Interdum stultus opportuna loquitur...

Sunday, October 31, 2004

Another Excellent Piece

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A fantastic piece on "From The Wilderness" (which also has good pieces against the "abiotic oil hypothesis" that I have mentioned recently.)
I get a lot of moaning whenever I ramble on about the falsity of "American Economic Superiority" - my position, as you'll understand, is that anybody who is in the process of going from a large net creditor position, to a large (the largest) net debtor, will appear prosperous... for a while - as they spend the borrowed money.
Consider your personal financial situation; you start your adult life with some education and usually not much else. On the way through it you pick up some non-internal assets (if you don't already have some as a result of bequest or student-life thrift).
Let's look at a one-year timespan during which you move from a position of having positive net assets (say, $2k in the bank and no debt) to a significant (but minor, on current scales) negative net asset position. Let's say you end the period with nothing in your bank account (except on paydays), and a $5k credit card which is maxed out.
What do you think youir lifestyle would look like for the previous year - the time during which your asset position deteriorated?
Well, compared to someone with identical income, you would have been able to consume an additional $7k, give or take.
Assume that you and your debt-free analogue were both on about the average exit salary for University graduates (a paltry $35,000), and presto - you look 20% richer than the non-debt-accumulator (or debt-non-accumulator?) during those two years.
As far a the conspicuous-consumption side of things is concerned, you look like the guy with the new iPod, the colour-screen mobile with polyphonic ringtones, and the fit threads, and your mate looks like a dud... in those stupid Target cords he wears... what a loser.
I am not arguing against the accumulation of debt; that would just be stupid.
Properly managed and put to useful purposes, the credit market is a terrific way of matching capital with purpose, and funding projects that would otherwise fail. It is a vital engine of capitalism when properly employed - but a lethal injection when abused (i.e., when used to fund an "income gap" between the desired lifestyel of a consumer and their actual manageable lifestyle given their income and prospects).
But as Adam Smith said, "there is scarce a man alive who, when in tolerable health and spirits, will not over-value his chances of success in a venture".
And there's the rub; people can always equivoate to themselves, telling themselves that debt-funded consumption is a "temporary mismatch" of revenues and outgoings that will right itself once a rough patch goes away.
So while "Cord-Boy" may not have saved an additional cracker in the year since you started "living large", he's still got that $2k. Yes, he has almost certainly gone backwards (since returns on cash at bank is always less than inflation), whereas you have bought "things"... like that iPod.
The depreciation rate on cash is about 2% - the return on bank accounts (paltry interest) minus inflation. What d'you reckon the depreciation rate on iPods is? Colour-screen mobiles? Try 50% a year. Minimum.
In short, debt-financed consumption is the road to ruin; debt financed investment is less so, only so long as the leverage employed is working in your favour.
And don't for a second think that a motor vehicle is an investment (unless it's a Duesenberg, a Bugatti or a McLaren F1 road car). New cars depreciate 15% the moment you sign the title deed; older cars depreciate more slowly, but they are definitely a net-negative investment proposition.
Anyhow - I've digressed from the US a little...
The US looks prosperous, but it isn't. It is effectively selling bits of itself to finance current consumption. That's not sustainable.
Again, think of your personal finances; at the end of the year, you've run down your savings and your Virgin credit card is maxed. You want to go with your mates to Bali to see juvenile prostitutes (does anybody go for any other reason? I've never been).
Someone tells you that you can sell a kidney (just kidding)... do you go? Some people would. (Thankfully, most people - in the third world - who sell their own bodyparts, use the funds to finance genuine investment rather than consumption).
But it's likely that someone with a teenage mentality (like the entire United States) would sell their guitar (at a loss) or some other asset in order to fund a "project" that generates no future cash flow.
But eventually you run out of things to sell... even if you've got an unlimited supply of Treasury notes. The US is at that stage now, just as Britain was at that stage in the 1920's.

Saturday, October 30, 2004

How Convenient...

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Note: just edited this post to check the ping function for a blog aggregator; not large-scale change to content for those who've read the post already.

Osama bin Laden made his pre-election booger-man video last night - waiting politely until after the stock market had closed, of course.

Given the strong ties between his family and that of George Bush (including funding part of Bush's failed Arbusto Oil), I'm not surprised that he decided to do something which appears to be solely designed to boost Bush's electoral chances next Tuesday.

And doing it in a way that it doesn't make the market nervous (coz the market was closed) and gives the White House the whole weekend to spin a fearful frenzy in the closing stages of an apparently-tight campaign? Well that's right neighbourly, as they say in regions where Bush likes to hang out.

I still think Bush is going to lose; the polls are close, but what matters is the polling behaviour of newly registered voters in a handful of key states like Ohio (where the GOP is trying to suppress the vote) and Florida (where Bush at least has the state governor in his pocket).

A guy who cares way more than me about who wins (and has a perfect track record over the last 40 years) reckons Kerry will end up with over 300 Electoral College seats (270 makes you a winner).

Economic Statistics

A mixed-ish bag of results last night, but on the whole the data exceeded (low-ball) expectations. Of particular interest was the "core" Personal Consumption Expenditure Deflator, which at 0.7% was the lowest in 42 years. Phew - lucky nobody buys food or energy...

The Employment Cost Index was softer than expectations at 0.9% (compared with 1.0% consensus) and 3.8% year-over-year. In other words, wages continue to grow such that the bottom two-thirds of all wage-earners are suffering declining purchasing power.

The Gross Domestic Product report showed economic growth (suitably massaged and subjected to the usual 1% hedonics boost) at 3.7% as compared with expectations of 4.3% growth. The GDP deflator came in at 1.3% (consensus guess was 1.5%).

The University of Michgan Index of Consumer Sentiment exceeded expectations by a pretty wide margin - the consensus guess was for a slight improvement to 88 (from 87.5 last month) but the index was actually 91.7.

So you can see - everything is rosy, but you should be very scared of the booger-man... so Vote Dubya or the terrorists will get you.

Thing is, folks are just dumb enough to fall for it.

Federal Reserve Open Market Operations

The Fed's OMO desk did a large repurchase last night - ($8.25 billion overnight) but only $3.712billion was in Treasury-backed collateral.

As a result, we ought not to have expected a market bounce to begin at midnight - and the market did right by us, with midnight being the timing for the session high.

Major US Indices

It was Friday, and there was no repo grease thrown onto the cogs... so no prizes for guessing that equities were pretty boring. After an early spurt which peaked at midnight (our time) the DJIA flopped around 10000 until a little rally in the final 30 minutes which took it up to 10030. By the close the print was 22.93 points (0.23%) higher, closing out the day at 10027.47 points; the broader S&P500 rose 2.76 points (0.24%), to end the session at 1130.2.

Over at Times Square, the Nasdaq Composite dipped 0.75 points (0.04%), to close at 1974.99, while larger-cap technology issues fared better with the Nasdaq100 losing 0.4 points (0.03%), to end at 1486.72 points.

NYSE Volume was above average, with 1.45 billion shares changing hands, and Nasdaq Volume was average, with 1.66 billion shares traded.

