Interdum stultus opportuna loquitur...

Thursday, June 30, 2005

USRant: Everyone Jumped, and Then...

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Poor us. We are cursed with the temporary torment in which a claque of self-serving parasites have wangled themselves the levers of power. It's been that way since the mid 1800s, and it will be that way until a group of highly motivated people put a stop to it. Sadly, due to assortative mating, these parasites breed like with like, creating subsequent generations of uber-parasites; women who like power marry men who seek it, and then they send their children to play with the children of people just like them.

The greatest con in human history is the idea that giving a man a vote somehow includes him meaningfully in the political process; capital must almost choke on its brandy when that joke is told during the dinners at which our political leaders whore themselves to the highest bidder. They must laugh especially hard in Australia, where they force their herd to express a choice (note: it is illegal to cast an 'improper' vote); the end-game of not voting is to be visited by the State's armed goons (you get fined, and if you don't pay the fine, the armed goons come get you).

As H.L. Mencken famously wrote - "democracy is based upon so childish a complex of fallacies that they must be protected by a rigid system of taboos, else even half-wits would argue it to pieces".

The question is - if you're not one of the 'highly motivated people' who will eventually overthrow our corrupt system, what do you do? Do you get all maudlin and increasingly acerbic, like a Thoreau or a Gore Vidal - or do you try and keep your sarcasm a bit livelier, like a Mencken or a Rothbard? It's a difficult one, when you see travesties like George W Bush's insulting speech last night. The primal impulse is to bash the idiot's head in with a rock, but that would get you imprisoned almost as fast as non-payment of a parking fine; the armed goons of the State would be upon you in a flash.

And of course you can't expect critiques of power from the Media - when the boards of the big media companies all include cross-membership with a big bank, a big oil company, a big defence contractor... you get the picture.

That's what the great bulk of 'progressive' people fail to comprehend - that media is not there to 'speak truth to power'. One of the most useful fictions the media ever invented for itself was the fiction that it is the gatekeeper of truth. Sure, it throws the public a periodic bone, but it is so hand-in-glove with politics that it reminds me of George Bush and gay prostitute Jeff Gannon (not that there's anything wrong with that).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed a single repurchase operation- a $9billion, overnight repurchase with not a single cent in T-backed collateral. It all went to prop up Fannie and Freddie; take a gander at homebuilding stocks' performance today, and you will understand why.

That's not helpful, Greenstain. Not helpful at all.

Major US Indices

With the media pimping the technical pullback in Crude Oil, every hopeful lined up for the starter's gun. The bell rang, the buy orders from the nuffnuffs hit the tape, and then...

Well, it should be obvious - a pop'n'drop. Smart money is taking every opportunity to get out of this market (as any good Dow Theorist will tell you, the recent line is resolving downwards, signalling distribution. That doesn't augur well for the chances of the Dow to hold above 10250 - which is an absolute key for a late-year rally.

Economic data looked OK - the highly-fake GDP numbers were revised upwards to growth of 3.8% (and the deflator down to 2.9%), both better than expectations. The Mortgage Bankers' Association Purchase Index fell again, but only by 0.4% (refinancing activity fell 1.8%).

After exploding upwards and hitting a high of 10433.79 within five minutes of opening, the Dow Jones Industrial Average turned tail and waved its way downward for almost the entire session. It carved out a little triangle between 10 a.m. and noon, which served to keep the hopeful hopeful, but then fell out of bed.

By the clsoe, the Dow was down 31.15 points (0.3%), at 10374.48 points. It fell as low as 10363.28 during the session - the low coinciding with the very minor penetration of 1200 by the S&P500 cash index, and the test of 1500 by the Nasdaq100. Round numbers - you see.

Within the blue-chip index, 8 stocks rose, the biggest gainers being American International Group (AIG, +6.00% to $58.48) and Hewlett Packard (HPQ, +1.73% to $24.07), which accounted for 29 Dow points between them (mopst of those in AIG, oviously).  The AIG move shows how stupid people are: the insurer is subject to accounting-fraud investigation, but people still believe its earnings report (which, though showing a solid increase in profits, also showed a combined ratio falling - not a great sign for an insurer). Furthermore, the costs associated with the Spitzer investigation did not impact at all on the quarter in question. People will have a hurt put on them who bought it today, unless they sold it today as well.

Losers in the Dow numbered 22 and were led by Walt Disney (DIS, -1.66% to $25.43) and 3M (MMM, -1.37% to $76.04), with these two stocks contributing -11 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 184.5m shares to 132.8m.

