Interdum stultus opportuna loquitur...

Saturday, June 18, 2005

USRant: Massive Volume, But No Joy...

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Recent economic data has been pretty feh. Market indices have appeared to take the outcomes in their stride, and have also stared rising oil prices in the face and shrugged. Or so it would appear - until you realise that all of the apparent recent 'strength' has been very, very 'Dow-centric'.

In the early part of the drive upwards from Dow-10k (i.e., since April 20th), there was good broad participation - as you might expect in a drive off an important round number like 10,000 (although all indices came back to test the lows on April 29th - with the tech indices making lower lows by a hair). That participation has narrowed considerably in recent weeks, but on the face of it, the market looks technically capable of breaking to a new Dow high (and striking upwards through the 1270's on the S&P - potentially throwing over to 1300) before the end of the year.

It almost goes without saying that there is absolutely no fundamental case for holding US equities; they are excessively valued, and the prognosis is poor for both the US and developed-world economies. The supposed 'recovery' in the US is a statistical fiction, a stage-magic act where the pretty lady is held aloft by the twin guy-wires of hedonic adjustment and the net birth-death model. The first generates phantom production, and the second generate phantom workers; but as I wrote all the way back in 2001, semiconductor firms can't book profits from hedonically-boosted 'expenditure' on technology, and phantom workers don't undertake much retail activity.

Still, the technical picture alone, says that the market can make new highs (in the Dow - the Nasdaq will never see 5000 again) before the next major fan-splat; the next minor fan-splat should arrive next week.

Not a lot of data this day; the preliminary estimate of the Consumer Sentiment index shot up to 94.8 (consensus was for 88), indicating ... what, exactly? I've said before that the best indicator of what the Consumer Sentiment indicator will say, is the move in the S&P500 and Dow, in the weeks before the survey. And whaddya know - markets bounced hard starting in late April, and the Consumer Sentiment numbers miraculously 'turned' in May. Forward looking, my arse.

Apart from the sentiment number, the current account showed yet another record deficit - a $195.1 billion deficit for the quarter (Q1 2005) - or 6.4% of GDP. If the current account keeps growing at the rate it has over the last year and a half, it will total over $900 billion this year. (In 2003 it was 'only' 4.8% of GDP; for 2004 it was  5.7%, and in Q4 of 2004 it annualised to  6.16%... call that a trend if you like).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $6billion, 6-day repurchase with $4.865billion in T-backed collateral. The repo was struck at 4.3 basis points below Fed Funds, but wasn't big enough to provide any juice to the markets.

Major US Indices

The Dow Jones Industrial Average opened 'gap up', to the extent it is able. The Dow doesn't 'gap', but it opened at 10579 and was above 10600 within the first minute. The first 20 minutes looked was pretty strong, with the market getting through 10650 before the first half-hour was up.

And that turned out the be the best you could get for the whole day - the session high of 10656.29 was stamped into the record books at 9:50 NY time precisely, and the Dow never saw that level again. For the rest of the session trade was bounded by 10600 below, and 10650 above.

By the close the Dow still clung to a gain of 44.42 points (0.42%), closing out the day at 10623.07 points - less than 2 points higher than its level at 9:31 a.m. (i.e., straight after the open).

It was a massive volume day, with total NYSE volume of 2.39 billion units. That puts it into the top 10 volume days of all time - although only at #9: in the light of that, the headline index response was not that flash.

Within the blue-chip index, 20 stocks rose, the biggest gainers being Caterpillar (CAT, +1.92% to $100.20) and Boeing (BA, +1.46% to $64.62), which accounted for 22 Dow points between them. Losers in the Dow numbered 7 and were led by International Business Machines (IBM, -0.86% to $76.39) and Wal Mart (WMT, -0.85% to $48.93), with these two stocks contributing -8 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 245.6m shares to 74.4m.

The broader S&P500 gained 6 points (0.5%), to 1216.96. Within the index, gainers numbered 335, while 153 S&P500 stocks fell for the day. Volume was tilted 2.1:1 in favour of the winners with 1364.03 million units traded in the winners as compared with 643.97 million traded in the losers .

