Interdum stultus opportuna loquitur...

Tuesday, June 28, 2005

USRant: No Repo... No Momentum-o...

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

This week, the market is fixated on the blatherings emanating from the quintessences of central planning; not the old Soviet politburo, not the Soviet Army. The absolute epitome of political urges to centrally-administer an economy is the Federal Reserve, which embodies the State's refusal to let the market set short-term interest rates and determine the quantity of credit in the economy.

Now you will recall that we (the West) spent trillions of dollars trying to 'defeat' creeping Socialism, on the basis that central planning was 'bad'. When I say 'spent', I should actually clarify - the State that extorts money from us (under pain of imprisonment by armed goons), then transferred loads of that money to their pals in the Thanatocracy.

And here we are, 60 years after the Cold War started (and almost 20 years after it ended). The entire global financial market hangs on the pronouncement of a group of people who couldn't earn a living in the private sector. Who won, exactly?

The reality is also that, following the recent Supreme Court decision in Kelo v City of New London Connecticut, the rule of private property is defunct in the United States, too. If someone else gets in the ear of your local council (promising greater TAX revenue - the most mellifluous sounds in the universe to a politician), that council can seize your property under eminent domain, and they get to determine how much you get compensated.

Tell me again - in this world of 50% income tax (once you count everything), seizure of property for cronies, and endless overseas wars - which set of ideas won the Cold War?

Another thought flashed through my head (since I always wonder whether to capitalise the first letter of 'a' and 'the' and 'of' in my little 'headlines'). If you do what is right (and you DON'T include 'a', 'the' and 'of' in acronyms), then the acronym for President of the United States is no longer POTUS... it's PUS.


Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $6billion, overnight repurchase with $2.684billion in T-backed collateral. The repo was struck at an average rate 5 basis points above Fed Funds.

Given that the Fed is going to raise rates again this week, look for the rate at which the repo is struck to rise (remember though - the important variable is not the absolute level of the average rate for the repo, but rather its spread to Fed Funds).

Major US Indices

Even the very negative market breadth on Friday, and the fact that today is chock full of 'Mondayness', the markets didn't open in a particularly ebullient frame of mind. Oil climbing 50c in the Asian session didn't help,. and it kept right on climbing once NYMEX opened its day session (getting to an intraday high of $60.95).

The Dow Jones Industrial Average wiggled around between 10300-ish and 10320-ish for the whole of the first three hours of trade, which must have driven futures traders absolutely spare. At 2 p.m. the market went on a bit of a downer, at which point it dipped to its intraday low (at 10253.49 - let's call that 10250-ish) and over the next 90 minutes managed a 50-point rally - the only decent move of the session.

By the close, the Dow was showing a loss of 7.06 points (0.07%), closing out the day at 10290.78 points. The index actually hit an intraday high of 10332.13 on a TICK spike in the first hour.

Within the blue-chip index, 12 stocks rose, the biggest gainers being Exxon Mobil (XOM, +1.98% to $59.30) and Boeing (BA, +1.93% to $61.76), which accounted for 18 Dow points between them. Losers in the Dow numbered 18 and were led by General Motors (GM, -1.79% to $33.47) and Walt Disney (DIS, -1.57% to $25.63), with these two stocks contributing -8 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 185.6m shares to 141.8m.

The broader S&P500 declined 0.88 points (0.07%), closing at 1190.69. Within the index, gainers numbered 229, while 267 S&P500 stocks fell for the day. Volume was tilted 1.7:1 in favour of the losers with 1003.84 million units traded in the losers as compared with 598.84 million traded in the winners .

Over at Times Square, the Nasdaq Composite slid 8.07 points (0.39%), to close at 2045.2, while larger-cap technology issues fared worse with the Nasdaq100 losing 6.43 points (0.43%), to end at 1493.75 points. Within the tech benchmark, gainers numbered 36, while 64 Nasdaq100 stocks fell for the day. Volume was tilted 1.8:1 in favour of the losers with 393.98 million traded in the losers compared to 222.76 million in the winners .

