Interdum stultus opportuna loquitur...

Tuesday, November 23, 2004

The TICK Trick...

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

Note: it's late, I know. It wasn't entirely my fault though...

Economic Statistics

ICSC-UBS Chain Store Sales rose 0.8% for the month and 3.9% over last year's level; that shows retail spending at major chain stores (which track about 10% of consumption expenditure) rising at a slower rate than real GDP.

Redbook Store Sales were also released, and didn't confirm the monthly figure from the ICSCreport. The Redbook indicated spending growth of 3.5% y/y.

Existing Homes Sales were reported, with the number at 6.75m, which fell short of the consensus guess (6.8m).

The State Street Investor Confidence Index gave a reading of number at 85.3, which was a drop of 4.3% compared to last month's reading of 89.20.

The 4-week bill auction was cleared at a yield of 1.95% and a bid-cover ratio of 2.12x, a bit worse than last week's auction (which cleared at 1.925% and bid-cover of 2.20x); this ties in withthe Fed Funds Futures market which is currently pricing in a 90% chance of a rate hike at the next FOMC meeting.

The 2-year note auction cleared with a yield of 2.945% and a bid-cover ratio of a rather strong 2.60x: last month's yield was 2.59% with a bid-cover of just 1.93x.

Tonight's numbers feature one fairly important datapoint - but for which no consensus estimate is available until the pre-market Hightower futures market report for the oil market. And that is the oil inventories number.

Other data out tonight (I will organise this into tables this weekend):

  • Durable Goods Orders are expected to rise by 0.6% after last month's 0.2% increase (as I always say, only look at Non-defence Capex ex-Aircraft);
  • New Jobless Claims are expected to be pretty static at 335k (last month was 334k);
  • New Home Sales are supposed to fall a tiny bit to 1.200million (last month: 1.206 million); and
  • the UMich Consumer Sentiment Index (final) is expected to be a bit higher than the poreliminary reading of 95.5 (consensus guess is currently 96).

Forthcoming US Economic Data Tomorrow's US Economic Data Calendar

Federal Reserve Open Market Operations

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

  • a $3.25billion, overnight repurchase with $3billion in T-backed collateral ; and
  • a $7.5billion, 3-day repurchase with $1.043billion in T-backed collateral.

Well looky there - not enough grease to generate a decent tradable rally from 10 a.m. NY time. And so it was; although there was a bit of a jamjob attempt, it faded all-too-quickly and by 11 a.m. the indices were plunging to their lows of the day.

Then, the usual thing happened - an intraday washout (of which, more in a moment).

Major US Indices

"Doubtful it stood, as two spent swimmers who do cling together and choke their art", as the Bloody Sergeant might have said.

At 11:15 a.m. NY time, things looked like going to hell in a hand-basket; then things just stopped.

Intraday traders will be familiar with concepts like TRIN (aka the ARMS Index) and TICK; TICK is my absolute favourite for indicating intraday washouts and/or "exhaustion" moves.

Like the "Fed Repurchase" trick, it is not very complex, and like the Fed repo trick it works.

Simply: if the market is in an uptrend as measured by short-term indicators, you only use TICK as a guide to take the long side. If TICK hits a level below -800 (preferably -1000... that is the sweet spot), you can almost bet that the intraday pullback is over.

The reverse is true in a downtrend - positive TICK extremes indicate an exhaustion move and should be "faded". There is long-side bias inherent in stock markets, and so there is a higher "hurdle" for "positive" TICK (it must exceed +1000, and preferably +1200).

In case you've been under a rock, the market is in a short-term uptrend: check out last night's action for how TICK works...

Anyway... when TICK hit -900(ish), the market gave up any furthre attempt to drop (and it helped that someone dragged Crude Oil back from above $50, too). From the TICK low, the Dow surged 70 points - although it took its sweet time about it. Still, TICK turned very positive, breadth improved, and other intraday sentiment indicators began to show signs of life.

In the afternoon, wave upon wave of program buying stabilised the market and then gave it some legs upwards. Program buying - where institutions buy "baskets" of stocks at the offer, is obvious when it's happening - the S&P futures jump a point in fifteen seconds, TICK hits +1000 and TIKI goes above 22.

That said, the day finished looking pretty weak despite the very high TICK leading into the close.

The major indices were as close to unchanged as makes no odds. the DJIA gained 3.18 points (0.03%), closing out the day at 10492.6 points; the broader S&P500 lost 0.3 points (0.03%), to end the session at 1176.94.

Over at Times Square, the Nasdaq Composite dipped 0.91 points (0.04%), to close at 2084.28, while larger-cap technology issues fared worse with the Nasdaq100 losing 5.68 points (0.36%), to end at 1562.6 points.

NYSE Volume was solid, with 1.43 billion shares traded, while Nasdaq Volume was super-chunky (over 2 bill), with 2.07 billion shares crossing the tape.

Nasdaq Composite2084.28-0.91-0.04%
NYSE Volume1.43bn--
Nasdaq Volume2.07bn--
US 30-yr yld4.84%0.01%0.25%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 2029 to 1308 for a single-day A/D reading of 721; Nasdaq gainers trumped losers by 1721 to 1351. If you think it's a bit odd that advancers were way ahead of decliners on a day which was pretty "bleh", you're not alone.

NYSE advancing volume exceeded volume in decliners by 783.68 to 619.29 million shares; Nasdaq advancing volume was greater than volume in decliners by 672.35 to 499.94 million shares.

