Interdum stultus opportuna loquitur...

Friday, April 29, 2005

USRant: Look Out Below.

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You will read all sorts of mindless falderol this weekend about Friday's "big rally" in Equities - but bear in mind that all it did was prevent a continuation of an existing weekly breakdown. For the week, the indices were barely changed - for the week the S&P rose 4 points, the Dow rose 25, and the Nasdaq Composite lost 15 points. So don't break out the Krug just yet - particularly since the market action in the last two hours today was faker than the hair colour of an Oprah audience. Faker than George Bush's masculinity. Faker than Paul Wolfowitz's commitment to his Oath of Office (the one where he pledged allegiance to the US, not the one where he pledged it to Likud - that one's completely genuine). Fake, fake, fake.

That doesn't bode well for next week...

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operations - a $4.75 billion overnight repurchase entirely in T-backed collateral.

$4.75 billion in T-backed is never enough to give the market firs-hour follow through, and so it was this session - the market had to wait for some really flagrant last-hour, month-end manipulation in Crude before it could get its groove on.

Major US Indices

The Dow Jones Industrial Average opened with a strong pop, and was up 60 points within five minutes. With insufficient repurchase gas in the tank, 10 a.m. was going to provide a test of the advance; if it was just nuffnuffs there would be no follow through, and if there was genuine institutional participation the index would have kept climbing.

Well, 10 a.m. marked a swing high that was not subsequently exceeded until after 2 p.m., when oil started dropping like a rock. Somebody big went hunting for nuffie-stops in the oil market, and did so by sticking their foot on oil's neck; at the same time simultaneously firing off mid-sized BUY programs in equities. It was all executed at the thinnest trade period of the week - Friday afternoon - for maximum effect.

After the opening orgasm, the market hit its morning peak right at 10 a.m. (10:03 for those playing at home), and within thirty seconds it was obvious there would be no institutional participation in any 10 a.m. jamjob. By 10:45 the Dow had given back all of the opening rally, and some interest as well... it fell to its intraday low just under 10050 (at 10048.12, to be more precise). At the same time, the S&Ps broker 1140, the Nasdaq Comp broke 1900 and the Nasdaq100 broke 1400... and then everything bounced.

And what a bounce; 60 Dow points in 20 minutes - precisely the sort of bounce you get when fade traders decide that they can pocket some profits, and breakout traders realise they've been had yet again. (All the indices broke below yesterday's low, encouraging breakout traders to jump short - whereas we have been looking for bounces to predominate since the weekly chart hit oversold almost two weeks ago).

Still, the market was below its 10 a.m. level right through until 2 p.m. - that is a good indication of the actual technical tenor of the thing at present. In the last two hours the Dow completed a 150-point march from its low, eventually closing with a gain of 122.14 points (1.21%), at 10192.51 points. The index hit an intraday high of 10196.36 ten minutes before the close (so the intraday march was only 148 points, actually).

The worrisome thing - from my perspective - is that 90 points of the Dow's rise happened in the last 90 minutes. That coincided with an obvious manipulative hammering of crude oil, and both spurts were timed to take advantage of thin Friday afternoon trading conditions (when the costs of manipulation are low, since you don't have to buy [sell] many contracts to 'clear the decks'). The bounce that I was expecting has not played out anywhere near as ebulliently as one would expect with the depth of the oversold condition that existed two weeks ago; that is not a good sign.

Within the blue-chip index, 26 stocks rose, the biggest gainers being Microsoft (MSFT, +3.48% to $25.30) - despite weaker than expected earnings. Du Pont (DD, +2.50% to $47.11) also had a good day. MSFT and DD accounted for 15 Dow points between them. Losers in the Dow numbered 4 and were led by Mcdonalds (MCD, -1.01% to $29.31) and American International Group (AIG, -0.57% to $50.85), with these two stocks contributing -4 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 386.9m shares to 38.3m.

The broader S&P500 gained 13.63 points (1.19%), to end the session at 1156.85. Within the index, gainers numbered 397, while 96 S&P500 stocks fell for the day. Volume was tilted 2.8:1 in favour of the winners with 1642.31 million units traded in the winners as compared with 584.06 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 17.47 points (0.92%), to close at 1921.65, while larger-cap technology issues fared worse with the Nasdaq100 adding 11.5 points (0.82%), to end at 1420.79 points. Within the tech benchmark, gainers numbered 73, while 26 Nasdaq100 stocks fell for the day. Volume was tilted 2.8:1 in favour of the winners with 714.87 million traded in the winners compared to 253.28 million in the losers .

