Interdum stultus opportuna loquitur...

Tuesday, April 19, 2005

USRant: Five Minutes of Fun....

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Gawr-ly, Sar-jint... (that's meant to be a Gomer Pyle impersonation). The US markets jumped out of the blocks like Ben Johnson in the famous 100-m sprint - both arms back, legs driving. Within 5 minutes they had advanced over 50 points - in fact for the entire remainder of the session, the Dow only managed to retain a further 3 points' worth of gains. The PPI rose 0.7% (in line with consensus), but that's not the number anyone was looking at. The "Core" PPI gave an excuse to push the markets... because everyone knows that we all produce stuff without any need for food or energy. At the same time, data on new housing starts dropped 17%, and permits for future starts dropped 4%.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation.

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

That's not really enough to get the market's endocrine system buzzing - but every little bit helps. Given the extreme oversold condition that prevailed at the end of last week, a bounce of some sort was always likely (back to to 200 day moving average would be the largest likely bounce).

Major US Indices

The Dow Jones Industrial Average gained 56.16 points (0.56%), closing out the day at 10127.41 points. The index opened at its low - 10071.55 - and exploded out of the blocks, hitting 10127.3 within 5 minutes. After a pullback to the high 10080's (which coincided with the only oversold reading of the session) the index rallied again to its intraday high of 10156.53 which was set just before 2:25 p.m. NY time.

Within the blue-chip index, 19 stocks rose, the biggest gainers being Coca Cola (KO, +3.49% to $42.40) and Exxon Mobil (XOM, +2.41% to $58.63), which accounted for 21 Dow points between them. Losers in the Dow numbered 10 and were led by International Business Machines (IBM, -1.53% to $75.48) and American Express (AXP, -0.75% to $50.55), with these two stocks contributing -11 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 233.4m shares to 174.7m.

The broader S&P500 advanced 6.8 points (0.59%), to end the session at 1152.78. Within the index, gainers numbered 353, while 143 S&P500 stocks fell for the day. Volume was tilted 2.5:1 in favour of the winners with 1.54 billion units traded in the winners as compared with 605.8 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 19.44 points (1.02%), to close at 1932.36, while larger-cap technology issues fared worse with the Nasdaq100 adding 10.82 points (0.77%), to end at 1420.8 points. Within the tech benchmark, gainers numbered 65, while 35 Nasdaq100 stocks fell for the day. Volume was tilted 2.6:1 in favour of the winners with 650.16 million traded in the winners compared to 247.13 million in the losers .

NYSE Volume was super-chunky, with 2.13 billion shares changing hands, while Nasdaq Volume was chunky, with 1.86 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10127.4156.160.56%
Nasdaq Composite1932.3619.441.02%
NYSE Volume2.13bn--
Nasdaq Volume1.86bn--


My 9-stock "bellwethers" group fell by an average of 0.21%

  • General Electric (GE) unchanged at $36.00;
  • Citigroup (C) +$0.14 (0.3%) to $46.35;
  • Wal Mart (WMT) -$0.28 (0.58%) to $47.60;
  • I.B.M. (IBM) -$1.17 (1.53%) to $75.48;
  • Intel (INTC) +$0.42 (1.89%) to $22.63;
  • Cisco Systems (CSCO) +$0.16 (0.94%) to $17.18;
  • eBay (EBAY) -$0.43 (1.32%) to $32.17;
  • Fannie Mae (FNM) -$0.61 (1.12%) to $53.79; and
  • Freddie Mac (FRE) -$0.31 (0.51%) to $61.00.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2497 to 830 for a single-day A/D reading of 1667; Nasdaq gainers trumped losers by 2156 to 921. The 10-day moving average of the A/D line rose to -40.8 on the NYSE, while the 10dma of the Nasdaq A/D rose to -313.5.

NYSE advancing volume exceeded volume in decliners by 1555.4 to 538.8 million shares; Nasdaq advancing volume was greater than volume in decliners by 1414.1 to 424.9 million shares.

18 NYSE-listed stocks rose to new 52-week highs, and 67 posted fresh 52-week lows, while on the Nasdaq there were 29 stocks that hit new 52-week highs, and 116 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1555.441414.12
Declining Volume (m)538.84424.89
New Highs1829
New Lows67116

Market Sentiment Statistics
CBOE Volatility Index14.96-1.6-9.66%
CBOE Nasdaq Volatility Index19.11-2.27-10.62%
Equity Put-Call Ratio0.71-0.06-7.79%
10-day PCR0.81-0.03-3.11%
SPX-VIX Ratio77.17.8611.35%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 4.6 basis points to 4.541%.

The middle of the yield curve was broadly higher: five year yields fell to 3.845%, and ten-year yields fell to 4.203%. the bull market in risk (and the bear market in time preference) continues - there is so much risk-preference being exhibited that you would be forgiven for thinking that the universe is on crack... except that a lot of people don't realise that's what they're doing (buying risk).

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 10.0 basis points tighter at 3.0 basis points; think about that. It's saying that short term corporate bonds are so safe that there's little point in having a spread between them and treasuries. There's no need for a 'risk factor'. Bondholders will accept just three one-hundredths of a percent higher interest, compared to what they expect from a "risk free" alternative. That is just madness; the algorithms are in charge, and nobody is stopping to think whether the output makes any damned sense.

Spreads between longer dated Treasuries and their corporate AAA counterparts fell to 52.0 basis points for 10-year AAA, and 78.5 basis points for 20-years. Keep watching those spreads - they will crack wide open (I think that a SENSIBLE spread between a Treasury and a high-grade corporate of similar maturity should be 200bp at the long end).

