, and the index futures had a one-way sleigh ride right to their closing bell. It wan't a big drop, but it was pretty telling.

I've tried to line up the Dow (top) and Dow future (bottom) charts so that their timescales are aligned. They're 1-minute charts, just to get a really good handle on precisely when important things happened. Notice what happened pretty much as soon as the last stock trade was processed...

DJIA and Dow Futures, 5 minute intraday...

By the close of the equities market, it looked like a "wash"...the DJIA gained 1.92 points (0.02%), closing out the day at 10522.23 points; the broader S&P500 advanced 0.89 points (0.08%), ending the day at 1182.65.

The Nasdaq Composite slid a barely-perceptible 0.57 points (0.03%), to close at 2101.97, while larger-cap technology issues fared worse with the Nasdaq100 losing 4.29 points (0.27%), to end at 1578.26 points.

NYSE Volume was modest, with 0.5 billion shares crossing the tape, while Nasdaq Volume was also pretty low, with 0.67 billion shares crossing the tape. Remember though, this was only a half-session.

Nasdaq Composite2101.97-0.57-0.03%
NYSE Volume0.5bn--
Nasdaq Volume0.67bn--
US 30-yr yld4.89%0.05%0.99%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1862 to 1222 for a single-day A/D reading of 640; Nasdaq gainers trumped losers by 1688 to 1211. SO while it was only a half-day, that didn't mean that stock bulls were only half-excited.

The press is now full of tripe about how the rally is "likely to continue for another 2-3 weeks without stopping" - as good an indication of a swing high as you need... the only better short-selling tip would be for some crowningly incompetent clown (like, say, Alan Greenspan) to tell you to buy stocks.

NYSE advancing volume exceeded volume in decliners by 307.54 to 188.6 million shares; Nasdaq advancing volume was greater than volume in decliners by 248.4 to 144.11 million shares. Again, don't look too hard at the numbers - it was a short session.

338 NYSE-listed stocks rose to new 52-week highs, and 1 posted fresh 52-week lows, while on the Nasdaq there were 150 stocks that hit new 52-week highs, and 11 which fell to fresh 52-week lows

Advancing Volume (m)307.54248.4
Declining Volume (m)188.6144.11
New Highs338150
New Lows111

Market Sentiment

The put-call ratio - although based on only half a days turnover - are still remarkably consistent with recent readings at about 0.54 (that compares with the 10-day average at 0.53).

VIX - still too low, indicating that the market is being "given its head" (as we horsey types say when you leave the bit loose), in order for the nuffies to be handed their heads (get it?!) down the track a little.

CBOE Equity Call Volume (000)279.89-446.43-61.47%
CBOE Equity Put Volume (000)150.29-334.4-68.99%
CBOE Volatility Index12.790.120.95%
CBOE Nasdaq Volatility Index17.94-0.49-2.66%
Equity Put-Call Ratio0.54-0.13-19.53%
10-day PCR0.53-0.0091-1.68%
SPX-VIX Ratio92.47-0.43-0.46%

Bond Market Analysis

Bonds fell quite charply along the curve after a pronouncement by the Bank of China (or one of its funcitonaries) about China's foreign exchange reserves.

I have said it for a long time - that one of these days the Chinese government was going to get fed up with subsidising US economic mooching, and would look elsewhere for a new trading pal (and stop buying US Treasuries as a result).

The yield on the benchmark 30-year Treasury bond rose 4.9 basis points to 4.888% (which is an odd coincidence since 888 is a very lucky number when translated into Chinese). The 5% mark is now more than a week overdue, but two more days like this and it's there.

UST 2Y (yld)3.0090.072.24%
UST 5Y (yld)3.6280.0521.45%
UST 10Y (yld)4.2260.041%
UST 30Y (yld)4.8860.0491.01%

The Banks Index lost 0.01 points (0.01%), closing at 101.92; within the index,

  • the Derivative King - JPMorganChase declined $0.01 (0.03%) closing at $37.69; and
  • Citigroup slid $0.10 (0.22%) closing at $45.42

The Broker-dealer Index gained 0.13 points (0.09%), to end the session at 145.93; the ticket clippers lined up as follows -

