Interdum stultus opportuna loquitur...

Friday, April 15, 2005

USRant: Mucho Repo, Zero Gaino...

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Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $13.5billion, overnight repurchase entirely in T-backed collateral; and
  • a $10billion, 14-day repurchase with $9.359billion in T-backed collateral .

Man - that's an awful lot of hot-sauce, and yet the market still spat up a massive hairball. Now that jest ain't right as they say in the bars where short men with undeclared homoerotic tendencies pretend to be cowboys... much like Dubya.


Major US Indices

The market didn't give the bulls a single scintilla of compassion as it applied the bolt-gun to the front of their heads.

As an aside - who could do that for a living? A non-hypocrite I guess... although I hasten to add that I've completely divested myself of that particular hypocrisy for the time being (except for tinned fish... don't ask me what tuna and salmon have done to invoke such a lack of sympathy).

Anyway... mass killing aside, let's get back to the markets...

Folks who thought a rally was coming (which certainly included me until after Tuesday's fraudulent short-squeeze) must have thought all their Christmases, Chanukahs and Kwanzas were arriving early two days ago; You will recall that I was much much more skeptical following the FOMC_minutes induced squeeze. It smelt like a fake, it walked like a fake, and it quacked like a fake... in short it was like Dubya's machismo.

Sometimes when the 'powers that be' try too hard to manipulate our consciousnesses, it just looks obvious (like Bush's faux-macho overcompensation for his penchant for wearing makeup while at Andover ... where he was a cheerleader).

The result: today the market made another new low for the year. In the process it did my charts a favour, since it cleared up any confusion as to which data provider was right as far as the Jan 24th low for the Dow was concerned; it now no longer matters whether it was 10317 or 10371... it's been smashed, by either 50 or a hundred points (both of which are significant enough).

The Dow Jones Industrial Average lost 125.18 points (1.2%), closing out the day at 10278.75 points - a new low for 2005. The index hit posted its intraday high at 10417.89, just 2 minutes after the open. It then waved its way down for pretty much the entire session and fell as low as 10273.43 (the low was just under 10 minutes before the close).

So with all that repo, there was precious little that da Boyz could do to get traction upwards. That's the biggest repurchase in quite some time, and yet there was literally not a single tick to be had by trying to exploit it.

Within the blue-chip index, 3 stocks rose, the biggest gainers being Johnson & Johnson (JNJ, +0.96% to $69.25) and Merck (MRK, +0.75% to $34.78), which accounted for 7 Dow points between them. Losers in the Dow numbered 27 and were led by General Motors (GM, -5.89% to $26.66) as the ratings agencies respond - yet again, two years too late - to the fact that GM is a carcass swinging in the breeze. The bolt you can see protruding from its head is cause by its defined benefit pension plan - it was 2001 when I first wrote about how the actuarial assumptions used to "massage" those plans were one of the biggest earnings fallacies in US corporate history... and GM has one of the biggest defined benefit plans.

Anyhow - that's a 12-year low for GM. I guess that's what happens when you try and turn a car manufacturer into a financial engineering firm, then basically give the cars away... you might lose money on every car, but you think you're gonna make it up by increasing volume.

The other big decliner was Caterpillar (CAT, -3.61% to $85.40), partly driven by a concerted effort to get the company to atone for its provision of bulldozers to the Israeli government, which uses them in its genocide against the Palestinians. (Since it's being done in territory that was occupied during a military conflict, it's actually a War Crime).

These two stocks contributed 36 Dow points worth of downward pressure on the index between them. Volume traded was tilted in favour of the losers by 382.1m shares to 69.1m.

The broader S&P500 dipped 11.74 points (1%), to end the session at 1162.05. Within the index, gainers numbered 62, while 434 S&P500 stocks fell for the day. Volume was tilted 4.8:1 in favour of the losers with 1904.86 million units traded in the losers as compared with 399.63 million traded in the winners .

The Nasdaq Composite declined 27.66 points (1.4%), to close at 1946.71, while larger-cap technology issues fared worse with the Nasdaq100 losing 20.55 points (1.41%), to end at 1441.13 points. Within the tech benchmark, gainers numbered 13, while 86 Nasdaq100 stocks fell for the day. Volume was tilted 4.6:1 in favour of the losers with 772.91 million traded in the losers compared to 167.63 million in the winners.