NYSE Volume was super-chunky, with 2.36 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill), with 2.04 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

All things considered, I'm thinking very seriously of waiting for the last nuffies to jump long on Monday morning NY time, and then taking a short (it will be necessary to wait for the repurchase data on Monday before finalising the entry... there will be an e-mail).

Major Market Statistics
Dow Jones Industrial Average10192.51122.141.21%
Nasdaq Composite1921.6517.470.92%
NYSE Volume2.36bn--
Nasdaq Volume2.04bn--


My 9-stock "bellwethers" group rose by an average of 1.29%

  • General Electric (GE) +$0.53 (1.49%) to $36.20;
  • Citigroup (C) +$0.77 (1.67%) to $46.96;
  • Wal Mart (WMT) +$0.09 (0.19%) to $47.14;
  • I.B.M. (IBM) +$0.47 (0.62%) to $76.38;
  • Intel (INTC) +$0.33 (1.42%) to $23.52;
  • Cisco Systems (CSCO) +$0.13 (0.76%) to $17.27;
  • eBay (EBAY) -$0.09 (0.28%) to $31.71;
  • Fannie Mae (FNM) +$1.71 (3.27%) to $53.95; and
  • Freddie Mac (FRE) +$1.47 (2.45%) to $61.52.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2178 to 1092 for a single-day A/D reading of 1086; Nasdaq gainers trumped losers by 1846 to 1233. The 10-day moving average of the A/D line rose to -11.4 on the NYSE, while the 10dma of the Nasdaq A/D rose to -343.3.

NYSE advancing volume exceeded volume in decliners by 1577.7 to 708.9 million shares; Nasdaq advancing volume was greater than volume in decliners by 1370.7 to 631 million shares.

44 NYSE-listed stocks rose to new 52-week highs, and 137 posted fresh 52-week lows, while on the Nasdaq there were 26 stocks that hit new 52-week highs, and 224 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1577.651370.72
Declining Volume (m)708.88630.98
New Highs4426
New Lows137224

Market Sentiment Statistics
CBOE Volatility Index15.33-1.49-8.86%
CBOE Nasdaq Volatility Index18.6-1.52-7.55%
Equity Put-Call Ratio0.82-0.01-1.2%
10-day PCR0.780.011.3%
SPX-VIX Ratio75.57.511.03%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 1.4 bps to 4.519%. Considering how bad yesterday's deflator numbers were, I am very surprised that bonds didn't fall more than a point. On Monday I will be taking a short in the 30-year bond market, pretty much at the open, unless I think of some sexier way to get exposure to a yield curve steepening. The bloody curve is FAR too flat at the moment, given the near-certainty of another 25bp hike by the Fed when next they meet. Note that I'm not saying that the curve s too flat because the economy is going to surprise to the upside; rather that the US external imbalances and the US dollar are going to surprise to the downside.

The middle of the yield curve was broadly lower: five year yields rose to 3.896%, and ten-year yields rose to 4.201%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 2.0 bps tighter at 8.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 61.0 bps for 10-year AAA, and 84.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly tighter with the AAA-A spread on 20-years 1.0 bps wider at 45.0 basis points and the 10-year AAA-A spread 1 bp wider at 2.0 bps.

Treasury Yields
UST 13wk (yld)2.83700%
UST 2Y (yld)3.630.082.25%
UST 5Y (yld)3.8960.0521.35%
UST 10Y (yld)4.2010.0280.67%
UST 30Y (yld)4.5190.0140.31%

The Banks Index gained 1.28 points (1.33%), ending the day at 97.39; within the index,

  • Fifth Third Bancorp (FITB) +$1.23 (2.91%) to $43.50;
  • Bank Of NY (BK) +$0.69 (2.53%) to $27.94;
  • National City Corp (NCC) +$0.73 (2.2%) to $33.96;
  • Mellon Financial (MEL) +$0.56 (2.06%) to $27.69; and
  • North Fork Bancorp (NFB) +$0.56 (2.03%) to $28.13.

