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Tuesday, January 04, 2005

USRant: New Year's Pop-n-Drop

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Economic Statistics

Construction Spending fell 0.4% for the month of November, far worse than expectations - consensus was for a rise of 0.2%. The damage in the housing sector was mainly done in the single-family dwelling segment, which fell 0.3%. Multi-family dwelling construction rose (apartment blocks and so on). Non-residential construction - offices, factories (does the US have those anymore? Oh yes... for making bombs), dropped 1.2% and is up only 2.5% from a year ago.

Call me old-fashioned, but to my way of thinking if businesses aren't building plants they're not going to be hiring too many folks any time soon. They're sure as eggs not going to be buying much equipment, either.

The Institute of Supply Management (ISM) Manufacturing Index survey results were released, and were about in line with expectations (slightly better than consensus in fact - consensus had guessed 58.2 and the actual outcome was 58.6). While the survey showed an increase relative to the previous month, that increase was less than a point. Furthermore, any doofus who looks at survey data is, well, a doofus. The prime driver of business-sector survey data - be it from from management or consumers - is the good old "animal spirits " first mentioned by Laurence Sterne in 'The Adventures of Tristram Shandy, Gentleman" (which book is, interestingly, also the origin of Uncle Toby of Uncle Toby's Oats). Line up some survey data with the S&P500 and you will notice that survey data always, always tracks the S&P with a lag of 2-6 weeks.


Federal Reserve Open Market Operations

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

  • a $4.75billion, overnight repurchase, 100% in Treasury-backed collateral.

Our notional cutoff for a decent market-goosing is $5 billion, and the Federal Meddlers came up short... so did the market. Maybe the Fed's decided to stop handing out liquidity as if it were candy... maybe Greenspan has converted back to a genuine free-market economist instead of a Soviet-style central planner (after all, the West wasted TRILLIONS of dollars fighting a "cold War" to prevent central planning... but then again I guess it wasn't a waste if you were a defence stock holder or a Carlyle board member).


Bond Auctions Completed

There were 2 bond auctions held -

  • $19 billion of 3-month bills, which cleared at a yield of 2.275% (just above Fed Funds) and a bid-cover ratio of 2.26x (up from the quarterly average of 2.04 last quarter); and
  • $17 billion of 6-month bills, which cleared at a yield of 2.56% and a bid-cover ratio of 2.82x (well up on from the quarterly average of 1.93 last quarter).


Bond Auction Announcements

Date Instrument Amount ($b)
Jan 6 4-week bills 10

Major US Indices

During the early part of the European session, it looked like people had turned back the clock to 1999... the futures rocketed from a low around 1212 (our support level from last week as outlined in the Forums last week, to a re-test and break of last week's high at 1219.75... they got up to 1220.75 or thereabouts while only the Europeans were in the sandbox... then tried to get to the same level just after the open of the day session.

But we know what happens when Greenstain - that blight on capitalism - doesn't give out the repo grease... stuff-all to the upside.

ES Intraday 5-min Chart

Much will be made of how the market reversed following the disappointingConstruction Spending data, but as Chris Rock might say, "Homie don't play dat". The usual uptrend behavior in the face of bad data, is to drop hard and fast (triggering stops on longs, and encouraging nuffnuffs to short) and then to turn just as hard and stop out the newly-long nuffies It is a market ritual.

So, anyway... by the time the low was hit (with less than ten minutes to go in the session, the Dow was down hard. In fact the Dow really does look like last night was a "key reversal" day, but we'll have to wait and see if 1212 in the S&P futures can be broken again to the upside. By the close the DJIA had lost 53.58 points (0.5%), closing out the day at 10729.43 points; the broader S&P500 declined 9.84 points (0.81%), to end the session at 1202.08.

Over at Times Square, the Nasdaq Composite slid 23.29 points (1.07%), to close at 2152.15, while larger-cap technology issues a teensy bit fared worse with the Nasdaq100 losing 17.61 points (1.09%), to end at 1603.51 points.

NYSE Volume was solid, with 1.51 billion shares changing hands, while Nasdaq Volume was chunky (over 2 bill), with 2.19 billion shares being shifted around.

