Interdum stultus opportuna loquitur...

Wednesday, June 29, 2005

USRant: Bond Tank-o-Rama...

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

What did I say after the US session on Friday? Let's recap...

Next week I plan to wait for a little pop on the day-session open to above 119, and then short the 30-year.

And guess what: yesterday the bond popped up as high as 119&10/32... giving the perfect entry for the short. And today that same bond closed at 118&16/32 (having traded as low as 118&11/32). I figure I'm entitled to claim an entry at 119&3/32 - to qualify the term 'a pop above 119 on the open', so I am crediting this as a genuine 'call' that has profited thus far to the tune of 19 ticks (closing basis) and 24 ticks (maximum positive excursion). That's $593.75 profit per $1553 margin, or  38.2% for the session.

Note also that I always bias this calculation downwards - with any decent broker the intraday margin is halved; anyone working on InteractiveBrokers ('IB'), for example, pays only $776 intraday margins on ZB (the ECBOT 30-year futures contract). That's not an advert for 'IB', but just quietly at $2.40 per side and with execution in less than 0.5 seconds, I've never found a better service for basic electronic futures, US stocks or US options. I have no relationship with IB except as a client - they are a ticket-clipper who doesn't pretend to be anything else.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $6.75billion, overnight repurchase with $0.341billion in T-backed collateral.

Yep - that's right - a teensy, tiny 341 million in T-backed collateral (all of the rest went to Mortgage backed... see the Fannie & Freddie show in the 'bellwethers' section).

Major US Indices

No repo to speak of, yet an explosive thrust upwards. Odd. Even before the better-than-expected consumer Confidence numbers (which came out at a 3-year high of 105.8 compared to expectations of 104.1), the futures had been trading up following a strong Asian session and opening strength in Europe. Prior to the open, chain store sales from both the ICSC-UBS and Redbook surveys showed stagnant week-on-week comparisons - but markets were ignoring it.

In other words, everyone got aboard the 'G-Train'. You know the one - it's where everyone positions themselves for a little 'ego handjob' for The Great Financial Architect of Our Times. It's the six-weekly smoke-and-mirrors show where Greenstain whispers sweet nothings in the market's ears after each FOMC meeting, pointing towards a bright oncoming light at the end of the tunnel... history will show that the light is an oncoming train, but it won't show it until after Greensplatt retires.

Of course with War Criminal (and PUS - President of the United States), Dear Leader Bush giving a hate-speech tonight about how everyone who disagrees with the slaughter in Iraq is either a terrorist or French, loads of people were trying to 'front run' the mindless-bandwagon jumping that will happen after that little propaganda effort, too.

You know how it will go - that people getting broomsticks shoved up their sphincters at Gitmo have nothing to complain about - it's no different from the White House shenanigans when gay prostitute Jeff Gannon used to stay over...

The Dow Jones Industrial Average opened at its low (10290.55) and exploded upward to trade above 10350 before the first half-hour was finished. The rest f the session was a waft rather than a rocket, but by the close the Dow was still showing a rise of 114.85 points (1.12%), closing out the day at 10405.63 points. The index hit an intraday high of 10409.7 almost a half-hour before the close - giving some idea of the lack of late-day momentum.

Within the blue-chip index, 28 stocks rose, the biggest gainers being United Technology (UTX, +2.91% to $53.02) and General Motors (GM, +2.66% to $34.36), which accounted for 18 Dow points between them. Losers in the Dow numbered just 2 - Pfizer (PFE, -0.64% to $27.90) and Exxon Mobil (XOM, -0.35% to $59.09), with these two stocks contributing -3 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 280.1m shares to 49.1m.

The broader S&P500added 10.88 points (0.91%), at 1201.57; an important 'shunt' upwards to give the market some psychological mojo before Greensplatt's murmurings - and to provide a psychological 'round number' floor under the market for the post-FOMC fade. Within the index, gainers numbered 432, while just 65 S&P500 stocks fell for the day. Volume was tilted 4.1:1 in favour of the winners with 1287.79 million units traded in the winners as compared with 316.57 million traded in the losers .

Over at Times Square, the Nasdaq Composite gained 24.69 points (1.21%), to close at 2069.89, while larger-cap technology issues fared worse with the Nasdaq100 adding 14.86 points (0.99%), to end at 1508.61 points. Within the tech benchmark, gainers numbered 80, while 19 Nasdaq100 stocks fell for the day. Volume was tilted 5.1:1 in favour of the winners with 588.20 million traded in the winners compared to 114.59 million in the losers .