IndexCloseGain(Loss)%
DJIA10027.4722.930.23%
S&P5001130.22.760.24%
Nasdaq Composite1974.99-0.75-0.04%
Nasdaq1001486.72-0.4-0.03%
NYSE Volume1.45bn--
Nasdaq Volume1.66bn--
US 30-yr yld4.79%-0.05%-0.93%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1921 to 1363 for a single-day A/D reading of 558; Nasdaq gainers trumped losers by 1550 to 1539.

NYSE advancing volume exceeded volume in decliners by 883.12 to 582.68 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 474.47 to 457.58 million shares.

135 NYSE-listed stocks rose to new 52-week highs, and 14 posted fresh 52-week lows, while on the Nasdaq there were 113 stocks that hit new 52-week highs, and 30 which fell to fresh 52-week lows

NYSENasdaq
Advancers19211550
Decliners13631539
Advancing Volume (m)883.12457.58
Declining Volume (m)582.68474.47
New Highs135113
New Lows1430

Market Sentiment

Recall that I said yesterday that da Boyz had perhaps decided to keep the market in a holding pattern until after next Tuesday's vote: well, the options market is really starting to dry up.

Note again how both put and call volume fell away last night; also volatility rose a tad.

That means that option writers are backing away, forcing bids higher; in other words they are trying to discourage trade by widening bid-ask gaps and forcing bidders to take the running.

That's how you get rising volatility but falling turnover.
IndexCloseGain(Loss)%
Equity Call Volume2.3m-0.43m-15.71%
Equity Put Volume1.57m-0.19m-10.92%
CBOE Volatility Index16.270.885.72%
CBOE Nasdaq Volatility Index21.90.653.06%
Equity Put-Call Ratio0.680.045.68%
SPX-VIX Ratio69.47-3.7927-5.18%

Bonds

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 0.045 points to 4.794%.

IndexCloseGain(Loss)%
UST 2Y (yld)2.557-0.02-0.93%
UST 5Y (yld)3.285-0.042-1.26%
UST 10Y (yld)4.029-0.04-1.1%
UST 30Y (yld)4.794-0.043-0.89%

The Banks Index advanced 0.33 points (0.33%), at 99.42; within the index,

  • the Derivative King - JPMorganChase advanced $0.12 (0.31%) to $38.60; and
  • Citigroup gained $0.11 (0.25%) ending the day at $44.37

The Broker-dealer Index lost 0.61 points (0.45%), to end the session at 135.9; the ticket clippers lined up as follows -

  • Merrill Lynch dipped $0.42 (0.77%) ending the day at $53.94
  • Morgan Stanley Dean Witter shed $0.74 (1.43%) closing at $51.09
  • Goldman Sachs added $0.95 (0.98%) to end the session at $98.38
  • Lehman Brothers declined $0.20 (0.24%) to end the session at $82.15

The Philadelphia SOX (Semiconductor) index declined 0.11 points (0.03%), at 412.25

  • Triquint slid $0.06 (1.66%) to $3.56
  • Micron Technology dipped $0.07 (0.57%) at $12.18
  • Intel dipped $0.01 (0.04%) to end the session at $22.26
  • Altera dipped $0.02 (0.09%) to $22.71
  • JDS Uniphase gained $0.03 (0.96%) ending the day at $3.17

Gold & Silver

Gold strengthened by $4.50 (1.06%) to $429.50 per ounce. The Gold Bugs Index gained 4.91 points (2.15%), ending the day at 233.6 points.

Silver rose $0.19 (2.59%) to close at $7.32 per ounce. The Gold and Silver Index (XAU) gained 1.81 points (1.78%), closing at 103.42 points.

IndexCloseGain(Loss)%
Gold429.54.51.06%
Silver7.320.1852.59%
PHLX Gold and Silver Index103.421.811.78%
AMEX Gold BUGS Index233.64.912.15%

Oil

Oil was firmer, rising by $1.12 per barrel, closing at $51.75 per barrel. The Oil and Gas Index (XOI) rose 8.85 points (1.29%), to 695.63 points.

The Oil service stocks (OSX) Index added 1.89 points (1.62%), to 118.53

IndexCloseGain(Loss)%
Reuters CRB2850.250.09%
Crude Oil Light Sweet51.751.122.21%
AMEX Oil Index695.638.851.29%
Oil Service Index118.531.891.62%

Currencies

The US Dollar Index plumbed its 12-month closing low last night, posting an intraday low of 84.95 (recall that the 12-month intraday low is 84.77).

IndexCloseGain(Loss)%
US Dollar Index84.98-0.37-0.43%
Euro1.27940.00540.42%
Yen105.76-0.49-0.46%
Sterling1.83710.00730.4%
Australian Dollar0.74830.00330.44%
Swiss Franc1.1938-0.0064-0.53%

European Markets

France's benchmark CAC-40 Index declined 15 points (0.4%), closing at 3706.82; the German DAX-30 Index gained 0.66 points (0.02%), to 3960.25; and in the UK, the FTSE-100 Index declined 18.6 points (0.4%), to end the session at 4624.2 points.

IndexCloseGain(Loss)%
CAC-403706.82-15-0.4%
DAX-303960.250.660.02%
FTSE-1004624.2-18.6-0.4%

Friday, October 29, 2004

Tonight's Data and Consensus Guesses

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Here's a little table... all times are NY time

TimePeriodIndexPriorConsensus
8:303Q-04Employment Cost Index0.9%1.0%
8:303Q-04GDP (advance)3.3%4.3%
8:303Q-04Chain Price Index (a)3.2%1.5%
8:303Q-04GDP PCE Price Index (a)3.1%-
8:303Q-04GDP PCE Core Price Index1.7%-
9:00Oct-04NY NAPM310.4-
9:45Oct-04UMich Consumer Sentiment87.588
10:00Oct-04Chicago Purchasers Index61.959.0
15:00Oct-04Agriculture Prices-5%0%

Thursday, October 28, 2004

US Stocks Squeak Out A Gain

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Economic Statistics

New Jobless Claims figures were released as usual, and showed an increase of 20,000 to 350,000; the consensus guess was for an increase of 5,000.

The bigger news was the decision by the Chinese central bank to raise official interest rates in the "other" economic superpower - both benchmark rates were increased by 27 basis points as follows:

  • benchmark rate on 1-year yuan deposits: from 1.98% to 2.25%;
  • benchmark rate on one-year yuan loans: from 5.31% to 5.58%.

Consider the ramifications for the US dollar: anybody who wishes to bet that China's economic future is one of larger current account surpluses, growing industrial capacity, and the accumulation of net external claims, can buy Chinese deposits with a 50 basis point spread to US official rates - and no risk of currency appreciation (because the consensus view is that China will not revalue the yuan for the foreseeable future).

So if you were a hedge fund, you might SELL US-denominated bonds and BUY Chinese bonds; this would lock in the spread - and the 50bps would be magnified by the artificial leverage (because your net outlay is reduced by the "hedge" of selling US Treasuries). If you were a large hedge fund, might do it lots and lots and lots (and in the process, force the US government to drive up US interest rates to eliminate the currency-risk-free spread).

So to my way of thinking, nobody has thought through the medium-term ramifications of China's move: this is not a large enough rate hike to "cool the Chinese economy" as many numb-nuts journalists have written - but it is certainly enough to generate interest-arbitrage trading in large volumes. It is a move calculated to add to China's net capital inflows in a way that does not result in transfers of ownership of Chinese businesses.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed two repurchases; both of them were 100% Treasury-backed collateral -

  • a $9.25billion overnight repurchase; and
  • a $7 billion, 13-day repurchase.