NYSE Volume was super-duper-chunky, with 2.35 billion shares changing hands, while Nasdaq Volume was chunky, with 1.93 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10278.75-125.18-1.2%
Nasdaq Composite1946.71-27.66-1.4%
NYSE Volume2.35bn--
Nasdaq Volume1.93bn--


My 9-stock "bellwethers" group fell by an average of 0.76%

  • General Electric (GE) -$0.14 (0.39%) to $35.50;
  • Citigroup (C) -$0.41 (0.9%) to $45.40;
  • Wal Mart (WMT) -$0.61 (1.26%) to $47.96;
  • I.B.M. (IBM) -$0.93 (1.1%) to $83.64;
  • Intel (INTC) -$0.33 (1.45%) to $22.49;
  • Cisco Systems (CSCO) -$0.19 (1.06%) to $17.81;
  • eBay (EBAY) +$0.20 (0.61%) to $32.99;
  • Fannie Mae (FNM) -$0.10 (0.18%) to $56.08; and
  • Freddie Mac (FRE) -$0.74 (1.17%) to $62.67.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2564 to 744, for a single-day A/D reading of -1820; I can't remember a time since the post-911 decline days when that number has been that bad, but I haven't really checked. Nasdaq losers exceeded gainers by 2304 to 744 - another massive tilt towards the losers. The 10-day moving average of the A/D line fell to -395.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to -609.5.

On the NYSE declining volume was greater than volume in advancing issues by 1885.3 to 441.2 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1541.1 to 362.4 million shares.

18 NYSE-listed stocks rose to new 52-week highs, and 118 posted fresh 52-week lows, while on the Nasdaq there were 24 stocks that hit new 52-week highs, and 160 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)441.22362.41
Declining Volume (m)1885.311541.08
New Highs1824
New Lows118160

Market Sentiment Statistics
CBOE Volatility Index14.531.229.17%
CBOE Nasdaq Volatility Index18.011.9412.07%
Equity Put-Call Ratio0.960.1315.66%
10-day PCR0.790.045.65%
SPX-VIX Ratio80-8.21-9.31%

Bond Market Analysis

Bonds fell moderately at the long end, with the yield on the benchmark 30-year Treasury bond rising 2.9 basis points to 4.716%.

The middle of the yield curve was broadly higher: five year yields fell 3.2 basis points to 3.994% (under 4% again - amazing), and ten-year yields fell to 4.358%. The bond market smells a severe economic contraction - otherwise the drunken-sailor profligacy of the US "Government", and its impact on bond supply, would have resulted in a much larger increase in bond vigilantism.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were unchanged at 12 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell one tick to 58.0 basis points for 10-year AAA, and fell 4.5 ticks to 82.0 basis points for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were mixed with the AAA-A spread on 20-years unchanged at 41.0 basis points and the 10-year AAA-A spread was a massive 44.0 basis points tighter at 39.0 basis points. That reinforces my view that the massive uptick in that spread two days ago, was the result of a cockup in the data for 10-year A yields. Everyone was carrying the same data at the time, but it smelt fishy. And as a wise man once said... any statistic that looks highly interesting, is probably wrong.

Treasury Yields
UST 13wk (yld)2.71200%
UST 2Y (yld)3.54-0.09-2.48%
UST 5Y (yld)3.994-0.032-0.79%
UST 10Y (yld)4.358-0.016-0.37%
UST 30Y (yld)4.7160.0290.62%

The Banks Index dipped 1.34 points (1.39%), closing at 95.36; within the index,

  • Fifth Third Bancorp (FITB) -$1.99 (4.62%) to $41.10;
  • Keycorp (KEY) -$0.64 (1.99%) to $31.52;
  • National City Corp (NCC) -$0.64 (1.9%) to $32.97;
  • US Bancorp (USB) -$0.53 (1.85%) to $28.07; and
  • Washington Mutual (WM) -$0.72 (1.84%) to $38.50.

The Broker-dealer Index dipped 2.34 points (1.65%), to 139.66; the ticket clippers lined up as follows -

  • E*Trade (ET) -$0.40 (3.45%) to $11.18;
  • Jeffries Group (JEF) -$0.93 (2.48%) to $36.57;
  • Merrill Lynch (MER) -$1.36 (2.46%) to $53.94;
  • Charles Schwab (SCH) -$0.20 (1.92%) to $10.22; and
  • A G Edwards (AGE) -$0.73 (1.75%) to $41.09.