Nasdaq Composite2152.15-23.29-1.07%
NYSE Volume1.51bn--
Nasdaq Volume2.19bn--


My 9-stock "bellwethers" group fell by an average of 0.40%

  • IBM (IBM) -$0.83 (0.84%) to $97.75;
  • Freddie Mac (FRE) -$0.71 (0.96%) to $72.99;
  • General Electric (GE) +$0.09 (0.25%) to $36.59;
  • Citigroup (C) +$0.09 (0.19%) to $48.27;
  • Fannie Mae (FNM) +$0.06 (0.08%) to $71.27;
  • Wal Mart (WMT) +$0.53 (1%) to $53.35;
  • Cisco Systems (CSCO) -$0.00 (0%) to $19.32;
  • Intel (INTC) -$0.32 (1.37%) to $23.07;
  • Ebay (EBAY) -$2.23 (1.92%) to $114.11;

Market Breadth & Internals

On the NYSE declining Issues beat out advancers by 2414 to 913, for a single-day A/D reading of -1501 (whoa, nellie... that's a little too extreme); and Nasdaq losers exceeded gainers by 2219 to 955.

NYSE declining volume dominated volume in advancing issues by 1148.76 to 325.59 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 834.65 to 414.16 million shares.

129 NYSE-listed stocks rose to new 52-week highs, and 4 posted fresh 52-week lows, while on the Nasdaq there were 138 stocks that hit new 52-week highs, and 2 which fell to fresh 52-week lows

Advancing Volume (m)325.59414.16
Declining Volume (m)1148.76834.65
New Highs129138
New Lows42

Market Sentiment

The VIX spiked up pretty hard, rising by a lazy 17% for the session as equity put volume soared. That ought to give enough short-term short positions to enable the market to squeeze higher, even though call volume remains at lofty levels.

The Put-call ratio is still at the low end of its recent range, but is will off the ludicrous lows seen in the leadup to Christmas.


Equity Call Volume (000)2690.8982.63.17%
Equity Put Volume (000)1596.33550.9752.71%
CBOE Volatility Index14.082.0817.33%
CBOE Nasdaq Volatility Index19.51.719.61%
Equity Put-Call Ratio0.590.1948.02%
10-day PCR0.5700%
SPX-VIX Ratio85.38-15.75-15.58%

Bond Market

Bonds rose hard at the long end (great directional call by Lockheed Hayheehoo Macedon, but the 10-yr yield isn't down to 3.5% yet), with the yield on the benchmark 30-year Treasury bond shedding 10.5 basis points to 4.813%. That, dear boys and girls, is a big-ass move.

UST 13wk (yld)2.221-0.05-2.03%
UST 2Y (yld)3.0820.0220.72%
UST 5Y (yld)3.62-0.03-0.79%
UST 10Y (yld)4.21-0.082-1.91%
UST 30Y (yld)4.813-0.105-2.14%

The Banks Index dipped 0.58 points (0.56%), to 103.53; within the index,

  • Northern Trust (NTRS) -$1.15 (2.37%) to $47.43;
  • M&T Bank (MTB) -$1.96 (1.82%) to $105.88;
  • PNC Financial Services (PNC) -$0.87 (1.51%) to $56.57;
  • Suntrust Banks (STI) -$1.09 (1.48%) to $72.79;
  • Keycorp (KEY) -$0.46 (1.36%) to $33.44;

The Broker-dealer Index lost 1.63 points (1.07%), closing at 150.97; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) -$0.30 (2.51%) to $11.66;
  • Legg Mason (LM) -$1.53 (2.09%) to $71.73;
  • A G Edwards (AGE) -$0.79 (1.83%) to $42.42;
  • E*Trade (ET) -$0.25 (1.67%) to $14.70;
  • Jeffries Group (JEF) -$0.65 (1.61%) to $39.63;

The Philadelphia SOX (Semiconductor) index dipped 9.05 points (2.09%), to 424.26

  • Teradyne (TER) -$0.50 (2.93%) to $16.57;
  • Micron Technology (MU) -$0.35 (2.83%) to $12.00;
  • National Semiconductor (NSM) -$0.50 (2.79%) to $17.45;
  • Advanced Micro Devices (AMD) -$0.61 (2.77%) to $21.41;
  • KLA-Tencor (KLAC) -$1.28 (2.75%) to $45.30;

Gold & Silver Markets

Someone put their foot on Gold's neck good and hard right at the day session open - check out the chart!!

