Interdum stultus opportuna loquitur...

Monday, June 13, 2005

USRant: Easy As Pie (So Why, Oh Why?)...

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

There's been one thing I've harped and harped about in these missives - the importance of repurchase grease in the lubrication of upwards momentum. Today I thought I was to be confounded (rarely) - despite an inadequate repurchase amount, the S&P futures drove from a 'tease' trade below 1200, all the way to about 1213, in less than an hour. The NYSE TICK was consistently registering readings of +1000, which is an indication of price-insensitive program buying activity (program trading has been as much as 71% of total NYSE turnover in recent weeks - the market is now almost 75% 'dumb machines' when just 3 years ago it was 80% dumb humans).

The 'clue' for the short side was a textbook divergence in the TICK and the S&P... tick kept hitting +1000, but a 15-minute chart of the S&P showed lower highs (as did a 5-minute chart). And on top of that, the repo amount was not enough.

Later today I will post a picture of the divergence (I'm not at my usual PC at the moment - hence the brevity of the ranting portions of today's missive). 

As it turned out, the 1:10 a.m. (Australian time) divergence was literally the perfect short signal. Overbought 15- and 5-minute charts, a TICK reading in the stratosphere with no price-companionship, no repo-driven pump buying - all with the added advantage of an easily defined stop (the prior bar's high). So why didn't I take it?

Simple - when things looks perfect at the time is when - as a contrarian - it's so damned hard to pull the trigger sometimes. Call it 'performance anxiety'. When the same signal plays out perfectly, you get two lesson... one: the market is predictable. Two: if you don't act, you will 'do your balls' as RedMenace says.

On balance, it ought to have been a barn-burner of a day, with the easiest-to-pick intraday bottom (at 1200 on the S&P futures.. a nice round number) and that text-book divergence within two points of the day's top. Have the courage to press the button both times, and a round-trip of 20 points per contract was there to be trousered. Instead, we scraped and wheedled our way to a mere 3 of those points (still, that's 7.5% for the session - which is hard to view as a failure).

Of course , all this is but toys in a world where over 2000 journalists are mewling over Michael Jackson's impending verdict - while NONE of them are asking hard questions about the Downing Street Memo. 

That, dear Reader, is why I am becoming more fond of the F--bomb; why should I care about 'obscenity' in a world where priorities are so obviously arse-backwards?  I'll tell you what I think is obscene - dropping bombs on children in the name of liberty. That's obscene. Police administering drug & alcohol tests to motorists (and inspecting their vehicles without probable cause or a warrant) - when the Police union refuses to have its members submit to random drug tests. That's obscene too.

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.

Major US Indices

After opening moderately weak, the Dow dipped to 10474.38 at the same time as the S&P futures dipped to touch (and penetrate, buy one tick) 1200 even. That happened just after 10 a.m. NY time, and from there it was a white-knuckle ride, with all indices stacking on points by the dozen... 13 in the S&P, 115 in the Dow... over  the following hour. Exactly one hour later, the Dow hit its intraday high at 10589.16... TICK was berserk, but that divergence reared its head and from then until just before the close, the market was like a  man with no legs doing butterfly through a vat of cold porridge.

The Dow Jones Industrial Average managed to hang on to just 9.93 points (0.09%) of a previous 76 points, closing out the day at 10522.56 points. Within the blue-chip index, 18 stocks rose, the biggest gainers being Hewlett Packard (HPQ, +2.01% to $23.89) and SBC Communications (SBC, +1.18% to $23.91), which accounted for 6 Dow points between them. Losers in the Dow numbered 12 and were led by Mcdonalds (MCD, -1.42% to $29.11) and Du Pont (DD, -0.83% to $46.86), with these two stocks contributing -6 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 181.7m shares to 113.4m.

The broader S&P500 posted a rise of 2.71 points (0.23%), at 1200.82. Within the index, gainers numbered 339, while 154 S&P500 stocks fell for the day. Volume was tilted 1.9:1 in favour of the winners with 949.47 million units traded in the winners as compared with 496.29 million traded in the losers .

Over at Times Square, the Nasdaq Composite gained 5.96 points (0.29%), to close at 2068.96, while larger-cap technology issues fared better with the Nasdaq100 adding 8.11 points (0.53%), to end at 1529.13 points. Within the tech benchmark, gainers numbered 67, while 33 Nasdaq100 stocks fell for the day. Volume was tilted 1.4:1 in favour of the winners with 344.81 million traded in the winners compared to 244.74 million in the losers .