The "buy at midnight" hypothesis worked yet again; the session low was set at 12:33, 2.75 points below the midnight level. From there the market rose 11 points in the following four hours.

(Note - once we move to Daylight Savings, midnight no longer coincides with the 10 a.m. repurchase moonshot; be aware of that for next week).

Major US Indices

The DJIA rose a meagre 2.51 points (0.03%), squeaking up in the last five minutes to prevent the ignominy of a 4-digit close. The blue-chip index closed the day at 10004.54 points; the broader S&P500 posted a rise of 2.04 points (0.18%), closing at 1127.44.

Over at Times Square, the Nasdaq Composite added 5.75 points (0.29%), to close at 1975.74, while larger-cap technology issues fared better with the Nasdaq100 adding 7.09 points (0.48%), to end at 1487.12 points.

NYSE Volume was chunky, with 1.63 billion shares crossing the tape, whileNasdaq Volume was solidly above average, with 1.82 billion shares traded.

IndexCloseGain(Loss)%
DJIA10004.542.510.03%
S&P5001127.442.040.18%
Nasdaq Composite1975.745.750.29%
Nasdaq1001487.127.090.48%
NYSE Volume1.63bn--
Nasdaq Volume1.82bn--
US 30-yr yld4.823%-0.023%-0.1%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1723 to 1561 for a single-day A/D reading of 162; and Nasdaq losers exceeded gainers by 1527 to 1500

Voume was split pretty evenly - as was to be expected on a flat-ish day. NYSE advancing volume exceeded volume in decliners by 854.54 to 756.46 million shares; Nasdaq advancing volume was greater than volume in decliners by 589.4 to 415.98 million shares.

167 NYSE-listed stocks rose to new 52-week highs, and 14 posted fresh 52-week lows, while on the Nasdaq there were 123 stocks that hit new 52-week highs, and 38 which fell to fresh 52-week lows

NYSENasdaq
Advancers17231500
Decliners15611527
Advancing Volume (m)854.54589.4
Declining Volume (m)756.46415.98
New Highs167123
New Lows1438

Market Sentiment

It appears that da Boyz are content to try and keep the market about where it is, between now and the election. Put option volume is drying up, but call option volume is drying up at a faster rate, pushing the equity-only put-call ratio upwards and keeping it in no-man's land.

Volatility is still at mind-bendingly complacent levels; effectively the options market tells us that investors expect lower-than-bond volatility, but investor surveys tell us that they expect higher-than-historical returns on investment in stocks. In other words, a risk-free lunch.

Sorry - can't happen, particularly while dividend yields (the source of the overwhelming majority of all long-term equity returns) are so low. Dream on, suckers.

IndexCloseGain(Loss)%
Equity Call Volume2.73m-0.85m-23.79%
Equity Put Volume1.76m-0.32m-15.35%
CBOE Volatility Index15.39-0.33-2.1%
CBOE Nasdaq Volatility Index21.25-0.27-1.25%
Equity Put-Call Ratio0.650.0611.07%
SPX-VIX Ratio73.261.66762.33%

Bonds

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.3 basis points to 4.839%.

IndexCloseGain(Loss)%
UST 2Y (yld)2.5730.010.27%
UST 5Y (yld)3.311-0.033-0.99%
UST 10Y (yld)4.06-0.02-0.51%
UST 30Y (yld)4.823-0.023-0.47%

The Banks Index rose 0.53 points (0.54%), at 99.09; within the index,

  • the Derivative King - JPMorganChase added $0.46 (1.21%) to end the session at $38.48; and
  • Citigroup added $0.71 (1.63%) ending the day at $44.26

The Broker-dealer Index advanced 0.57 points (0.42%), to 136.51; the ticket clippers lined up as follows -

  • Merrill Lynch posted a rise of $0.06 (0.11%) at $54.36
  • Morgan Stanley Dean Witter added $0.61 (1.19%) at $51.83
  • Goldman Sachs advanced $1.33 (1.38%) closing at $97.43
  • Lehman Brothers advanced $0.65 (0.8%) to $82.35

The Philadelphia SOX (Semiconductor) index added 1.46 points (0.36%), ending the day at 412.36

  • Triquint slid $0.03 (0.82%) at $3.62
  • Micron Technology advanced $0.11 (0.91%) at $12.25
  • Intel added $0.27 (1.23%) ending the day at $22.27
  • Altera posted a rise of $0.02 (0.08%) to $22.73
  • JDS Uniphase dipped $0.37 (10.54%) at $3.14

Gold & Silver

Gold finished the session almost unchanged, rising by just $0.10 (0.02%) to $425.20 per ounce. it had traded as high as the mid-$428s, and down as far as the high $421s. In other words, it simply couldn't make up its mind.

Given that it held up reasonably well, it appears that some smart money is taking indirect bets against the US dollar- a sensible thing to do when the "Next Big Thing" has just set up a no-risk bet against your currency.

Interestingly - for those anti-journalists like me - the supposed Chinese-inspired weakening in the prices of stocks that sell stuff to China was not reflected in things like the price of copper (probably the most widely-used industrial metal): copper rose for the session - although the CRB index did fall.

The Gold Bugs Index lost 3.47 points (1.49%), at 228.69 points.

Silver fell by $0.07 (0.97%) to close at $7.15 per ounce. The Gold and Silver Index (XAU) lost 1.59 points (1.54%), ending the day at 101.61 points.

IndexCloseGain(Loss)%
Gold425.20.10.02%
Silver7.145-0.07-0.97%
PHLX Gold and Silver Index101.61-1.59-1.54%
AMEX Gold BUGS Index228.69-3.47-1.49%

Oil

Texas Tea was smacked again, to the tune of a couple of percent. The Chinese central bank decision was seen as a negative for commodities more generally; as I mentioned above that is a stupid stupid stupid view to hold, given that a 25-ish basis point hike means absolutely nothing in terms of slowing the Chinese economy.

After all, nobody expects US demand for oil to slow when the Fed raises rates, now do they?

Oil dropped $1.33 per barrel (2.55%), closing at $50.80 per barrel. The Oil and Gas Index (XOI) declined 12.73 points (1.82%), to end the session at 686.78 points.

The Oil service stocks (OSX) Index declined 2.77 points (2.32%), to end the session at 116.64 points.

IndexCloseGain(Loss)%
Reuters CRB284.75-1.25-0.44%
Crude Oil Light Sweet50.8-1.33-2.55%
AMEX Oil Index686.78-12.73-1.82%
Oil Service Index116.64-2.77-2.32%

Currencies

The US Dollar Index has been tracing out higher lows and higher highs (on an hourly basis) for a few sessions now; too many journalists are being spoon-fed "weak US dollar" stories. This is generating a good crop of dumb money newcomer-USD-shorts into the USDX market (and the various major crosses in the ForEx market) - which paradoxically enables those touting short USD positions to pick up their desired long USD positions on the cheap.

I am still a long-term US dollar bear; it sounds extreme, but I think that the US dollar will eventually go the way of the Reichsmark and the original Cruziero. Shorter term I epxect another little downdraft, then a bounce back up towards 90 on the US dollar index - a bounce that will fail and set up a 3rd wave down which will scare the living daylights out of the global curency market.