GOLD Intraday Chart

If that's not "stop-tickling" (not "Stop tickling... no really, STOP") then I'm a Dutchman.

Gold got smacked by $8.30 (1.89%) on a close-close basis, finishing at $430.70 per ounce. Anyone want to guess whose stops were getting triggered all the way to $425? If you guessed "the little guys" you would be right.

Although I lost faith in my pullback hypothesis some time ago, it now looks like a short bias should be held for a little while: the expanded Precious Metals commentary (coming soon to a ProRant near you) will give further and better particulars as to when, at what price, and where my stops would be.

Gold Bugs Index shed 8.79 points (4.08%), to 206.54

  • Golden Star (GSS) -$0.28 (6.98%) to $3.73;
  • Randgold (GOLD) -$0.66 (5.78%) to $10.76;
  • Goldcorp (GG) -$0.82 (5.45%) to $14.22;
  • Meridian Gold (MDG) -$0.93 (4.9%) to $18.04;
  • Glamis Gold (GLG) -$0.84 (4.9%) to $16.32;

Silver fell by $0.31 (4.53%) to close at $6.53 per ounce. The Gold and Silver Index (XAU) lost 3.7 points (3.72%), closing at 95.65 points.

  • Durban Roodepoert Deep (DROOY) -$0.09 (5.84%) to $1.45;
  • Goldcorp (GG) -$0.82 (5.45%) to $14.22;
  • Meridian Gold (MDG) -$0.93 (4.9%) to $18.04;
  • Newmont (NEM) -$2.05 (4.62%) to $42.36;
PHLX Gold and Silver Index95.65-3.7-3.72%
AMEX Gold BUGS Index206.54-10.42-4.8%

Oil Market

Oil fell back slightly, shedding $0.95 per barrel and closing at $42.25 per barrel.

The Oil and Gas Index (XOI) slid 21.3 points (2.95%), at 699.82

  • Sunoco (SUN) -$4.09 (5.01%) to $77.62;
  • Amerada Hess (AHC) -$3.03 (3.68%) to $79.35; and
  • Unocal (UCL) - former employer of Hamid Karzai - -$1.47 (3.4%) to $41.77.
The Oil service stocks (OSX) Index lost 4.56 points (3.68%), closing at 119.38

  • Transocean (RIG) -$2.27 (5.36%) to $40.12;
  • Nabors(NBR) -$2.35 (4.58%) to $48.94; and
  • Schlumberger (SLB) -$2.70 (4.03%) to $64.25.
Reuters CRB279.75-4.25-1.5%
Crude Oil Light Sweet42.25-0.95-2.2%
AMEX Oil Index699.82-18.53-2.58%
Oil Service Index119.38-3.6-2.93%

Currency Markets

For some reason, currency markets got all twitterpated with the US dollar for a while there; the Yen dropped to the 104's, the Euro got down to the mid-1.33's... goes to show what can happen in a thin market (i.e., outside regular day-session hours).

EC Intraday Chart

US Dollar Index81.410.610.75%
Australian Dollar0.7773-0.0006-0.08%
Swiss Franc1.14810.01481.31%
Canadian Dollar0.82790.00580.71%

European Markets

France's benchmark CAC-40 Index posted a rise of 34.52 points (0.9%), closing at 3855.68; the German DAX-30 Index gained 35.45 points (0.83%), to end the session at 4291.53 points; and in the UK, the FTSE-100 Index lost 5.8 points (0.12%), ending the day at 4814.3... The Frogs and the Krauts were victims of the good ol' fashioned "pop'n'drop", while the Poms stay open a little longer and reversed along with the US. Funny stuff..


Tonight's Pivots (US Futures Market)

R2109441228.171659.5113 8/32
R1108481217.331637112 28/32
Pivot107791209.671621112 13/32
S1106831198.831598.5112 1/32
S2106141191.171582.5111 18/32