  • Merrill Lynch declined $0.08 (0.14%) at $56.53
  • Morgan Stanley Dean Witter slid $0.23 (0.45%) ending the day at $51.12
  • Goldman Sachs declined $0.16 (0.15%) closing at $104.84
  • Lehman Brothers added $0.28 (0.33%) ending the day at $84.80

The Philadelphia SOX (Semiconductor) index declined 2.67 points (0.62%), to end the session at 430.98

  • Triquint gained $0.04 (0.94%) at $4.31
  • Micron Technology dipped $0.08 (0.7%) to end the session at $11.40
  • Intel slid $0.40 (1.69%) ending the day at $23.21
  • Altera dipped $0.34 (1.47%) ending the day at $22.75
  • JDS Uniphase posted a rise of $0.03 (0.96%) to end the session at $3.16

Gold & Silver Markets

Depending who you ask, Gold did and didn't break $450 last night. Kitco's little screen bug (seen all over the net) shows spot trading at above $450 at the close, and that's good anough for me. My "point of reference" is always the futures market, and ComEx was closed on Thursday and Friday.

The Gold Bugs Index gained 6.18 points (2.61%), to end the session at 243.39 points. The Gold and Silver Index (XAU) gained 2.66 points (2.48%), to 109.87 points.

PHLX Gold and Silver Index109.872.162.01%
AMEX Gold BUGS Index243.396.392.7%

Oil Market

The NYMEx Oil market was also closed, so there's no pricing for WTI Crude either.

The Oil and Gas Index (XOI) gained 6.68 points (0.9%), to end the session at 745.38, while the Oil service stocks (OSX) Index gained 0.03 points (0.02%), at 127.02 points.

Crude Oil Light SweetCLOSED
AMEX Oil Index745.3811.441.56%
Oil Service Index127.021.911.53%

Currency Markets

Here is where all the interesting things happened.

The Euro broke 1.33, hitting a high of 1.3330, after the unfortunately-amusingly-named Yu Yongding - an advisor to the Chinese Central bank - stated that the rate of growth of Chinese USD reserves was slowing and that they had fallen to $180 billion in the latest data.

"Well," thought the currency screen... "a Chinaman said it, and it's about China. This bloke must have the ear of Chariman Mao!"

So the USD tanked, the Euro (the "next big thing" for reserve currencies) spiked above 1.33, and everybody held their breath.

The aforementioned Dr Yu then hurriedly mentioned that he wasn't speaking on behalf of the Chinese government, and that the figures he quoted were from Federal Reserve Flow of Funds data that's three months old now.

"What's that?" said the 20-somethings manning currency desks around the globe. "Mao hasn't been alive since before I was born? Who is this Yu Yongding guy then? What? There's a billion of 'em?"

What this shows, is how little this data gets read; if the entire global foreign exchange market can be moved by an unknown Chinaman talking about last quarter's publicly available data, you know that the market is chock-a-block with nuffnuffs.

Anyhow, once the requisite soothing noises had been made, the Euro plummeted over 1.25 cents... there wil be a few nuffnuffs who are a bit poorer this morning.

The US dollar index fell through my 82 bounce target on Dr Yu's comments, hitting 81.83. Five minutes later it had bounced back to 82.45 - so any "punt" at 82 was nicely in the money almost immediately.

But that's not where it ended - that would be far too easy. From there on, it was a slow bleed for the rest of the session for the USD. It finished at 81.83 - a new closing low for the year. A new intraday low of 81.78 was set a few minutes before the close. And the Euro - after falling from 1.3330 all the way to 1.3182 - recovered to close within 10 pips of 1.33 again, settling at 1.3292. If you were on the right side of all that, there was a small fortune in the offing... but very few people would have gotten it right.

US Dollar Index81.82-1.17-1.41%
Australian Dollar0.79020.00460.59%
Swiss Franc1.1384-0.0194-1.68%
Canadian Dollar0.85030.0070.83%

European Markets

France's benchmark CAC-40 Index slid 15.39 points (0.41%), to end the session at 3782.2; the German DAX-30 Index declined 6.08 points (0.15%), ending the day at 4154.27 and in the UK, the FTSE-100 Index dipped 11.9 points (0.25%), to end the session at 4741.5 points.


Monday's Pivots (US Futures Market)

R2105691189.931594.33112 26/32
R1105401185.371585.67112 23/32
Pivot105221182.931581.33112 20/32
S1104931178.371572.67112 17/32
S2104751175.931568.33112 14/32