IndexCloseGain(Loss)%
US Dollar Index85.35-0.21-0.25%
Euro1.27310.00330.26%
Yen106.29-0.23-0.22%
Sterling1.82880.00340.19%
Australian Dollar0.74570.00320.43%
Swiss Franc1.2006-0.0072-0.6%

European Markets

France's benchmark CAC-40 Index posted a rise of 43.43 points (1.18%), to 3721.82; the German DAX-30 Index advanced 30.56 points (0.78%), at 3959.59; and in the UK, the FTSE-100 Index advanced 12.7 points (0.27%), closing at 4642.8 points.

IndexCloseGain(Loss)%
CAC-403721.8243.431.18%
DAX-303959.5930.560.78%
FTSE-1004642.812.70.27%

Lucky I Can Lift Heavy Things...

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There's a saying I've always liked: "I'm not too bright, but I can lift heavy things".

It applies to me in spades at times. It applies particularly when I try to do division in my head.

Somehow I managed to calculate 115/70 as being equal to 1.5... that would be true of 105/70.

115/70 is actually 1.6428 - call it 1.64. That is the current multiplier for the price of the TLT option (the November $89 put, code TLT WK)... so the current gain on that option is a hair over 64%, not 50% as I stated this morning.

Remember that my stated standard operating procedure is always to take half the position off at a raw gain of 100% - which would mean offering half the position at $140.

The "Save Bush Bounce" Continues

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Well, you might recall that I was prepared to admit ownership of 2 November expiry $89 puts over the Lehman 20-year Treasury iShares (TLT) - having declared a bid of $70 per option a while back. Likewise (same trade logic, different vehicle) I felt a tad sheepish for not fully declaring the trade management behind a declared short in the December04 30-year bond futures (ZB04Z) from 114 & 1/32.

Last night - with the continued pump in equities - the bond market tanked nicely; the ZB trade is now up a full point (ZB04Z closed at 113 & 1/32) having been as low as 112 & 29/32. That's $1000 profit so far, on initial margin of $1755.

The Lehman iShares - which are supposed to replicate the movement of a 20-year Treasury - also dropped hard, down 88c (0.98%) to $88.74; this saw the put I mentioned (TLTWK) rise to close at $115 for a gain of exactly 50% per option over the $70 bid to acquire them.

And to top it off, the Live Cattle put option (the December04 $89 strike) that I wanted -but missed out on by bidding too low. It rose to close at $3.22, up from $2.85 the previous day and $2.10 the night I tried to acquire it (October 20, our time). December04 Cattle closed at 86.65, down 0.625 (0.72%). Had I taken a short futures position in the Decembers rather than trying to finesse an entry by buying a put option, I would be up $880 per contract - on initial margin of $1620. Still, no use whining; missed is missed as the Guru says.

Economic Statistics

Before the market opened, Durable Goods data were released, and reinforced the fact that the US economy is weaker than a baby.

The "headline" durable goods number was 0.2% rise, well below the 0.5% consensus guess. As you know, I always go straight for the key number in the report, which is (repeat after me...

Non-defence Capital Expenditure, excluding aircraft.

And that stank. Down 1.7% for the month. Non-defence capex ex aircraft is the best measure of actual spending on capital goods (equipment, machinery and so forth).

If you read a line of crap about how "new orders" and "unfilled orders" for this category were strong, ignore it. Stuff like that is written by people who never actually look at the degree of correlation between current "new orders" and actual expenditure in the future (they are almost uncorrelated). And "unfilled orders" is irrelevant except as an indication of lack of manufacturing capacity (which is not a problem with the economy-wide capacity utilisation rqate still below 80%).

Later in the day, data on New Home Sales was released, showing an increase and exceeding the consensus guess. Sales numbers rose 3.5%, as opposed to a consensus guess calling for a decline of about a percent and a bit.

And one final number was trumpeted louder than I have seen any number pimped for a while. The Energy Information Administration announced that crude oil stocks had risen by 4 million barrels (1.4%) for the week. This was cited as one of the catalysts for a decent sized pullback in crude.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk didn't feel too compelled to grease the wheels last night; the only repurchase was a $4.75 billion overnight, entirely in Treasury-backed collateral. It was undertaken at a 2 basis point discount to Fed Funds, and received a massive $30.75 billion in offers tendered (in other words, da Boyz were clawing over each other trying to get as much of that dough as was possible).

It was close to the $5 billion cutoff required for a midnight moonshot, and sho' nuff the market touched its session low at 12:03 a.m. our time and never looked back.

Major US Indices

If you're a bull, you're probably reading this site by mistake; if you've got any brains you will sell this strength - it is entirely bogus, and will last only so long as some taxpayer-funded clown thinks it will help get Bush re-elected. Driving the market up towards the election was always a likely scenario, but the damage has already been done (to Bush's electoral chances as well as to the technical structure of the market).

Still, short squeezes are fun to watch (unless it's your own nuts in the vice... but I was short bonds, as you're well aware).

The DJIA advanced another 113.55 points (1.15%), closing out the day at 10002.03 points; the broader S&P500 added 14.31 points (1.29%), to 1125.4. So da Boyz managed to get the Dow back to 10k - whoop-de-doo.

Over at Times Square, the Nasdaq Composite gained 41.2 points (2.14%), to close at 1969.99, while larger-cap technology issues fared better with the Nasdaq100 adding 37.89 points (2.63%), to end at 1480.03 points.

NYSE Volume was chunky, with 1.75 billion shares crossing the tape, whileNasdaq Volume was super-chunky (over 2 bill), with 2.07 billion shares traded.

IndexCloseGain(Loss)%
DJIA10002.03113.551.15%
S&P5001125.414.311.29%
Nasdaq Composite1969.9941.22.14%
Nasdaq1001480.0337.892.63%
NYSE Volume1.75bn--
Nasdaq Volume2.07bn--
US 30-yr yld4.84%0.08%1.72%

Market Breadth & Internals

On the NYSE advancing issues exceeded decliners by 2299 to 1003 for a single-day A/D reading of 1296 - another breach of the "idiotic optimism" alert level; Nasdaq gainers trumped losers by 2120 to 920, showing that technology stocks also joined in the born-again levels of wild-eyed juilation.

NYSE advancing volume exceeded volume in decliners by 1271.37 to 455.42 million shares; Nasdaq advancing volume was greater than volume in decliners by 885.6 to 227.44 million shares.

197 NYSE-listed stocks rose to new 52-week highs, and 13 posted fresh 52-week lows, while on the Nasdaq there were 146 stocks that hit new 52-week highs, and 45 which fell to fresh 52-week lows.

NYSENasdaq
Advancers22992120
Decliners1003920
Advancing Volume (m)1271.37885.6
Declining Volume (m)455.42227.44
New Highs197146
New Lows1345

Market Sentiment

There was truly massive call buying last night - and the top turnover call options were in an odd group of stocks: Washington Mutual, ConocoPhilips, HCA Inc and Delta Airlines.

A financial services company, an oil company, a healthcare company and an airline. Go figure.

Equity call volume was at its highest level since January 15th, and at 0.58 the Put-Call ratio is now at a level where a contrarian would start looking for one-level down puts over QQQ.