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were mixed with the AAA-A spread on 20-years 3.0 basis points looser at 43.0 basis points and the 10-year AAA-A spread 6.0 basis points tighter at 38.0 basis points.

Treasury Yields
UST 13wk (yld)2.84700%
UST 2Y (yld)3.530.061.73%
UST 5Y (yld)3.845-0.051-1.31%
UST 10Y (yld)4.203-0.046-1.08%
UST 30Y (yld)4.541-0.046-1%

The Banks Index posted a rise of 0.41 points (0.43%), at 96.14; within the index,

  • State Street (STT) +$3.49 (8.47%) to $44.68;
  • Mellon Financial (MEL) +$1.15 (4.28%) to $28.00;
  • Washington Mutual (WM) +$0.81 (2.12%) to $39.02;
  • Northern Trust (NTRS) +$0.91 (2.08%) to $44.71; and
  • Bank Of NY (BK) +$0.49 (1.74%) to $28.62.

The Broker-dealer Index advanced 1.09 points (0.79%), to 139.87; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.19 (1.87%) to $10.35;
  • Merrill Lynch (MER) +$0.80 (1.5%) to $54.04;
  • Legg Mason (LM) +$1.03 (1.43%) to $72.94;
  • Raymond James (RJF) +$0.38 (1.33%) to $29.04; and
  • A G Edwards (AGE) +$0.51 (1.25%) to $41.31.

The Philadelphia SOX (Semiconductor) index added 6.71 points (1.74%), closing at 392.56

  • Texas Instruments (TXN) +$1.25 (5.45%) to $24.17;
  • National Semiconductors (NSM) +$0.83 (4.45%) to $19.50;
  • Teradyne (TER) +$0.38 (2.99%) to $13.09;
  • Freescale Semiconductors (FSL-B) +$0.42 (2.55%) to $16.92; and
  • Marvell Tech Group (MRVL) +$0.80 (2.41%) to $34.03.

Gold & Silver Markets

Aaahhh... the nuffies are piling into Gold again... this is likely to be the move that provides the shorting opportunity of the year for Gold. It will only be a short-term job, but it will be a goodie - and will provide a little profit cushion for an attempt to try to pick the intra-year bottom (which should be just under $400, but which could easily extend to $90 intrasession as the lemmings all jump at the same time).

Gold rose $5.40 (1.26%) to close at $432.90 per ounce.

Gold Bugs Index posted a rise of 8.02 points (4.32%), to 193.77

  • Iamgold (IAG) +$0.66 (11.93%) to $6.19;
  • Coeur d'Alene (CDE) +$0.25 (7.51%) to $3.58;
  • Hecla Mining (HL) +$0.30 (6.41%) to $4.98;
  • Meridian Gold (MDG) +$0.78 (5.05%) to $16.24; and
  • Randgold Resources (GOLD) +$0.56 (4.89%) to $12.02.

Silver rose $0.21 (2.91%) to close at $7.25 per ounce. The Gold and Silver Index (XAU) gained 2.76 points (3.13%), ending the day at 90.81 points.

  • Durban Rooderpoert Deep (DROOY) +$0.07 (9.21%) to $0.83;
  • Meridian Gold (MDG) +$0.78 (5.05%) to $16.24;
  • Gold Fields (GFI) +$0.52 (4.86%) to $11.23; and
  • Kinross Gold (KGC) +$0.23 (4.28%) to $5.60.
Precious Metals and Indices
PHLX Gold and Silver Index90.812.763.13%
AMEX Gold BUGS Index193.778.024.32%

Oil Market

Wouldn't you know it. The correction of the oversold condition in Crude came 2 sessions too late for those little calls that died worthless on Friday. The snapback occurred precisely as forecast - with a massive intraday snap upward - but there was precious little to be done about it (silly me - had I advocated taking the call position in Heating Oil, we would have been OK... heating oil options expire this Friday).

Oil was firmer, rising by $1.77 per barrel, closing at $52.22 per barrel.

The Oil and Gas Index (XOI) added 14.91 points (1.83%), to end the session at 829.28

  • Occidental Petroleum (OXY) +$1.91 (2.82%) to $69.76;
  • Marathon Oil (MRO) +$1.23 (2.74%) to $46.14; and
  • Amerada Hess (AHC) +$2.39 (2.57%) to $95.37.

The Oil service stocks (OSX) Index gained 3.04 points (2.31%), ending the day at 134.39

  • Halliburton (HAL) +$1.66 (4.03%) to $42.84; and
  • Rowan Companies (RDC) +$1.06 (3.86%) to $28.50.
Energy Complex
Reuters CRB304.036.342.13%
Crude Oil Light Sweet52.221.773.51%
Heating Oil1.4910.043.08%
Natural Gas7.080.141.94%
Unleaded Gas1.56750.074.43%
AMEX Oil Index829.2814.911.83%
Oil Service Index134.393.042.31%

Currency Markets

It's hard to retain any confidence in the USD rally that I've considered likely for a while; the USD index made a swing high recently at above 85, but the action of the USD is like watching an 80-year-old trying to do butterfly in a vat of cold porridge. You would rather not watch, and you wish someone would make it stop, but you can't take your eyes off it 'coz you really want to see how it ends.

It's always been my hypothesis that the USD would bounce - hard - from the low 80s (my first guess was 82-ish, and when that produced only the feeblest of bounces, 80 was the line in the sand). It seems that the index is now getting ready to drop below 80. I am certainly not going to advocate "trend-chasing" shorts here; 120 was the place to be short the USD index, as I said at the time.

USD Exchange Rates
US Dollar Index83.59-0.42-0.5%
Australian Dollar0.77160.00410.53%
Swiss Franc1.1803-0.0077-0.65%
Canadian Dollar0.80840.00720.9%