The Philadelphia SOX (Semiconductor) index lost 6.22 points (1.55%), ending the day at 395.71

  • Advanced Micro Devices (AMD) -$0.80 (4.69%) to $16.26;
  • Teradyne (TER) -$0.44 (3.32%) to $12.81;
  • KLA-Tencor (KLAC) -$1.21 (2.84%) to $41.38;
  • Taiwan Semiconductors (TSM) -$0.20 (2.35%) to $8.32; and
  • Micron Technology (MU) -$0.22 (2.2%) to $9.77.

Gold & Silver Markets

Gold fell by $5.30 (1.23%) to close at $424 per ounce. A breakdown from here is relatively unlikely, but it's still sensible to have a negative outlook. I doubt that the little bump up above $430 was the "last gasp" rally that I was looking for (as a prelude to a good shorting entry). Nobody has taken the slightest bit of notice of the MACD "buy" signal, which as I said yesterday is moderately bearish.

Gold Bugs Index lost 8.03 points (4.2%), at 183.02

  • Eldorado Gold (EGO) -$0.22 (8.18%) to $2.47;
  • Coeur d'Alene (CDE) -$0.25 (7.35%) to $3.15;
  • Hecla Mining (HL) -$0.35 (6.88%) to $4.74;
  • Golden Star (GSS) -$0.17 (6.2%) to $2.57; and
  • Randgold Resources (GOLD) -$0.65 (5.39%) to $11.40.

Silver fell by $0.17 (2.29%) to close at $7.06 per ounce. The Gold and Silver Index (XAU) lost 2.95 points (3.27%), at 87.18 points.

  • Durban Rooderpoert Deep (DROOY) -$0.14 (17.5%) to $0.66;
  • Meridian Gold (MDG) -$0.87 (5.34%) to $15.42;
  • Freeport McMoran (FCX) -$1.69 (4.63%) to $34.82; and
  • Agnico Eagle (AEM) -$0.65 (4.61%) to $13.44.
Precious Metals and Indices
PHLX Gold and Silver Index87.18-2.95-3.27%
AMEX Gold BUGS Index183.02-8.03-4.2%

Oil Market

It's not looking too too bad for the $51.50 call purchased yesterday at the open for $60; the option expires tomorrow, and if the little bounce in crude prices continues it ought to finish up doing OK. that sounds optimistic, however from low to high today oil bounced a full $1.60 (but again it depends on who you ask; I have one data source that says that the low in May crude futures was $49.75, and a second data source that says it was $50.05...both agree that the high was $51.40).

Another move like that and the option will close tomorrow at $100 or slightly above. Not exactly what I was looking for, but if it comes it's better than a poke in the eye.

Oil was firmer, rising by $0.88 per barrel, closing at $51.19 per barrel.

The Oil and Gas Index (XOI) lost 0.4 points (0.05%), at 828.89

  • TotalFinaElf S.A. (TOT) -$1.88 (1.61%) to $114.88;
  • BP (BP) -$0.64 (1.04%) to $60.62; and
  • ChevronTexaco (CVX) -$0.50 (0.92%) to $53.77.

The Oil service stocks (OSX) Index declined 1.07 points (0.8%), ending the day at 132.9

  • GlobalSantaFe (GSF) -$0.67 (1.91%) to $34.45;
  • Transocean (RIG) -$0.90 (1.81%) to $48.80; and
  • Weatherford International (WFT) -$0.85 (1.54%) to $54.52.
Energy Complex
Reuters CRB299.38-1.45-0.48%
Crude Oil Light Sweet51.190.881.75%
Heating Oil1.4820.032.42%
Natural Gas7.0660.071.03%
Unleaded Gas1.5020.021.38%
AMEX Oil Index828.89-0.4-0.05%
Oil Service Index132.9-1.07-0.8%

Currency Markets

USD Exchange Rates
US Dollar Index85.070.650.77%
Australian Dollar0.7701-0.0077-0.99%
Swiss Franc1.21370.01481.23%
Canadian Dollar0.8052-0.0024-0.3%