The ducks are lining up for a swing at the fences on the short side - but they're not there yet. There's massively tilted volume and advance-decline stats, low volatility, a low level for the put-call ratio... all good. The last remaining plank is for bears to give up - for put volume to dry up and drive the put-call ratio to a more extreme low (in the mid-0.40's would be an absolute sweet spot).

IndexCloseGain(Loss)%
Equity Call Volume3.58m1.22m51.57%
Equity Put Volume2.08m0.57m38.17%
CBOE Volatility Index15.72-0.67-4.09%
CBOE Nasdaq Volatility Index21.52-0.95-4.23%
Equity Put-Call Ratio0.58-0.06-8.84%
SPX-VIX Ratio71.593.79965.6%

Bonds

Bonds fell along the curve, with the yield on the benchmark US 30-yr bond rising 8.2 basis points to 4.844%. The 10-year bond yield was also up 8 ticks, and is now above 4%. Basically, the bond market is playing out as I thought it would this week - which is why I was talking about short bond futures and/or put options over the bond-market iShares.

IndexCloseGain(Loss)%
UST 2Y (yld)2.5830.072.83%
UST 5Y (yld)3.3470.0872.67%
UST 10Y (yld)4.0830.082.1%
UST 30Y (yld)4.8450.0741.55%

The Banks Index posted a rise of 1.19 points (1.22%), closing at 98.56; within the index,

  • the Derivative King - JPMorganChase gained $0.53 (1.41%) ending the day at $38.02; and
  • Citigroup added $0.56 (1.29%) ending the day at $43.90

The Broker-dealer Index posted a rise of 5.05 points (3.86%), to 135.94; the ticket clippers lined up as follows -

  • Merrill Lynch posted a rise of $1.38 (2.61%) to $54.30
  • Morgan Stanley Dean Witter posted a rise of $1.97 (4%) ending the day at $51.22
  • Goldman Sachs advanced $2.34 (2.5%) at $96.10
  • Lehman Brothers gained $1.10 (1.36%) to end the session at $81.70

The Philadelphia SOX (Semiconductor) index added 14.13 points (3.56%), at 410.9

  • Triquint added $0.18 (5.19%) at $3.65
  • Micron Technology advanced $0.45 (3.85%) closing at $12.14
  • Intel added $0.60 (2.8%) closing at $22.00
  • Altera gained $1.06 (4.9%) to $22.71
  • JDS Uniphase gained $0.12 (3.54%) to $3.51

Gold & Silver

Anyone who doesn't believe that all markets are being massaged to help the electoral chances of George Bush, has probably left this site by now.

Let me make this clear: that's what's happening. The increase in oil inventories was nowhere near enough to drive a 5% fall in oil prices; oil prices got a big helping hand downwards.

Likewise the gold & silver markets; bad data continues (with the exception of houses - the next toxic waste) and yet gold gets hammered. How odd.

Gold weakened by $2.50 (0.58%) to $425.20 per ounce. The Gold Bugs Index lost 5.71 points (2.4%), to 232.16 points.

Silver fell by $0.15 (1.97%) to close at $7.21 per ounce. The Gold and Silver Index (XAU) lost 2.45 points (2.32%), at 103.2 points.

IndexCloseGain(Loss)%
Gold425.2-2.5-0.58%
Silver7.205-0.145-1.97%
PHLX Gold and Silver Index103.2-2.45-2.32%
AMEX Gold BUGS Index232.16-5.71-2.4%

Oil

Oil was absolutely shellacked last night, shedding $2.82 per barrel (5.1%), closing at $52.46 per barrel. The Oil and Gas Index (XOI) lost 11.74 points (1.65%), ending the day at 699.51 points.

The Oil service stocks (OSX) Index slid 3.69 points (3%), to end the session at 119.41 points.

As I mentioned last week, the oil market is ripe for a decent-sized correction. I don't think this is the start of that correction - this is just newbies getting handed their tuition fees in a thin, lopsided market. Although I am a big advocate of learning-by-pulling-the-trigger, it has to be done sensibly - and most new participants in commodities markets arrive with little more than a free CD from a brokers and a handbook of phrases like "the trend is your friend". they wouldn't know risk control if it bit their nuts off - which is what the market usually does.

IndexCloseGain(Loss)%
Reuters CRB286-1.5-0.52%
Crude Oil Light Sweet52.46-2.82-5.1%
AMEX Oil Index699.51-11.74-1.65%
Oil Service Index119.41-3.69-3%

Currencies

Folks are warbling across cyberspace about this weensie little bounce in the US Dollar index, as if it's back at 120 already. Just as with commodities markets, the ForEx market is full of people who expect the market to move in a stright line.

As I mentioned the other day, the US Dollar made a multi-year low against the Swiss Franc the other night. Once again, everybody was on the same side of the boat.

I'm certainly not advocating US dollar longs - not by a long shot. There are times to initiate short USD positions, but this ain't one of them: the day I am long US dollars is the day that it trades at 0.40 Euro and/or 55 Yen. there might be long side opportunities on the way to the US debt default (that is coming, sure as eggs is eggs), but I will sit on the sidelines through all of them (I will tell you about them before they arrive though).

IndexCloseGain(Loss)%
US Dollar Index85.560.260.3%
Euro1.2706-0.0055-0.43%
Yen106.42-0.27-0.25%
Sterling1.8276-0.0067-0.37%
Australian Dollar0.7448-0.0011-0.15%
Swiss Franc1.20660.00550.46%

European Markets

France's benchmark CAC-40 Index rose 58.91 points (1.63%), to end the session at 3678.39; the German DAX-30 Index gained 66.77 points (1.73%), closing at 3929.03; and in the UK, the FTSE-100 Index rose 46.7 points (1.02%), closing at 4630.1 points.

IndexCloseGain(Loss)%
CAC-403678.3958.911.63%
DAX-303929.0366.771.73%
FTSE-1004630.146.71.02%

Wednesday, October 27, 2004

Housekeeping II...

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

I'm trying to faff around with the template for these rantings - little things so that when I insert text later it defaults to "justified" (I can't stand jagged edges in paragraphs... it makes my eyes hurt).

As a result, folks taking RSS/Atom notices of updates, might get a few false alarms today - nothing will change as far as content goes, but RSS readers might "see" changes and notify anyhow.

Sorry if that happens - I don't know if it will or not.

Here's That Bounce (see Friday)

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

I think I know why people find those "Left Behind" novels so riveting - those are the religious-whackery nutball-job books about the impending Rapture and Armageddon.
Being left behind must be one of the most terrifiying things... and I can really feel it. By being too much of a cheapskate while trying to get hold of the $89 December expiry puts over Live Cattle, I've been left behind in a big way. I was keen to get those options at $1.90ish, but they've never even looked like it - and at the moment they're at $2.85 having been as high as $3.15. Like I said, I should've just sold a futures contract rather than trying to be an options smartarse. As Joe Dolce mused in one of his e-letters (the one where he poked fun at Left Behind) I need a good swift kick in the Left Behind.
Economic Statistics
One significant data point last night - the Conference Board's Index of Consumer Confidence. It was significantly worse than expectations; the consensus guess was for confidence to fall to 94, but instead fell to 92.8; most of the damage in the index resulted from a downshift in expectations of the future - the "expectations" component of the index fell to 92 which is its lowest level since March.
The other data that was released were the two weekly chain store sales numbers - and both were bad.
The ICSC-UBS Store Sales numbers showed a decline of 0.6% from the previous week, and a modest 3.6% rise in spending year-over-year. The Redbook survey showed much the same, with a 0.7% fall for the month to date and a 3.1% increase over last year.
Federal Reserve Open Market Operations

No liquidity, no bounce - that's always my view. Last night the Fed obliged as any good crack dealer ought to - feeding its liquidity-addicted market brethren.