Over at Times Square, the Nasdaq Composite advanced 0.96 points (0.05%), to close at 2090.11, while larger-cap technology issues fared better with the Nasdaq100 adding 0.71 points (0.05%), to end at 1538.13 points. Within the tech benchmark, gainers numbered 51, while 46 Nasdaq100 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 470.17 million traded in the winners compared to 280.73 million in the losers .

NYSE Volume was super-duper-chunky, with just under 2.4 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill), with 2.1 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10623.0744.420.42%
Nasdaq Composite2090.110.960.05%
NYSE Volume2.4bn--
Nasdaq Volume2.1bn--


My 9-stock "bellwethers" group rose by an average of 0.47%

  • General Electric (GE) +$0.39 (1.08%) to $36.50;
  • Citigroup (C) -$0.08 (0.17%) to $47.46;
  • Wal Mart (WMT) -$0.42 (0.85%) to $48.93;
  • I.B.M. (IBM) -$0.66 (0.86%) to $76.39;
  • Intel (INTC) -$0.00 (0%) to $27.12;
  • Cisco Systems (CSCO) -$0.00 (0%) to $19.53;
  • eBay (EBAY) +$0.49 (1.3%) to $38.05;
  • Fannie Mae (FNM) +$1.25 (2.12%) to $60.15; and
  • Freddie Mac (FRE) +$1.03 (1.59%) to $65.94.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2030 to 1229 for a single-day A/D reading of 801; again, it's odd that the advance-decline numbers were so skewed considering the relatively weak index performance. Nasdaq losers exceeded gainers by 1588 to 1469. The 10-day moving average of the A/D line rose to 619.0 on the NYSE, while the 10dma of the Nasdaq A/D fell to 235.9.

NYSE advancing volume exceeded volume in decliners by 1584.7 to 764.3 million shares; Nasdaq advancing volume was greater than volume in decliners by 1076.8 to 766.3 million shares.

337 NYSE-listed stocks rose to new 52-week highs, and 18 posted fresh 52-week lows, while on the Nasdaq there were 144 stocks that hit new 52-week highs, and 41 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1584.661076.77
Declining Volume (m)764.28766.26
New Highs337144
New Lows1841

Market Sentiment Statistics
CBOE Volatility Index11.480.332.96%
CBOE Nasdaq Volatility Index14.63-0.35-2.34%
Equity Put-Call Ratio0.6100%
10-day PCR0.620-0.49%
SPX-VIX Ratio106-2.6-2.39%

Bond Market Analysis

Bonds were pretty much unchanged at the long end, with the yield on the benchmark 30-year Treasury bond shedding 0.6 bps to 4.365%. The 30-year bond futures rose 4 ticks to 116&22/32.

The middle of the yield curve was broadly lower (in price) but not by much: five year yields rose to 3.867%, and ten-year yields rose to 4.078%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps tighter at a single basis point (yesterday 2-year AAA bonds were seen as less risky than Treasuries!!); spreads between longer dated Treasuries and their corporate AAA counterparts rose to 52.0 bps for 10-year AAA, and 94.0 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 9.0 bps tighter at 34.0 basis points and the 10-year AAA-A spread 8.0 bps tighter at 3.0 bps.

Treasury Yields
UST 13wk (yld)2.91300%
UST 2Y (yld)3.680.020.55%
UST 5Y (yld)3.8670.010.26%
UST 10Y (yld)4.0780.0020.05%
UST 30Y (yld)4.365-0.006-0.14%

The Banks Index gained 0.52 points (0.52%), to 99.71; within the index,

  • Golden West Financial (GDW) +$1.83 (2.82%) to $66.74;
  • M&T Bank Corp (MTB) +$1.97 (1.88%) to $106.60;
  • BB&T Corp (BBT) +$0.59 (1.48%) to $40.39;
  • Comerica (CMA) +$0.84 (1.46%) to $58.46; and
  • North Fork Bancorp (NFB) +$0.40 (1.43%) to $28.33.

The Broker-dealer Index rose 0.24 points (0.16%), ending the day at 151.69; the ticket clippers lined up as follows -

  • Bear Stearns (BSC) +$1.70 (1.65%) to $104.79;
  • Charles Schwab (SCH) +$0.16 (1.38%) to $11.73;
  • Lehman Brothers (LEH) +$1.29 (1.35%) to $97.00;
  • Goldman Sachs (GS) +$1.15 (1.12%) to $103.80; and
  • Legg Mason (LM) +$0.73 (0.86%) to $85.98.