NYSE Volume was chunky, with 1.77 billion shares changing hands, while Nasdaq Volume was only a little above average, with 1.64 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10405.63114.851.12%
Nasdaq Composite2069.8924.691.21%
NYSE Volume1.77bn--
Nasdaq Volume1.64bn--


My 9-stock "bellwethers" group rose by an average of 1.23%

  • General Electric (GE) +$0.54 (1.56%) to $35.15;
  • Citigroup (C) +$0.25 (0.53%) to $47.02;
  • Wal Mart (WMT) +$0.91 (1.91%) to $48.43;
  • I.B.M. (IBM) +$1.42 (1.92%) to $75.30;
  • Intel (INTC) +$0.47 (1.82%) to $26.33;
  • Cisco Systems (CSCO) +$0.13 (0.68%) to $19.16;
  • eBay (EBAY) -$0.18 (0.54%) to $33.45;
  • Fannie Mae (FNM) +$0.93 (1.61%) to $58.79; and
  • Freddie Mac (FRE) +$0.98 (1.52%) to $65.43.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2368 to 899 for a single-day A/D reading of 1469; Nasdaq gainers trumped losers by 2218 to 843. The 10-day moving average of the A/D line rose to 211.0 on the NYSE, while the 10dma of the Nasdaq A/D rose to 25.4.

NYSE advancing volume exceeded volume in decliners by 1347 to 379.7 million shares; Nasdaq advancing volume was greater than volume in decliners by 1279.8 to 329 million shares.

177 NYSE-listed stocks rose to new 52-week highs, and 34 posted fresh 52-week lows, while on the Nasdaq there were 98 stocks that hit new 52-week highs, and 36 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1346.961279.81
Declining Volume (m)379.74329.04
New Highs17798
New Lows3436

Market Sentiment Statistics
CBOE Volatility Index11.58-0.94-7.51%
CBOE Nasdaq Volatility Index14.84-0.89-5.66%
Equity Put-Call Ratio0.820.033.8%
10-day PCR0.740.022.88%
SPX-VIX Ratio103.88.669.11%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 5.1 bps to 4.24%. I won't recap again (I did that in the opening remarks); not because it wouldn't be fun, but because I don't want to jinx the call though, so I will keep the chest-beating to a minimum... one of the things that Madam Market likes almost as much as desperation, is Hubris.

The middle of the yield curve was broadly lower, price-wise: five year yields rose to 3.753%, and ten-year yields rose to 3.976%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 4.0 bps wider at 5.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 54.0 bps for 10-year AAA, and 106.0 bps 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 11.0 bps tighter at 26.0 basis points and the 10-year AAA-A spread 3.0 bps wider at 5.0 bps.

Treasury Yields
UST 13wk (yld)3.07500%
UST 2Y (yld)3.630.061.68%
UST 5Y (yld)3.7530.0721.96%
UST 10Y (yld)3.9760.0741.9%
UST 30Y (yld)4.240.0511.22%

The Banks Index rose 1.01 points (1.03%), to end the session at 99.35; within the index,

  • Bank Of NY (BK) +$0.70 (2.43%) to $29.52;
  • BB&T Corp (BBT) +$0.70 (1.76%) to $40.40;
  • State Street (STT) +$0.84 (1.74%) to $49.17;
  • Keycorp (KEY) +$0.54 (1.65%) to $33.27; and
  • M&T Bank Corp (MTB) +$1.72 (1.64%) to $106.57.

The Broker-dealer Index rose 3.01 points (1.91%), closing at 160.73; the ticket clippers lined up as follows -

  • E*Trade (ET) +$0.60 (4.47%) to $14.03;
  • Legg Mason (LM) +$4.21 (4.21%) to $104.20;
  • A G Edwards (AGE) +$1.19 (2.73%) to $44.80;
  • Ameritrade (AMTD) +$0.48 (2.62%) to $18.77; and
  • Jeffries Group (JEF) +$0.87 (2.3%) to $38.63.