The Open Market Operations desk performed a single $6.5 billion overnight repurchase, with all of the repo in market-goosing Treasury-backed collateral..

And the timing of the low for the session? Go on - guess. No, seriously - guess.

If you guessed "Midnight", give yourself 16 free S&P futures points (USD$800), because let me tell you, the "buy at midnight" trade never looked back. After some pretty weak data, the market simply took off; the low tick was bang-on midnight, and the high print for the day was at the close.

Major US Indices

It's all very well engineering a short-squeeze every now and then (and recall how easy it was to forecast this week's bounce last week) - but there's no getting away from the fact that the US economy's statistical mirage of a recovery is being exposed for the maggotty carcass that folks like me always suspected.
"Liquidity always wins"... "don't fight the Fed"... blah blah blah.
My mate Tim the Ginger Menace sent me an old UBS "call" from January 2001, by none other than Ed Kerschner - telling UBS clients about how the recent (as of jan 2001) "pullback" was just like the pullback in 2000... that is, a buying opportunity. God stab my vitals!
Funny how people who always yabber about "don't fight the Fed" never quote that line of crap when the Fed's tightening.
Anyhow. we got our bounce. As I said last Friday, the key question is whether or not this bounce can be sustained until the end of this week - if so, the "one news cycle" mentality of Americans will wash the palimpsest of the collective memory of US "investors". They will remember nothing of Bush's economic vandalism... only the unalloyed joy of a five-session advance.
(And of course this bounce has helped my bond trade nicely)...

The DJIA advanced 138.49 points (1.42%), closing out the day at 9888.48 points; the broader S&P500 rose 16.29 points (1.49%), closing at 1111.09.

Over at Times Square, the Nasdaq Composite added 14.75 points (0.77%), to close at 1928.79, while larger-cap technology issues fared worse with the Nasdaq100 adding 9.57 points (0.67%), to end at 1442.14 points.

Insurance stocsk were the big winners, with Dow component AIG stacking on 7.5% as investors decided to ignore the fact that AIG is being investigated for premium-rigging. Insted, "investors" decided that a drop of $12 (18%) in ten session was worth a punt. (Note that AIG also bounced on the third day after the announcement of the Department of Justice investigation... but never actually managed to be properly resurrected).
But of course investors had every reason to feel that the DoJ investigation is done and dusted... after all, the company stated in a press release that it would "seek a prompt resolution of outstanding issues". I guess that means that punters think "resolution" means "positive outcome for the defendant"...
Also, Marsh & McLennan (MMC)- the world's largest insurance broker and the company at the centre of New York Attorney-General Eliott Spitzer's latest crusade - rose 9%. It's CEO resigned, and Spitzer declared he would not pursue criminal charges against the company.
MMC was a $46 stock three weeks ago; now it's a $28 stock; regardless of whether the company is the subject of criminal action by Spitzer, these things have a habit of ramifying; each time Spitzer lifts the lid, the under-funded and udnermanned Securities And Exchange Commission gets another hint as to where to look for corrupt practices. So expect the SEC to knock on MMC's door - expect earnings restatements.
David Fleckenstein has a very interesting take on the recent weakness in insurance stocks - particularly in light of the toxic trade in derivatives they are involved in.

NYSE Volume was chunky, with 1.69 billion shares changing hands, while Nasdaq Volume was also well above average, with 1.82 billion shares crossing the tape.

IndexCloseGain(Loss)%
DJIA9888.48138.491.42%
S&P5001111.0916.291.49%
Nasdaq Composite1928.7914.750.77%
Nasdaq1001442.149.570.67%
NYSE Volume1.69bn--
Nasdaq Volume1.82bn--
US 30-yr yld4.76%0.01%0.17%

Market Breadth & Internals

On the NYSE, advancing Issues exceeded decliners by 2339 to 957 for a single-day A/D reading of 1382 - well above the "mindless optimism" benchmark of net 1200; Nasdaq gainers trumped losers by 1776 to 1259.
NYSE advancing volume exceeded volume in decliners by 1355.14 to 313.82 million shares - a ratio of 4.3:1, again above the sorts of levels that imply rashness. Nasdaq advancing volume was greater than volume in decliners by 605.49 to 398.32 million shares.

115 NYSE-listed stocks rose to new 52-week highs, and 26 posted fresh 52-week lows, while on the Nasdaq there were 93 stocks that hit new 52-week highs, and 58 which fell to fresh 52-week lows

NYSENasdaq
Advancers23391776
Decliners9571259
Advancing Volume (m)1355.14605.49
Declining Volume (m)313.82398.32
New Highs11593
New Lows2658

Market Sentiment

Finally, the sentiment indicators are resolving themselves. Call option buying spiked last night, and put buying softened considerably. The herd is on the charge - which means that there will be a load of carcasses at the bottom of the next cliff.
The equity only Put Call Ratio declined to 0.64 - still well above the 0.5-0.6 seen at market tops, but nonetheless indicative of option buyer complacency (as is the VIX).
IndexCloseGain(Loss)%
Equity Call Volume2.36m0.26m12.34%
Equity Put Volume1.51m-0.1m-6.32%
CBOE Volatility Index16.39-0.19-1.15%
CBOE Nasdaq Volatility Index22.47-0.23-1.01%
Equity Put-Call Ratio0.64-0.13-16.61%
SPX-VIX Ratio67.791.75942.66%

Bonds

The December04 contract in the 30-year bond finished the session at 114 & 1/32 - precisely my shorting price from last week. The Lehman 20-year Treasury iShares (TLT) fell 27c to $89.62 and the $89 strike option (TLT WK) rose to $75.
Bonds fell across the spectrum in the face of the strong stocks, with the yield on the benchmark US 30-yr bond rising 0.8 basis points to 4.762% and the yield on the 10-year nudging 4% again.

