Interdum stultus opportuna loquitur...

Tuesday, November 16, 2004

Producer Prices Rise... Stock Prices Fall

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

First, a Housekeeping Notice...

I'm going to re-organise some bits of the Rant site today - mostly to get rid of some clutter, but also to get the template ready to "fold in" to a broader offering (which will include a bunch of stuff on Australian equities and derivatives thereon - of which more later).

My "development" style goes something like this -

  1. buggerise around with the template/CSS style sheet;
  2. update the site;
  3. check for grotesque outcomes;
  4. fix any "grosies" found at (3);
  5. go to (1)...

As a result, those of you taking RSS feeds might get several notifications that the site has updated, but your RSS feeds won't see any new headlines. That will mean that I've just done some "adjusting".

The other thing that you will notice (tomorrow) is that the little "clicklets" or whatever they're called, will be organised into a semi-logical pattern.

Those that are in the "Comment/Rate" section are from Blog "aggregators" that invite comments from readers: any comments on, and suggestions for, "revamp" content would be appreciated. the same goes for "ratings"... Democracy stinks if you're running a country, but I'm hoping that the self-selection that drives the readership here will result in more sensible outcomes than "the tyranny of the majority". Plus, if elections included the possibility to actual state the force with which you like or dislike a candidate, the country wouldn't kid itself that the majority cares a damn about "democracy" where you get to choose between two sets of party loyalists.

The readership of this little corner of the Blogosphere is growing quite fast. That's one of the genuinely satisfying things about a borderless information community; if you provide stuff that people in Lithuania want to read, they can and will read it.

The more folks that stumble on this Rant, the better - it means more "ad-click" revenue (yes, those little Google ads benefit me). It therefore funds more content, since I can without having to shell out my own coin... the more widely publicised it gets, the faster it grows... and so on. Word of mouse advertising, as Joe Dolce once said in one of his terrific e-mails.

We Now Return to (semi-) Normal Ranting...

I notice that War Crimes conspirator Condoleeza Rice is being tipped to replace Colin "My Lai Cover-Up" Powell. Not satisfied with having an oil tanker named after her, and not satisfied with wrecking a sovereign country, she now wants her boyfriend Georgie to give her a diplomatic slot? It would be like making Adolf Eichmann your liaison with the Jewish community.

(Do you doubt that "boyfriend" thing? Why? Oh, that! Well, I guess if you think that... but why would you? But if you did... but he's so macho... but he was a cheerleader... not that there's anything wrong with that)

Economic Statistics

More taxation-by-inflation, slowing sales, Marines committing War Crimes (oh wait - that's not a statistic... it's a symptom of the level of intelligence of the average grunt)... another day in the Empire of Decay.
  • the Producer Price Index rose 1.7%, which was mor than double the consensus guess of 0.6%; thanfully it was all in things that nobody worries about - energy costs, food and so on. The PPI ex-Food & Energy was just 0.3% (again, triple the consensus guess of 0.1%)... so anybody who doesn't drive, or heat their home, or eat, will be doing just fine;
  • ICSC-UBS Store Sales came in at -0.4% (the guessers do't hazard a guess on this state);
  • Redbook were reported, with the number at 3.7% year-on-year (again, no guess).

Federal Reserve Open Market Operations

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

  • a $4.25billion, overnight repurchase, entirely transacted in T-backed collateral.

The repo was also struck at a discount to Fed Funds - just a couple of teenies, but it still means that da Boyz are deliberately being looked after by Easy Al, the worst central banker since John Law.

Major US Indices

The DJIA lost 62.59 points (0.59%), closing out the day at 10487.65 points; the broader S&P500 shed 8.38 points (0.71%), at 1175.43.

Over at Times Square, the Nasdaq Composite declined 15.47 points (0.74%), to close at 2078.62, while larger-cap technology issues fared worse with the Nasdaq100 losing 12.43 points (0.8%), to end at 1548.53 points.

NYSE Volume was about average, with 1.36 billion shares traded, while Nasdaq Volume was solid, with 1.9 billion shares crossing the tape.