The Philadelphia SOX (Semiconductor) index rose 3.82 points (0.91%), to end the session at 425.19

  • Advanced Micro Devices (AMD) +$1.05 (6.31%) to $17.70;
  • National Semiconductors (NSM) +$0.61 (2.84%) to $22.11;
  • Texas Instruments (TXN) +$0.73 (2.65%) to $28.26;
  • Intel (INTC) +$0.47 (1.82%) to $26.33; and
  • Broadcom (BRCM) +$0.59 (1.64%) to $36.65.

Gold & Silver Markets

Gold fell by $3.50 (0.79%) to close at $436.80 per ounce. The Gold market has absorbed the USD bounce nicely, and unless something completely unforeseen occurs, Gold is now more likely to take off than to drop. I know it's odd that there hasn't been a significant nuffie-skinning, but the USD has stalled twice at my previously-stated target at around 90 on the USDX and there is no fundamental or technical reason why it should continue to defy gravity... which should be good for a new high in Gold, and probably before the end of the year.

That's an odd thing to try and reconcile with a potential upside pop in US equities (as I've mentioned before, 1300 is a 'valid target' on the S&P for the time being), but that's the number that gets spat out by a methodology that I believe in (and which works particularly well in the bonds).

The Gold Bugs Index slid 2.03 points (1.03%), to 194.42

  • Golden Star (GSS) -$0.10 (3.23%) to $3.00;
  • Randgold Resources (GOLD) -$0.34 (2.4%) to $13.81;
  • Glamis Gold (GLG) -$0.35 (2.09%) to $16.38;
  • Eldorado Gold (EGO) -$0.05 (2.04%) to $2.40; and
  • Gold Fields (GFI) -$0.18 (1.66%) to $10.65.

Silver fell by $0.11 (1.56%) to close at $7.11 per ounce. The Gold and Silver Index (XAU) lost 0.57 points (0.62%), to end the session at 91.1 points.

  • Durban Rooderpoert Deep (DROOY) -$0.07 (7%) to $0.93;
  • Gold Fields (GFI) -$0.18 (1.66%) to $10.65;
  • Agnico Eagle (AEM) -$0.18 (1.44%) to $12.32; and
  • Anglogold Ashanti (AU) -$0.48 (1.35%) to $35.16.
Precious Metals and Indices
PHLX Gold and Silver Index91.1-0.57-0.62%
AMEX Gold BUGS Index194.42-2.03-1.03%

Oil Market

Oil lost ground, shedding $2.01 per barrel, closing at $58.28 per barrel. Don't think for one second that this is the start of a genuine retracement; this is just to crush the souls of newcomers. Think of it as a crucible into which people throw themselves in the expectation of riches; those who survive enjoy fun, games, and low-stress, high-income lifestyle - but it's maybe 1% of the people who think they'll do well. That's the approximate ratio of 'fade' players in the market.

That's not to 'dis' trend-followers; the 'Turtles' are a well-documented bunch of trend followers who mad tens of millions of dollars. But their 'system' requires very deep pockets (or to trade in options until you GET deep pockets), and it's certainly not a 'breakout' system (which I also refer to as 'get into the end of a trend... on the wrong side' system). It's breakout traders who go broke.

The Oil and Gas Index (XOI) declined 10.07 points (1.11%), to 899.27

  • Amerada Hess (AHC) -$4.16 (3.77%) to $106.26;
  • Marathon Oil (MRO) -$1.62 (2.91%) to $53.96; and
  • ConocoPhillips (COP) -$1.42 (2.39%) to $58.10.

The Oil service stocks (OSX) Index dipped 3.13 points (2.1%), closing at 145.99

  • Transocean (RIG) -$1.76 (3.15%) to $54.20;
  • Noble Corp (NE) -$1.96 (3.1%) to $61.24; and
  • Nabors Industries (NBR) -$1.74 (2.84%) to $59.55.
Energy Complex
Reuters CRB308.62-4.78-1.53%
Crude Oil Light Sweet58.28-2.01-3.33%
Heating Oil1.6395-0.03-2%
Natural Gas7.08-0.05-0.77%
Unleaded Gas1.6275-0.05-2.72%
AMEX Oil Index899.27-10.07-1.11%
Oil Service Index145.99-3.13-2.1%

Currency Markets

USD Exchange Rates
US Dollar Index88.990.540.61%
Australian Dollar0.7625-0.0066-0.86%
Swiss Franc1.28170.01341.06%
Canadian Dollar0.8115-0.0015-0.18%