IndexCloseGain(Loss)%
UST 2Y (yld)2.5160.020.84%
UST 5Y (yld)3.2510.0170.53%
UST 10Y (yld)3.9990.030.83%
UST 30Y (yld)4.7650.0130.27%
The Banks Index rose 1.51 points (1.58%), at 97.37; within the index,
  • the Derivative King - JPMorganChase rose $0.47 (1.27%) to $37.49; and
  • Citigroup posted a rise of $0.76 (1.78%) ending the day at $43.34

The Broker-dealer Index rose 1.63 points (1.26%), closing at 130.89; the ticket clippers lined up as follows -

  • Merrill Lynch advanced $1.12 (2.16%) at $52.92
  • Morgan Stanley Dean Witter added $1.17 (2.43%) at $49.25
  • Goldman Sachs rose $1.34 (1.45%) to end the session at $93.76
  • Lehman Brothers advanced $1.69 (2.14%) to $80.60

The Philadelphia SOX (Semiconductor) index declined 1.1 points (0.28%), closing at 396.77

  • Triquint declined $0.21 (5.71%) closing at $3.47
  • Micron Technology slid $0.02 (0.17%) at $11.69
  • Intel posted a rise of $0.09 (0.42%) ending the day at $21.40
  • Altera declined $0.31 (1.41%) closing at $21.65
  • JDS Uniphase lost $0.02 (0.59%) closing at $3.39

Gold & Silver

Gold weakened by $1.7 (0.4%) to $427.7 per ounce. The Gold Bugs Index lost 1.68 points (0.7%), to end the session at 237.87 points.
Silver fell by $0.03 (0.34%) to close at $7.35 per ounce. The Gold and Silver Index (XAU) lost 0.33 points (0.31%), closing at 105.65 points.
IndexCloseGain(Loss)%
Gold427.7-1.7-0.4%
Silver7.35-0.025-0.34%
PHLX Gold and Silver Index105.65-0.33-0.31%
AMEX Gold BUGS Index237.87-1.68-0.7%

Oil

Oil was firmer, rising by $0.93 per barrel, closing at $55.22 per barrel. The Oil and Gas Index (XOI) posted a rise of 3.59 points (0.51%), closing at 711.25 points.
The Oil service stocks (OSX) Index added 1.68 points (1.38%), to end the session at 123.1 points.
IndexCloseGain(Loss)%
Reuters CRB287.500%
Crude Oil Light Sweet55.220.931.71%
AMEX Oil Index711.253.590.51%
Oil Service Index123.11.681.38%

Currencies

The US dollar had a bit of a reprieve from its recent pain, rising a little across the board. The decline's not over yet, but with the election in a week I doubt that there will be much action in forex markets until the election is resolved (or descends into litigation and chaos... dollar bears would love to see Ohio become the focus of massive electoral litigation...)
IndexCloseGain(Loss)%
US Dollar Index85.30.230.27%
Euro1.2761-0.0043-0.34%
Yen106.69-0.13-0.12%
Sterling1.8339-0.0066-0.36%
Australian Dollar0.7457-0.0003-0.04%
Swiss Franc1.20110.00490.41%

European Markets

France's benchmark CAC-40 Index gained 10.42 points (0.29%), ending the day at 3619.48; the German DAX-30 Index added 7.85 points (0.2%), closing at 3862.26; and in the UK, the FTSE-100 Index gained 18.9 points (0.41%), to 4583.4 points.

IndexCloseGain(Loss)%
CAC-403619.4810.420.29%
DAX-303862.267.850.2%
FTSE-1004583.418.90.41%

Monday, October 25, 2004

Lunchtime to the Rescue

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

Before We Kick Off... I thought I should mention something I just read. The cable TV kiddies' channel Nickelodeon holds a poll (of kiddies) assessing preferences for President. Why they do that, I don't know - but they do it.

Kerry won that poll by 57% to 43% (you don't get a lot of "undecided" in kiddie polls).

I'm only mentioning it because the Nickelodeon poll has been on the money for the last four Presidential elections in a row. Perhaps it's because kiddies reflect the views of their parents like so many little psychological mirrors; this election strikes me as one in which an awful lot of people who normally sit at home on polling day, are going to get off their flabby asses and go vote. that will mean a change of government unless the GOP's dirty tricks brigade can undermine it.

Back to normal viewing...

Economic Statistics

A report on Existing Home Sales numbers was the only data of any significance released last night (released at 10 a.m. NY time), and it exceeded expectations. The number of existing homes sold rose by 3.1% for the month to an annualised 6.75 million units (the consensus guess was 6.55 million - i.e., unchanged from the previous month).

Recall what I said about "low ball" expectations this week?

Why - when the mortgage market is benefiting from the recent pullback in mortgage rates - would the sales of existing homes remain unchanged? (More accurately, why would you write down that you expect the rate to remain unchanged).

Simple, silly - so that it becomes a data point that BubbleVision and the rest of the echo chamber can shout from the rooftops... "the mortgage market exceeded Wall Street's expectations..."

Don't think for one second that this sort of thing is happening to make mortgage brokers feel good; it is pro-government propaganda, nothing more.

Federal Reserve Open Market Operations

The Fed's open market operations desk opened the sauce bottle last night, with a $9 billion overnight repurchase, with $5.85 billion in Treasury-backed collateral. The repurchase was struck at a rate just under the Fed Funds rate and had a massive bid-to-repo ratio of 4.67 (that is, $28.57 billion was asked for).

And of course, the low for the morning session (actually the low for the day) was set at a little after midnight (our time - 10 a.m. NY time). That actual print low in the futures pit was a single point below the midnight level, and was at 12:04 a.m.; from there the market climbed 5 points in less than 20 minutes.

That little push did not develop into the self-sustaining squeeze that was being aimed for by da Boyz. Less than an hour later the market had given it all back (well, almost all of it), and the whole shebang had to start over again. A 7-point thrust (in just under an hour) during thin lunchtime trade (the cheapest time to goose the market up) propelled the market to its intraday high, and from there the rest of the session - three hours - was spent making sure the thing stayed where it was put.

Major US Indices

By the close, the Dow had recovered from an early 40-point fall, to close just 7.82 points (0.08%) lower, closing out the day at 9749.99 points.

The broader S&P500 slid 0.94 points (0.09%), to end the session at 1094.8.

Over at Times Square, the Nasdaq Composite declined 1.1 points (0.06%), to close at 1914.04, while larger-cap technology issues fared worse with the Nasdaq100 losing 5.68 points (0.39%), to end at 1432.57 points.

NYSE Volume was average, with 1.38 billion shares traded for the session, while Nasdaq Volume was about average, with 1.6 billion shares changing hands.

IndexCloseGain(Loss)%
DJIA9749.99-7.82-0.08%
S&P5001094.8-0.94-0.09%
Nasdaq Composite1914.04-1.1-0.06%
Nasdaq1001432.57-5.68-0.39%
NYSE Volume1.38bn--
Nasdaq Volume1.6bn--
US 30-yr yld4.75%-0.01%-0.15%

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 1724 to 1564 for a single-day A/D reading of 160; Nasdaq gainers trumped losers by 1660 to 1396.

NYSE volume was pretty evenly split between advancers and decliners, with declining volume just shading unit turnover in the winners. Volume in losers wound up at 698.63 million shares compared with 663.8 million shares in gainers.

likewise the volume breakdown on the Nasdaq was pretty even. Advancing volume was greater than volume in decliners by 468.59 to 391.19 million shares.

76 NYSE-listed stocks rose to new 52-week highs, and 45 posted fresh 52-week lows, while on the Nasdaq there were 53 stocks that hit new 52-week highs, and 76 which fell to fresh 52-week lows

NYSENasdaq
Advancers17241660
Decliners15641396
Advancing Volume (m)663.8468.59
Declining Volume (m)698.63391.19
New Highs7653
New Lows4576

Market Sentiment

Call turnover dropped sharply, helping the equity-only Put-Call Ratio rise into the mid-70's - still nowhere near a contrarian signal.

Volatility (as measured by the implied volatility on front-month index options) rose a little, but when you consider that tradable bottoms usually occur with the VIX above 40, there's a long way to go before the options market can be said to be showing any genuine trepidation.