Nasdaq Composite2078.62-15.47-0.74%
NYSE Volume1.36bn--
Nasdaq Volume1.9bn--
US 30-yr yld4.9%0.01%0.14%

Market Breadth & Internals

On the NYSE declining Issues beat out advancers by 2056 to 1277, for a single-day A/D reading of -779; and Nasdaq losers exceeded gainers by 1927 to 1158

On the NYSE declining volume was greater than volume in advancing issues by 970.24 to 368.39 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 592.68 to 501.22 million shares.

187 NYSE-listed stocks rose to new 52-week highs, and 3 posted fresh 52-week lows, while on the Nasdaq there were 117 stocks that hit new 52-week highs, and 18 which fell to fresh 52-week lows

Advancing Volume (m)368.39501.22
Declining Volume (m)970.24592.68
New Highs187117
New Lows318

Market Sentiment

I mentioned in yesterday's Rant that yesterday ought to have been the end of the rally; the question now is "for how long?".

Technically, the market remains staggeringly, eye-poppingly overbought. Small-cap indices have actually broken to new highs, and the Dow Transports likewise is "going ballistic".

The Trannies breakout has been cited by some "amateur" Dow Theorists as a sign of a new bull market. All that shows is that there is a certain class of scum (call them "stock brokers") that will try and spin any factoid into a coherent story if it measns more coin in their pockets.

Fact: the only other time this sort of thing has happened (a breakout to new monthly highs on the Trannies that was not confirmed by the Industrials) was in the 1970s - and it presaged a sharp and severe downturn.

Everything says "more downside is only a matter of time" -

  • VIX is absurdly low;
  • SPX/VIX is stupendously high;
  • market-wide valuation is above 1929 levels, with earnings at a peak as a proportion of GDP;
  • debt debt debt debt;
  • credit ratings downgrades are rising;
  • Fannie Mae has "new issues" (not good for the mortgage market);
  • employment still stagnant and interest rates rising...

Nothing except momentum is positive. As John Hussman would say, the market is exhibiting a mildly constructive technical picture, but has no investment merit (his stuff is sensational - Hussman Funds).

Options expiration is this Friday for November options; at present the November options I've mentioned are a mixed bag.

The QQQ WL (QQQ Nov $38 puts, bought at $50) have been hammered and still look like they might expire worthless unless the market gets some downside traction (three more days similar to today would do nicely).

Meanwhile the TLT WK (TLT Nov $89 puts, bought at $70) over the Lehman 20-yr Treasury iShares are travelling well. One was sold at $140 - thereby locking in a 100% on one tranche. The second half-position closed the session at $115: a bad CPI number will see it hit $200 tomorrow.

CBOE Equity Call Volume (000)795.85-212.46-21.07%
CBOE Equity Put Volume (000)454.765714.33%
CBOE Volatility Index13.21-0.17-1.27%
CBOE Nasdaq Volatility Index18.60.10.54%
Equity Put-Call Ratio0.570.1844.85%
10-day PCR0.560.00210.39%
SPX-VIX Ratio88.980.50.57%


Bonds fell modestly along the curve, in the light of the PPI numbers; owever the bond marketwas also reasonably happy with the foreign "flow of funds" data which showed foreign private investors buying Treasuries again. The yield on the benchmark 30-year Treasury bond rose 7 basis points to 4.902%. As I said yesterday, it ought to break 5% this week, and then look out.

UST 2Y (yld)2.8760.020.59%
UST 5Y (yld)3.5530.0240.68%
UST 10Y (yld)4.2050.010.36%
UST 30Y (yld)4.9010.0040.08%

The PPI raised the spectre of faster and larger Fed rate hikes - this did not do the Financials one iota of good. (Note: Financials now make up 22% of the total market cap of the S&P500 - up from about 9% in 1980s: they are at a swing high in profitability on any metric that you would care to name).