NYSE Volume was chunky, with 1.76 billion shares changing hands, while Nasdaq Volume was about average, with 1.52 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10290.78-7.06-0.07%
Nasdaq Composite2045.2-8.07-0.39%
NYSE Volume1.76bn--
Nasdaq Volume1.52bn--


My 9-stock "bellwethers" group fell by an average of 0.62%: notice that Citigroup - the most manipulated stock in the OEX - is finally starting to slip.

  • General Electric (GE) -$0.17 (0.49%) to $34.61;
  • Citigroup (C) -$0.18 (0.38%) to $46.77;
  • Wal Mart (WMT) +$0.15 (0.32%) to $47.52;
  • I.B.M. (IBM) -$0.13 (0.18%) to $73.88;
  • Intel (INTC) -$0.24 (0.92%) to $25.86;
  • Cisco Systems (CSCO) -$0.27 (1.4%) to $19.03;
  • eBay (EBAY) -$0.74 (2.15%) to $33.63;
  • Fannie Mae (FNM) -$0.19 (0.33%) to $57.86; and
  • Freddie Mac (FRE) -$0.05 (0.08%) to $64.45.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1671 to 1637, for a single-day A/D reading of -34; and Nasdaq losers exceeded gainers by 1798 to 1269. The 10-day moving average of the A/D line rose to -65.2 on the NYSE, while the 10dma of the Nasdaq A/D fell to -270.8.

On the NYSE declining volume was greater than volume in advancing issues by 1019.5 to 725.5 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1005.6 to 492 million shares.

129 NYSE-listed stocks rose to new 52-week highs, and 56 posted fresh 52-week lows, while on the Nasdaq there were 48 stocks that hit new 52-week highs, and 54 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)725.46492.03
Declining Volume (m)1019.531005.61
New Highs12948
New Lows5654

Market Sentiment Statistics
CBOE Volatility Index12.520.342.79%
CBOE Nasdaq Volatility Index15.730.432.81%
Equity Put-Call Ratio0.790.011.28%
10-day PCR0.720.022.63%
SPX-VIX Ratio95.1-2.73-2.79%

Bond Market Analysis

Bonds rose moderately at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.6 bps to 4.189%. The 'wait for a pop above 119 and then short 30-year futures' hasn't done any harm - the 30-year bond futures closed at 119&8/32.

The middle of the yield curve was broadly higher: five year yields fell to 3.681%, and ten-year yields fell to 3.902%. Look at those numbers again: from Thursday, the Fed Funds rate will be 3.75%, at which point the yield curve will be inverted in the belly (i.e., everything from 3-month to 5-years rates will be lower than Fed Funds), and 10-year yields will be just 15 basis points above FFR. That's madness, in a world where the US is spending $2 billion a DAY more than it produces, and the US Federal Debt limit is raised again to over $8 TRILLION. The end-game for the bonds - as I have said before, is for 30-years to yield over 6.5% (i.e., a price under 100 in 30-year futures): the aim is to periodically reposition at higher prices and hopefully pocket some of the interim (downward) swings, ignoring the upswings.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were unchanged at 1.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 56.0 bps for 10-year AAA, and 103.5 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 37.0 basis points and the 10-year AAA-A spread 3.0 bps wider at 2.0 bps.

Treasury Yields
UST 13wk (yld)3.03500%
UST 2Y (yld)3.570.010.28%
UST 5Y (yld)3.681-0.013-0.35%
UST 10Y (yld)3.902-0.012-0.31%
UST 30Y (yld)4.189-0.026-0.62%

The Banks Index slid 0.29 points (0.29%), to end the session at 98.34; within the index,

  • MBNA Corp (KRB) -$0.43 (2%) to $21.02;
  • Northern Trust (NTRS) -$0.61 (1.34%) to $45.08;
  • North Fork Bancorp (NFB) -$0.25 (0.9%) to $27.52;
  • Zions Bancorp (ZION) -$0.61 (0.83%) to $73.06; and
  • Bank Of NY (BK) -$0.24 (0.83%) to $28.82.

The Broker-dealer Index shed 0.1 points (0.06%), ending the day at 157.72; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) -$0.19 (1.64%) to $11.41;
  • E*Trade (ET) -$0.20 (1.47%) to $13.43;
  • Ameritrade (AMTD) -$0.26 (1.4%) to $18.29;
  • Goldman Sachs (GS) -$0.47 (0.45%) to $103.20; and
  • Bear Stearns (BSC) -$0.45 (0.43%) to $103.82.