IndexCloseGain(Loss)%
Equity Call Volume2.1m-0.38m-15.41%
Equity Put Volume1.61m-0.15m-8.52%
CBOE Volatility Index16.581.38.51%
CBOE Nasdaq Volatility Index22.71.346.27%
Equity Put-Call Ratio0.760.068.16%
SPX-VIX Ratio66.03-5.68-7.92%

Bonds

I told you (on Friday) that the options in TLT would sting a little (recall that the vehicle in question is TLTWK - the December04 $89 strike puts). Well, the $70 they're held at wasn't such a bad deal, because they closed last night's session unchanged at that level; the 30-year bond spiked - hard - from its closing level, hitting 114 & 25/32 during the European session, before settling at 114 & 13/32 by the close (recall, I'm notionally short ZBZ04 from 114 & 1/32).

Last night was the standard "equities weak, bonds strong" malarkey that you might expect from a first-year economics student (one who takes the "assume there are only two assets" mantra and runs with it). In the afternoon, as equities sputtered to life, the bond market softened... as the execrable Delta Goodrem might whine, "So Predictable..."

Bonds rose along the curve, even as the US Dollar cratered against all comers. The benchmark yield on the benchmark US 30-yr bond shed 0.7 basis points to 4.754%.

IndexCloseGain(Loss)%
UST 2Y (yld)2.491-0.01-0.48%
UST 5Y (yld)3.231-0.015-0.46%
UST 10Y (yld)3.966-0.01-0.2%
UST 30Y (yld)4.752-0.001-0.02%
The Banks Index lost 0.05 points (0.05%), to 95.86; within the index,
  • the Derivative King - JPMorganChase declined $0.45 (1.2%) to $37.02; and
  • Citigroup advanced $0.02 (0.05%) at $42.58

The Broker-dealer Index lost 0.7 points (0.54%), closing at 129.26; the ticket clippers lined up as follows -

  • Merrill Lynch shed $0.45 (0.86%) at $51.80
  • Morgan Stanley Dean Witter lost $0.24 (0.5%) closing at $48.08
  • Goldman Sachs lost $0.28 (0.3%) ending the day at $92.42
  • Lehman Brothers rose $0.25 (0.32%) at $78.91

The Philadelphia SOX (Semiconductor) index advanced 2.71 points (0.69%), to 397.87

  • Triquint was unchanged (by the close) at $3.68
  • Micron Technology gained $0.18 (1.56%) closing at $11.71
  • Intel gained a penny (0.05%) to end the session at $21.31
  • Altera advanced $0.19 (0.87%) ending the day at $21.96
  • JDS Uniphase advanced $0.02 (0.59%) to $3.41

Gold & Silver

Gold strengthened by $3.80 (0.89%) to $429.40 per ounce; at one stage the gold futures were above $432, which casts my pullback into real doubt - because the prior peak (which I took to be wave 5 of a minor degree) has been exceeded.

There's a bit of stuff in Elliott Wave Theory about "orthodox" tops compared with the actual high print for an instrument, but I would not rely on that to validate a short position.

For the moment it looks like the pullback hypothesis for Gold might have reached its use-by date, but as I said previously, I can't see any alternative structure that gives a short-term target that's higher by enough to make it tradable.

The Gold Bugs Index gained 9 points (3.9%), at 239.55 points.

Silver rose $0.04 (0.48%) to close at $7.37 per ounce. The Gold and Silver Index (XAU) gained 3.62 points (3.54%), closing at 105.98 points.

IndexCloseGain(Loss)%
Gold429.43.80.89%
Silver7.3650.0350.48%
PHLX Gold and Silver Index105.983.623.54%
AMEX Gold BUGS Index239.5593.9%

Oil

Oil made a new all time high last night, peaking at $55.67 during early European trade (in fact it was at about 5:30 p.m. Australian time, which is half an hour into the European session).

Once the NYMEX day session opened, it fell like a rock - falling a dollar in the first 45 minutes of NYMEX day session trade. No prizes for guessing that somebody stuck their government-sponsored foot on the neck of the market and pushed.

By the close, oil had lost ground, shedding $0.83 per barrel, closing at $54.32 per barrel.

The Oil and Gas Index (XOI) posted a rise of 0.13 points (0.02%), to end the session at 707.66, and the Oil service stocks (OSX) Index lost 0.35 points (0.29%), to end the session at 121.42

IndexCloseGain(Loss)%
Reuters CRB287.50.50.17%
Crude Oil Light Sweet54.32-0.83-1.5%
AMEX Oil Index707.660.130.02%
Oil Service Index121.42-0.35-0.29%

Currencies

Another day, another barrage of bad news for the US dollar. Around the traps I've seen stories about how nations as diverse as India, Russia, and China are starting to accumulate non-dollar balances in preference to further accumulation of US dollars and US debt instruments.

Notice the stark difference between those three nations and the nation that was first to price its oil in Euros?

(Hint: that nation was Iraq, and Hussein made the decision on the day of the all-time low in the Euro... he may have been a despot - I don't know, and I sure as hell ain't gonna believe the Yanks - but he woulda made one hell of a currency trader!!)

Well, in case you can't see it: the difference is that them three's actually got "nookular" weapons rather than just "neocon fantasy weapons", so even Bush isn't dumb enough to try anything too pushy.

The US Dollar index hit a 12-month closing low last night, and came within 0.08 points of an outright 1-year low - the low print last night was 84.85 and the 12-month intraday low is 84.77. It wasn't that long ago that I indicated just how close to its low the dollar had fallen...

The Euro and the Swiss Franc were the major beneficiaries - perhaps people have finally worked out that every single percentage point of difference between the so called "stagnant" euro-zone and the "robust" US economies is accounted for by hedonic adjustment (the Yanks use it far more than the Europeans).

I note with some interest that the USD is still 3% above its one-year low against the Yen - and only a little over 0.8% above its low against the Euro. (It's over 6% from its low against the Australian dollar).

But it has cracked mightily against that ultimate "safe haven" currency - the Swissie - dropping below 1.20 for the first time to a level not seen since August 30th 1996.

IndexCloseGain(Loss)%
US Dollar Index85.07-0.88-1.02%
Euro1.28010.01210.95%
Yen106.87-0.32-0.3%
Sterling1.84040.01270.69%
Australian Dollar0.74590.00570.77%
Swiss Franc1.196-0.0147-1.21%

European Markets

Follow the "leader" - again. Blind-sided by the "drop and pop" - again.

This is the same place that gave us Voltaire, Descartes, Wittgenstein, Neitzsche, Schopenhauer, Wagner... and Pepys, Newton, Ashmole, Dee... and the Enlightenment and the Industrial Revolution. They would be retching violently to see their intellectual heritage being represented (in financial markets) by the current crop of screen-watching "what are the Yanks doing" wide boys.

France's benchmark CAC-40 Index shed 78.11 points (2.12%), closing at 3609.06; the German DAX-30 Index lost 80.73 points (2.05%), to end the session at 3854.41; and in the UK, the FTSE-100 Index dipped 50.9 points (1.1%), ending the day at 4564.5.

IndexCloseGain(Loss)%
CAC-403609.06-78.11-2.12%
DAX-303854.41-80.73-2.05%
FTSE-1004564.5-50.9-1.1%