The Broker-dealer Index added 1.75 points (1.29%), to 137.42; the ticket clippers lined up as follows -

  • Morgan Stanley (MWD) +$2.18 (4.32%) to $52.62;
  • Charles Schwab (SCH) +$0.32 (3.19%) to $10.35;
  • Ameritrade (AMTD) +$0.21 (2.04%) to $10.48;
  • Jeffries Group (JEF) +$0.57 (1.6%) to $36.14; and
  • A G Edwards (AGE) +$0.61 (1.56%) to $39.71.

The Philadelphia SOX (Semiconductor) index rose 1.31 points (0.34%), to 385.65

  • Micron Technology (MU) +$0.14 (1.46%) to $9.71;
  • Intel (INTC) +$0.33 (1.42%) to $23.52;
  • Texas Instruments (TXN) +$0.35 (1.42%) to $24.96;
  • Taiwan Semiconductors (TSM) +$0.10 (1.18%) to $8.61; and
  • Broadcom (BRCM) +$0.34 (1.15%) to $29.90.

Gold & Silver Markets

Gold rose $3.70 (0.86%) to close at $435 per ounce. I was right when I surmised yesterday that the RantBuilder had rolled forward the price to reflect the new front month. Today it's also got the correct reference value for yesterday, so changes and percentage changes are also correct.

Gold Bugs Index advanced 2.04 points (1.16%), to end the session at 178.03

  • Newmont Mining (NEM) +$1.14 (3.1%) to $37.97;
  • Iamgold (IAG) +$0.18 (3.05%) to $6.09;
  • Kinross Gold (KGC) +$0.15 (2.88%) to $5.35;
  • Freeport McMoran (FCX) +$0.69 (2.03%) to $34.66; and
  • Meridian Gold (MDG) +$0.28 (1.87%) to $15.24.

Silver fell by $0.05 (0.68%) to close at $6.9 per ounce. The Gold and Silver Index (XAU) gained 1.38 points (1.68%), closing at 83.51 points.

  • Newmont Mining (NEM) +$1.14 (3.1%) to $37.97;
  • Kinross Gold (KGC) +$0.15 (2.88%) to $5.35;
  • Barrick Gold (ABX) +$0.51 (2.34%) to $22.32; and
  • Freeport McMoran (FCX) +$0.69 (2.03%) to $34.66.
Precious Metals and Indices
PHLX Gold and Silver Index83.511.381.68%
AMEX Gold BUGS Index178.032.041.16%

Oil Market

Oil dropped like a rock, shedding $2.40 per barrel, closing at $49.72 per barrel. To put into perspective how extreme the decline was, front-month crude was trading at $51.20 at 1:40 p.m., $50.20 ten minutes later, and $49.20 an hour after that. The drop from $50.10 to $49.20 happened in less than three minutes. In other words, long-side sops were being hunted (during the thin Friday afternoon trade).

Oddly, the Oil and Gas Index (XOI) actually advanced 7.65 points (0.95%), closing at 816.67, mostly because major oilers have been reporting blowout earnings (with some few exceptions). Like I've said before - the Iraq invasion wasn't about securing oil supplies for the American people - it was about securing profits for American political donors (and of course enabling massive tax transfers to American Defence contractors).

  • Occidental Petroleum (OXY) +$1.70 (2.53%) to $69.00;
  • ConocoPhillips (COP) +$2.09 (2.03%) to $104.85; and
  • Exxon Mobil (XOM) +$1.03 (1.84%) to $57.03.

The Oil service stocks (OSX) Index lost 0.33 points (0.26%), to 128.92

  • Smith International (SII) -$0.69 (1.17%) to $58.11;
  • Transocean (RIG) -$0.39 (0.83%) to $46.37; and
  • Noble Corp (NE) -$0.42 (0.82%) to $50.90.
Energy Complex
Reuters CRB303.74-0.66-0.22%
Crude Oil Light Sweet49.72-2.4-4.6%
Heating Oil1.4358-0.06-3.86%
Natural Gas6.585-0.21-3.02%
Unleaded Gas1.4933-0.06-3.6%
AMEX Oil Index816.677.650.95%
Oil Service Index128.92-0.33-0.26%

Currency Markets

USD Exchange Rates
US Dollar Index84.420.040.05%
Australian Dollar0.78050.00170.22%
Swiss Franc1.19530.00230.19%
Canadian Dollar0.7945-0.0042-0.53%