The Philadelphia SOX (Semiconductor) index shed 5.63 points (1.32%), at 421.37

  • Micron Technology (MU) -$0.41 (3.88%) to $10.17;
  • Altera (ALTR) -$0.64 (3.14%) to $19.71;
  • Advanced Micro Devices (AMD) -$0.52 (3.03%) to $16.67;
  • Teradyne (TER) -$0.36 (2.73%) to $12.84; and
  • Broadcom (BRCM) -$0.73 (1.98%) to $36.06.

Gold & Silver Markets

Gold fell by $1.20 (0.27%) to close at $440.30 per ounce. It's pretty moribund; methinks that there are a load of nervous longs out there at present, who desperately need the USD to fall hard. Guess what the market loves? Desperation. The market loves desperate money in the same way that George Bush loves gay escort faux-journalists (e.g., Jeff Gannon, who stayed over at the White House often... not that there's anything wrong with that).

Gold Bugs Index shed 2.76 points (1.39%), to end the session at 196.45

  • Hecla Mining (HL) -$0.14 (3.04%) to $4.46;
  • Harmony Gold (HMY) -$0.24 (2.86%) to $8.15;
  • Eldorado Gold (EGO) -$0.07 (2.78%) to $2.45;
  • Meridian Gold (MDG) -$0.46 (2.54%) to $17.64; and
  • Glamis Gold (GLG) -$0.33 (1.93%) to $16.73.

Silver fell by $0.07 (0.89%) to close at $7.23 per ounce. The Gold and Silver Index (XAU) lost 0.93 points (1%), to 91.67 points.

  • Harmony Gold (HMY) -$0.24 (2.86%) to $8.15;
  • Meridian Gold (MDG) -$0.46 (2.54%) to $17.64;
  • Newmont Mining (NEM) -$0.63 (1.59%) to $39.08; and
  • Kinross Gold (KGC) -$0.08 (1.35%) to $5.85.
Precious Metals and Indices
PHLX Gold and Silver Index91.67-0.93-1%
AMEX Gold BUGS Index196.45-2.76-1.39%

Oil Market

Oil was firmer, rising by $0.45 per barrel, closing at $60.29 per barrel (down from its session high of $60.95).

There is a definite tension in the Crude market at the moment. More and more folks are throwing short near each 'round dollar' as oil rises, hoping to be first on board the reversal. Conversely, breakout traders are trying to 'buy through' each round dollar, in the hope of a spike... when that happens, the early-bird shorts get stopped out and actually add to the momentum. That's why oil will not reverse at a round dollar figure - precisely because everyone is watching for it to do just that. It's far more likely  to reverse with a 'remainder' in the 25-50¢ range (i.e., at $61.35 or thereabouts).

The Oil and Gas Index (XOI) posted a rise of 11.47 points (1.28%), at 909.34

  • ConocoPhillips (COP) +$1.31 (2.25%) to $59.52;
  • Exxon Mobil (XOM) +$1.15 (1.98%) to $59.30; and
  • Royal Dutch Shell (RD) +$1.20 (1.9%) to $64.45.

The Oil service stocks (OSX) Index posted a rise of 1.94 points (1.32%), to end the session at 149.12

  • Baker Hughes (BHI) +$1.55 (3.08%) to $51.95;
  • Weatherford International (WFT) +$1.63 (2.77%) to $60.40; and
  • Global Industries (GLBL) +$0.19 (2.26%) to $8.58.
Energy Complex
Reuters CRB313.4-1.02-0.32%
Crude Oil Light Sweet60.290.450.75%
Heating Oil1.6730.021.37%
Natural Gas7.135-0.23-3.06%
Unleaded Gas1.6730.021.04%
AMEX Oil Index909.3411.471.28%
Oil Service Index149.121.941.32%

Currency Markets

USD Exchange Rates
US Dollar Index88.45-0.33-0.37%
Australian Dollar0.7691-0.0003-0.04%
Swiss Franc1.2683-0.0063-0.49%
Canadian Dollar0.8130.00260.32%