The Banks Index slid 0.99 points (0.96%), to end the session at 102.59; within the index,

  • the Derivative King - JPMorganChase declined $0.69 (1.76%) closing at $38.47; and
  • Citigroup lost $0.62 (1.33%) at $46.05

The Broker-dealer Index lost 1.35 points (0.93%), to end the session at 144.25; the ticket clippers lined up as follows -

  • Merrill Lynch slid $0.41 (0.72%) ending the day at $56.75
  • Morgan Stanley Dean Witter declined $0.69 (1.3%) ending the day at $52.51
  • Goldman Sachs slid $0.90 (0.86%) to $103.72
  • Lehman Brothers slid $1.46 (1.73%) at $83.01

The Philadelphia SOX (Semiconductor) index lost 1.96 points (0.46%), ending the day at 427.61

  • Triquint lost $0.09 (2.2%) to end the session at $4.01
  • Micron Technology lost $0.15 (1.24%) closing at $11.97
  • Intel rose $0.07 (0.29%) ending the day at $23.84
  • Altera shed $0.01 (0.04%) ending the day at $23.26
  • JDS Uniphase shed $0.06 (1.85%) to $3.18

Gold & Silver

Gold strengthened by $2.50 (0.57%) to $439.50 per ounce; for the second session straight, it traded above $440 but couldn't hold that number into the close. It traded above $440 after the close too...

The Gold Bugs Index gained 3.92 points (1.65%), at 240.88 points.

Silver rose $0.02 (0.2%) to close at $7.56 per ounce. The Gold and Silver Index (XAU) gained 1.58 points (1.48%), to 108.67 points.

PHLX Gold and Silver Index108.671.581.48%
AMEX Gold BUGS Index240.883.921.65%


Oil lost even more ground , shedding $0.78 per barrel, closing at $46 per barrel. I guess the explosions at pipelines in Iraq just aren't news anymore - not now that we've got a "nuffie retreat" happening as successive waves of late entrants are "stopped out".

The Oil and Gas Index (XOI) slid 2.64 points (0.38%), at 698.63, while the Oil service stocks (OSX) Index advanced 0.68 points (0.59%), to end the session at 116.04 points.

Reuters CRB284.500%
Crude Oil Light Sweet46-0.78-1.67%
AMEX Oil Index698.63-2.64-0.38%
Oil Service Index116.040.680.59%


The BoJ is doing everything in its power to stop the Yen from rising to parity (I'm calling 100 as "parity" here), becasue they know that once 100 breaks, 85 is literally only a couple ofweeks away.

They have wasted an amount equal to double Australia's entire GDP trying to stem the strength of the Yen - and that's just in the past 2 years. Ludicrous stuff.

Politicians and central wankers ought to be smacked hard in the head with pieces of wood (with nails in) until they finally accept that bureaucracy cannot price things at non-market prices indefinitely... it just impoverishes the Treasury and makes Madame Market surly, so the end-game is actually more worser.

Like I said yesterday, the Western taxpayers were raped for trillions of dollars to fund the pissing competition that was the "Cold War". We were supposed to be trying to prevent people from permitting their capital from being employed in centrally-planned economic systems.

In reality we were funding the massive expansion of the military-industrial complex - to the final effect of having Big Oil and Big Defence owning the Pentagon and the White House. Add the natural butt-kissing tendencies of politicians in second-rate nations (like Blair and Howard), and you've got a recipe for loomingeconomic disaster.

US Dollar Index83.88-0.19-0.23%
Australian Dollar0.7722-0.0005-0.06%
Swiss Franc1.1759-0.0028-0.24%
Canadian Dollar0.83580.00260.31%

European Markets

France's benchmark CAC-40 Index slid 26.7 points (0.7%), to 3794.27; the German DAX-30 Index lost 17.12 points (0.41%), ending the day at 4117.22 points; and in the UK, the FTSE-100 Index slid 32.7 points (0.68%), to end the session at 4770.4 points.


Tonight's Pivots (US Market)

R2105661184.91566.67113 2/32
R1105331181.21560.83112 25/32
Pivot105081178.51552.17112 15/32
S1104751174.81546.33112 6/32
S2104501172.11537.67111 28/32