239 NYSE-listed stocks rose to new 52-week highs, and 2 posted fresh 52-week lows, while on the Nasdaq there were 142 stocks that hit new 52-week highs, and 24 which fell to fresh 52-week lows

Advancing Volume (m)783.68672.35
Declining Volume (m)619.29499.94
New Highs239142
New Lows224

Market Sentiment

I'm considering abandoning the "pure" CBOE data on equity options, in favour of a broader sample. Last night on the ISE, calls overwhelmed puts by almost 2.5:1, yet the CBOE data shows a FALL in call buying.

Every other sentiment measure remains mindlessly overbought; it's becoming boring to keep harping on it. The SPX/VIX ratio is one that I have epxressed doubts about in the past, and I still have my doubts (because it is made up of two variables with different orders of integration). Still, it's reaching ludicrous levels - mostly because VIX isstill showing volatility at 9-year lows.

CBOE Equity Call Volume (000)726.32-1.05-0.14%
CBOE Equity Put Volume (000)484.68103.7227.23%
CBOE Volatility Index12.67-0.3-2.31%
CBOE Nasdaq Volatility Index18.43-0.34-1.81%
Equity Put-Call Ratio0.670.1427.41%
10-day PCR0.540.01362.58%
SPX-VIX Ratio92.892.132.34%

Bond Market Analysis

Bonds fell slightly at the long end, after rallying early in the session as oil prices got back through $50 a barrel briefly. The yield on the benchmark 30-year Treasury bond rose 1.2 basis points to 4.838%.

UST 2Y (yld)2.9430.010.44%
UST 5Y (yld)3.5720.0140.39%
UST 10Y (yld)4.1840.010.14%
UST 30Y (yld)4.837-0.008-0.17%

The Banks Index posted a rise of 0.75 points (0.74%), to end the session at 101.51; within the index,

  • the Derivative King - JPMorganChase rose $0.16 (0.43%) at $37.58; and
  • Citigroup advanced $0.01 (0.02%) to end the session at $45.16

The Broker-dealer Index rose 0.81 points (0.57%), at 143.32; the ticket clippers lined up as follows -

  • Merrill Lynch added $0.46 (0.82%) to $56.80
  • Morgan Stanley Dean Witter slid $0.31 (0.59%) at $51.95
  • Goldman Sachs rose $0.38 (0.37%) ending the day at $103.42
  • Lehman Brothers gained $1.46 (1.79%) to $83.10

The Philadelphia SOX (Semiconductor) index posted a rise of 1 points (0.23%), to 432.88

  • Triquint rose $0.04 (0.94%) ending the day at $4.28
  • Micron Technology lost $0.27 (2.31%) ending the day at $11.43
  • Intel dipped $0.06 (0.25%) to end the session at $24.10
  • Altera gained $0.05 (0.21%) to end the session at $23.45
  • JDS Uniphase advanced $0.02 (0.64%) at $3.16

Gold & Silver Markets

$450 held for now (the high was $449.90) - you can hear the insto traders just daring the nuffies to buy $450... "go on, little guy... or are you CHICKEN?... Buk-buk-buk-bukkERRRRRK"

After having one little shot at $450, Gold softened and finally closed $1.80 (0.4%) lower at $447.40 per ounce. The Gold Bugs Index gained 0.7 points (0.29%), to end the session at 242.02 points.

Silver fell by $0.03 (0.33%) to close at $7.56 per ounce. The Gold and Silver Index (XAU) gained 0.57 points (0.52%), to end the session at 110.25 points.

PHLX Gold and Silver Index107.71-2.54-2.3%
AMEX Gold BUGS Index237-5.02-2.07%

Oil Market

Oil was firmer, rising by $0.94 per barrel, closing at $49.25 per barrel. that was still a full dollar off its highs.

The Oil and Gas Index (XOI) rose 11.35 points (1.58%), to 730.49 and the Oil service stocks (OSX) Index posted a rise of 0.69 points (0.56%), ending the day at 123.67.

Reuters CRB2870.50.17%
Crude Oil Light Sweet48.760.450.93%
AMEX Oil Index733.943.450.47%
Oil Service Index125.111.441.16%

Currency Markets

After dipping to as low as 1.2975, the Euro went berserk, topping at 1.4105 during the session. Apart from broader USD weakness, this was also the reulst of some market chatter regarding Russia's move to redenominate some of its foreign currency reserves into Euros.

I've said this before many times; sooner or later the oil worlds is going to wise up to the stupidity (from their point of view) of denominating global oil trade in USD. Saddam Hussein had already redenominated Iraqi oil trade into Euros (something that the Yanks put a stop to as soon as they invaded), and the Iranians, Venezuelans and Russians have a vested interest in enjoining their Middle Eastern counterparts to do likewise. this will undermine the reserve status of the USD as other central banks till not have to hold USD deposits solely for oil purchases..

US Dollar Index82.99-0.26-0.31%
Australian Dollar0.78560.00340.43%
Swiss Franc1.1581-0.0044-0.38%
Canadian Dollar0.843-0.0008-0.09%

European Markets

France's benchmark CAC-40 Index slid 24.53 points (0.65%), at 3774.25; the German DAX-30 Index slid 10.91 points (0.26%), ending the day at 4123.98; and in the UK, the FTSE-100 Index advanced 9.3 points (0.2%), at 4742.4.


Tonight's Pivots (US Futures Market)

R2105641185.071587.17114 10/32
R1105301181.431577.33113 31/32
Pivot104861176.471565.67113 13/32
S1104521172.831555.83113 2/32
S2104081167.871544.17112 16/32