The Philadelphia SOX (Semiconductor) index gained 1.18 points (0.27%), ending the day at 430.51

  • Freescale Semiconductors (FSL-B) +$0.66 (3.24%) to $21.04;
  • Teradyne (TER) +$0.41 (3.07%) to $13.76;
  • ST Microelectronic (STM) +$0.29 (1.8%) to $16.36;
  • Infineon Tech (IFX) +$0.15 (1.61%) to $9.47; and
  • KLA-Tencor (KLAC) +$0.66 (1.44%) to $46.53.

Gold & Silver Markets

Gold rose $2.1 (0.48%) to close at $438.3 per ounce; it's partly that reversal in the USD (from pretty much where every good technician was expecting - about 90 on the USDX), but Gold has a simmering strength that has nothing to do with the USD. That's odd on the face of it - everything in the tea-leaves says that Gold ought to spend some time killing the nuffies before resuming its uptrend.

Gold Bugs Index gained 0.72 points (0.36%), to 202.16

  • Harmony Gold (HMY) +$0.18 (2.24%) to $8.20;
  • Freeport McMoran (FCX) +$0.54 (1.42%) to $38.54;
  • Eldorado Gold (EGO) +$0.03 (1.14%) to $2.66;
  • Agnico Eagle (AEM) +$0.12 (0.94%) to $12.88; and
  • Goldcorp (GG) +$0.13 (0.85%) to $15.37.

Silver fell by $0.01 (0.14%) to close at $7.35 per ounce. The Gold and Silver Index (XAU) gained 0.51 points (0.55%), to end the session at 92.91 points.

  • Harmony Gold (HMY) +$0.18 (2.24%) to $8.20;
  • Freeport McMoran (FCX) +$0.54 (1.42%) to $38.54;
  • Agnico Eagle (AEM) +$0.12 (0.94%) to $12.88; and
  • Barrick Gold (ABX) +$0.22 (0.9%) to $24.73.
Precious Metals and Indices
PHLX Gold and Silver Index92.910.510.55%
AMEX Gold BUGS Index202.160.720.36%

Oil Market

Oil was on fire (and not just around Kirkuk), rising by and impressive $1.97 per barrel, closing at $58.47 per barrel.

Do not let a journalist tell you that this is a 'new high' for oil prices; it ain't necessarily so...

When the market hit its recent swing high (on April 4 - a couple of weeks before stocks made their recent swing lows), July Crude hit a high of $59.94 and closed at $58.80 (the session before that, it closed at $58.87). Back then, though, the front-month was May, which topped out at $58.25 or so. The Cash index for Crude hasn't been calculated yet, but if it has the same proportional change as the front-month, it will fall a couple of cents short of its recent high (which was set on April 1st at $57.28).

The Oil and Gas Index (XOI) advanced 19.06 points (2.13%), ending the day at 912.88

  • Unocal (UCL) +$2.23 (3.63%) to $63.69;
  • ConocoPhillips (COP) +$2.08 (3.55%) to $60.68; and
  • TotalFinaElf S.A. (TOT) +$3.55 (3.05%) to $119.80.

The Oil service stocks (OSX) Index rose 1.17 points (0.79%), to end the session at 148.82

  • Smith International (SII) +$1.29 (2.05%) to $64.11;
  • Baker Hughes (BHI) +$0.87 (1.72%) to $51.55; and
  • Transocean (RIG) +$0.97 (1.71%) to $57.73.
Energy Complex
Reuters CRB310.982.390.77%
Crude Oil Light Sweet58.471.973.49%
Heating Oil1.65180.031.65%
Natural Gas7.690.121.59%
Unleaded Gas1.64710.063.51%
AMEX Oil Index912.8819.062.13%
Oil Service Index148.821.170.79%

Currency Markets

USD Exchange Rates
US Dollar Index87.67-1-1.13%
Australian Dollar0.77790.00470.61%
Swiss Franc1.2575-0.0148-1.16%
Canadian Dollar0.81350.00440.54%