NYSE Volume was chunky, with 1.64 billion shares changing hands, while Nasdaq Volume was about average, with 1.43 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Index Close Gain(Loss) %
Dow Jones Industrial Average 10522.56 9.93 0.09%
S&P500 1200.82 2.71 0.23%
Nasdaq Composite 2068.96 5.96 0.29%
Nasdaq100 1529.13 8.11 0.53%
NYSE Volume 1.64bn - -
Nasdaq Volume 1.43bn - -


My 9-stock "bellwethers" group rose by an average of 0.27%

  • General Electric (GE) -$0.08 (0.22%) to $36.55;
  • Citigroup (C) -$0.04 (0.08%) to $47.60;
  • Wal Mart (WMT) +$0.30 (0.63%) to $48.28;
  • I.B.M. (IBM) +$0.28 (0.37%) to $75.05;
  • Intel (INTC) +$0.02 (0.07%) to $27.00;
  • Cisco Systems (CSCO) +$0.06 (0.31%) to $19.30;
  • eBay (EBAY) +$0.38 (1.04%) to $37.01;
  • Fannie Mae (FNM) +$0.13 (0.22%) to $58.13; and
  • Freddie Mac (FRE) +$0.08 (0.12%) to $64.79.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1928 to 1354 for a single-day A/D reading of 574; Nasdaq gainers trumped losers by 1630 to 1419. The 10-day moving average of the A/D line rose to 345.7 on the NYSE, while the 10dma of the Nasdaq A/D rose to 71.7.

NYSE advancing volume exceeded volume in decliners by 1072.4 to 514.3 million shares; Nasdaq advancing volume was greater than volume in decliners by 862.3 to 540.7 million shares.

153 NYSE-listed stocks rose to new 52-week highs, and 37 posted fresh 52-week lows, while on the Nasdaq there were 115 stocks that hit new 52-week highs, and 47 which fell to fresh 52-week lows.

Market Breadth Statistics

NYSE Nasdaq
Advancers 1928 1630
Decliners 1354 1419
Advancing Volume (m) 1072.36 862.33
Declining Volume (m) 514.31 540.74
New Highs 153 115
New Lows 37 47

Market Sentiment Statistics
Index Close Gain(Loss) %
CBOE Volatility Index 11.69 -0.27 -2.26%
CBOE Nasdaq Volatility Index 15.74 -0.13 -0.82%
Equity Put-Call Ratio 0.64 0.28 77.78%
10-day PCR 0.65 0 -0.31%
SPX-VIX Ratio 102.7 2.52 2.52%

The Banks Index shed 0.07 points (0.07%), at 98.23; within the index,

  • Fifth Third Bancorp (FITB) -$0.75 (1.79%) to $41.25;
  • North Fork Bancorp (NFB) -$0.14 (0.51%) to $27.12;
  • BB&T Corp (BBT) -$0.16 (0.4%) to $39.50;
  • Wells Fargo (WFC) -$0.21 (0.34%) to $61.10; and
  • State Street (STT) -$0.15 (0.3%) to $49.75.

The Broker-dealer Index declined 0.31 points (0.21%), to 148.25; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$0.53 (1.44%) to $36.17;
  • Raymond James (RJF) -$0.35 (1.27%) to $27.18;
  • Lehman Brothers (LEH) -$1.05 (1.12%) to $93.05;
  • Merrill Lynch (MER) -$0.55 (0.99%) to $55.20; and
  • Legg Mason (LM) -$0.56 (0.66%) to $84.28.

The Philadelphia SOX (Semiconductor) index shed 0.43 points (0.1%), to end the session at 430.32

  • Infineon Tech (IFX) -$0.20 (2.14%) to $9.15;
  • Advanced Micro Devices (AMD) -$0.25 (1.42%) to $17.32;
  • Applied Materials (AMAT) -$0.17 (0.99%) to $16.98;
  • Linear Technology (LLTC) -$0.33 (0.86%) to $38.18; and
  • Altera (ALTR) -$0.12 (0.56%) to $21.45.
Note: the rest of the tables will be updated when I get back to my own desk - which should be around midday or thereabouts...