The broader S&P500 lost 1.72 points (0.14%), to 1199.85. Within the index, gainers numbered 224, while 268 S&P500 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 888.75 million units traded in the losers as compared with 767.91 million traded in the winners .

Over at Times Square, the Nasdaq Composite shed 1 points (0.05%), to close at 2068.89, while larger-cap technology issues fared worse with the Nasdaq100 losing 4.5 points (0.3%), to end at 1504.11 points. Within the tech benchmark, gainers numbered 36, while 64 Nasdaq100 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 516.82 million traded in the losers compared to 299.45 million in the winners .

NYSE Volume was chunky, with 1.77 billion shares changing hands, while Nasdaq Volume was a little abvoe average, with 1.69 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10374.48-31.15-0.3%
Nasdaq Composite2068.89-1-0.05%
NYSE Volume1.77bn--
Nasdaq Volume1.69bn--


My 9-stock "bellwethers" group fell by an average of 0.29%

  • General Electric (GE) -$0.15 (0.43%) to $35.00;
  • Citigroup (C) -$0.24 (0.51%) to $46.78;
  • Wal Mart (WMT) +$0.11 (0.23%) to $48.54;
  • I.B.M. (IBM) -$0.57 (0.76%) to $74.72;
  • Intel (INTC) -$0.08 (0.3%) to $26.25;
  • Cisco Systems (CSCO) +$0.20 (1.04%) to $19.36;
  • eBay (EBAY) -$0.55 (1.64%) to $32.90;
  • Fannie Mae (FNM) +$0.04 (0.07%) to $58.83; and
  • Freddie Mac (FRE) -$0.23 (0.35%) to $65.20.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1850 to 1371 for a single-day A/D reading of 479; Nasdaq gainers trumped losers by 1565 to 1454. The 10-day moving average of the A/D line rose to 259.2 on the NYSE, while the 10dma of the Nasdaq A/D rose to 40.8.

NYSE advancing volume exceeded volume in decliners by 873.5 to 803.3 million shares; Nasdaq advancing volume was greater than volume in decliners by 886 to 759.9 million shares.

202 NYSE-listed stocks rose to new 52-week highs, and 35 posted fresh 52-week lows, while on the Nasdaq there were 117 stocks that hit new 52-week highs, and 33 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)873.47885.97
Declining Volume (m)803.31759.91
New Highs202117
New Lows3533

Market Sentiment Statistics
CBOE Volatility Index11.770.191.64%
CBOE Nasdaq Volatility Index14.46-0.38-2.56%
Equity Put-Call Ratio0.71-0.11-13.41%
10-day PCR0.73-0.01-0.74%
SPX-VIX Ratio101.9-1.82-1.76%

Bond Market Analysis

After a spike back up to 119&1/32 following the GDP data (stop-running, dear folks), bonds fell again.

The 30-year T-bond  future bottomed out (for the session) at 117&30/32 and clsoed at 118&5/32 - for a profit of 30 ticks ($937.65) per contract, and a 'maximum positive excursion' of 35 ticks (1093.75) per contract. That's a return of 60.4% per $1553 margin requirement. Not bad for 2 days (and at its peak, it was 70.42% profit). The trading plan was laid out, in detail, last Friday. Unstated in that plan (because I've said it often before) is that one half of the position should always be taken off at 100% profit - that effectively gives the second half of the trade for free.

Because of the natural behaviour of the bond market though, I also usually have a '3 strikes off the same match' view (you can see it in the archives) whereby on 'fade' trades at a genuine top, you usually get two trades that profit by half a pointbefore the bond actually cracks open. Think of Monday as trade 1, and today as trade 2 - there is still a chance that the bond will bounce back to 119 again to set up strike 3 - so if you're in the trade, be aware.

The yield on the benchmark 30-year Treasury bond rose 2.5 bps to 4.265%.

The middle of the yield curve was broadly lower (in price): five year yields rose to 3.769%, and ten-year yields rose to 3.99%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 2.0 bps tighter at 3.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 49.0 bps for 10-year AAA, and 98.0 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 15.0 bps wider at 41.0 basis points and the 10-year AAA-A spread 4.0 bps wider at 9.0 bps.

Treasury Yields
UST 13wk (yld)3.06300%
UST 2Y (yld)3.640.010.28%
UST 5Y (yld)3.7690.0160.43%
UST 10Y (yld)3.990.0140.35%
UST 30Y (yld)4.2650.0250.59%

The Banks Index gained 0.12 points (0.12%), closing at 99.47; within the index,

  • Wachovia (WB) +$0.51 (1.01%) to $50.91;
  • Wells Fargo (WFC) +$0.60 (0.98%) to $61.94;
  • Zions Bancorp (ZION) +$0.60 (0.82%) to $74.13;
  • Comerica (CMA) +$0.39 (0.67%) to $58.79; and
  • Keycorp (KEY) +$0.21 (0.63%) to $33.48.

The Broker-dealer Index posted a rise of 0.03 points (0.02%), to end the session at 160.76; the ticket clippers lined up as follows -

  • Legg Mason (LM) +$1.98 (1.9%) to $106.18;
  • Raymond James (RJF) +$0.37 (1.32%) to $28.44;
  • Morgan Stanley (MWD) +$0.30 (0.57%) to $53.32;
  • Lehman Brothers (LEH) +$0.49 (0.5%) to $99.14; and
  • Jeffries Group (JEF) +$0.14 (0.36%) to $38.77.

The Philadelphia SOX (Semiconductor) index dipped 3.82 points (0.9%), ending the day at 421.37

  • Teradyne (TER) -$0.52 (4.09%) to $12.20;
  • KLA-Tencor (KLAC) -$1.39 (3.07%) to $43.88;
  • Broadcom (BRCM) -$0.79 (2.16%) to $35.86;
  • Advanced Micro Devices (AMD) -$0.33 (1.86%) to $17.37; and
  • Freescale Semiconductors (FSL-B) -$0.28 (1.31%) to $21.06.

Gold & Silver Markets

Gold rose $1.60 (0.37%) to close at $438.40 per ounce. gold/s got uite a bit of work to do to mount a convincing bull run - it pretty much has to close above $449 to be genuinely convincing.

Still, Gold stock hounds are convinced - the Gold Bugs Index posted a rise of 8.68 points (4.46%), ending the day at 203.1

  • Eldorado Gold (EGO) +$0.19 (7.92%) to $2.59;
  • Coeur d'Alene (CDE) +$0.25 (7.31%) to $3.67;
  • Golden Star (GSS) +$0.20 (6.67%) to $3.20;
  • Gold Fields (GFI) +$0.65 (6.1%) to $11.30; and
  • Glamis Gold (GLG) +$0.99 (6.04%) to $17.37.

Silver fell by $0.04 (0.49%) to close at $7.08 per ounce. The Gold and Silver Index (XAU) gained 3.45 points (3.79%), to end the session at 94.55 points.

  • Gold Fields (GFI) +$0.65 (6.1%) to $11.30;
  • Kinross Gold (KGC) +$0.28 (4.84%) to $6.06;
  • Barrick Gold (ABX) +$1.10 (4.45%) to $25.80; and
  • Harmony Gold (HMY) +$0.36 (4.38%) to $8.57.
Precious Metals and Indices
PHLX Gold and Silver Index94.553.453.79%
AMEX Gold BUGS Index203.18.684.46%

Oil Market

Oil lost ground again, thanks to the journalistic echo chamber and the 1.1 million barrel build in crude oil inventories. The front month shed $1.13 per barrel, closing at $57.15 per barrel. 

Other elements in the Energy complex were also weak - but I am still of the view that $60.95 was not the swing top that everyone is looking for it to be.

The Oil and Gas Index (XOI) lost 4.04 points (0.45%), closing at 895.23

  • Occidental Petroleum (OXY) -$1.30 (1.65%) to $77.67;
  • Royal Dutch Shell (RD) -$0.89 (1.35%) to $65.08; and
  • BP (BP) -$0.85 (1.32%) to $63.55.

The Oil service stocks (OSX) Index advanced 0.36 points (0.25%), to end the session at 146.35

  • Global Industries (GLBL) +$0.16 (1.92%) to $8.51;
  • Smith International (SII) +$0.59 (0.93%) to $63.71; and
  • Tidewater (TDW) +$0.28 (0.74%) to $38.23.
Energy Complex
Reuters CRB308.790.170.06%
Crude Oil Light Sweet57.15-1.13-1.94%
Heating Oil1.6225-0.02-1.04%
Natural Gas7.0960.020.23%
Unleaded Gas1.587-0.04-2.49%
AMEX Oil Index895.23-4.04-0.45%
Oil Service Index146.350.360.25%

Currency Markets

USD Exchange Rates
US Dollar Index89.110.120.13%
Australian Dollar0.7619-0.0006-0.08%
Swiss Franc1.28230.00060.05%
Canadian Dollar0.8140.00250.31%