Interdum stultus opportuna loquitur...

Monday, July 18, 2005

USRant: According to Plan...

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Friday's post-market discussion of the US markets was pretty unambiguous; the hypothesis was that there would be a pullback during Globex (the 'overnight' pre-market session) that would be followed by a shortable post-open 'nuffie  charge"... to recap:

It's now looking like Monday might be the 'burst' day - where the market bursts out of the blocks at the open, and after an hour (or less) the entire rally bursts. I think that 1135 [typo - should have been 1235, obviously] ought to pretty much cap any upmove on Monday, and those prepared to punt Globex on Sunday night will get a nice little pullback (to the 1228 area) in order to get set for Monday's opening - the Charge of the Nuffie Brigade.

The Globex low was 1228, and the post-open bounce only  got to 1229.25 (very weak); still, the core of the hypothesis - that the day's high would be set before the first hour was up, at a price below 1235 - was spot on.

Don't listen to anything that you read regarding Citigroup's poor earnings being the core catalyst for the down-move today; the only thing it prevented was a decent opening bounce. Today's overall loss would have happened irrespective of what C reported. It was overdue, pure and simple.

Journalists need for there to be a one-line explanation for every damn thing on the planet - "Dow rises as Oil Prices Soften", "Dow Rises as Oil Prices Help XOM Earnings", "they hate us because we're free", "Axis of Evil"... you get the drift. It's got nothing to do with time pressure - it's got to do with laziness and a desire to cozy up to power.

That's why nobody at the major newspapers has wondered aloud why the poor bastards being framed for the London bombings bought return tickets.

Also, no journalist has proposed that Humvees ought to be up-armoured by pasting passports and birth certificates all over them - but that's the inescapable conclusion if you believe that in a bombing where there is huge difficulty identifying the bodies, somehow the documents carried by those closest to the bomb miraculously survived. So forget kevlar and mylar - if I'm going into battle I want a vest made entirely of passports and birth certificates, because evidently them sumbitches is indestructible.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $10.25billion, weekend repurchase entirely in T-backed collateral. Sounds great, but then look at the average rate - a mere 0.7 basis points below Fed Funds. No 'rick free guaranteed return', ergo no chunk of repo risked by being put to work in the S&P futures.

Major US Indices

The Dow Jones Industrial Average lost 65.84 points (0.62%), closing out the day at 10574.99 points (which was also its low). The index hit an intraday high of 10640.19 (right at the open - remember that the open is a statistical artefact for the Dow), but dropped to 10614 before the end of the first minute. By the end of the first half-hour, the Dow was below 10600 at 10593, before rallying to 10632 at 10:30 NY time (the end of the first hour). Although it made a new session swing high (at 10534.6) and hour later, that was the usual 'tease tick' that I write about so often - luring 'first hour breakout' traders onto the long side of the market, thence to smack them about the ears.

Within the blue-chip index, 5 stocks rose, the biggest gainers being Home Depot (HD, +2.02% to $42.45) and Alcoa (AA, +0.62% to $27.67), which accounted for 8 Dow points between them. Losers in the Dow numbered 25 and were led by Citigroup (C, -3.06% to $45.00) on that bad earnings report and American International Group (AIG, -1.81% to $60.10), with these two stocks contributing -20 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 270.7m shares to 28.3m.

The broader S&P500 declined 6.79 points (0.55%), to end the session at 1221.13. Within the index, gainers numbered 148, while 341 S&P500 stocks fell for the day. Volume was tilted 2.8:1 in favour of the losers with 1022.72 million units traded in the losers as compared with 361.22 million traded in the winners.

In the after-market, S&P futures have risen to 1228 (so far). This time it can be attributed to more than just technicals - the only thing that happened was IBM's earnings.

In its earnings release, IBM exceeded expectations, earning $1.12 a share excluding one-time items (consensus was for $1.04). At $22.27b, Revenue fell 3.5% year over year... which was OK depending who you ask: Reuters consensus was for $22.39b (in which case revenue was light), while First Call's estimate was for $21.9b (in which case this report was OK revenue-wise). Gross margins were better than expected at 39.4%.

Over at Times Square, the Nasdaq Composite dipped 11.91 points (0.55%), to close at 2144.87, while larger-cap technology issues fared better with the Nasdaq100 losing 7.73 points (0.49%), to end at 1570.09 points. Within the tech benchmark, gainers numbered 28, while 68 Nasdaq100 stocks fell for the day. Volume was tilted 3.2:1 in favour of the losers with 369.95 million traded in the losers compared to 114.19 million in the winners .

NYSE Volume was chunky, with 1.58 billion shares changing hands, while Nasdaq Volume was about average, with 1.31 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10574.99-65.84-0.62%
Nasdaq Composite2144.87-11.91-0.55%
NYSE Volume1.58bn--
Nasdaq Volume1.31bn--


My 9-stock "bellwethers" group fell by an average of 0.88%; I've been harping about how C has been lagging the rest of the market for two weeks now... and now we finally find out why. Short answer: there are no earnings surprises when you're a market maker. da Boyz have been distributing C the whole time, which is why it failed to get any traction while the broader market moved up.

  • General Electric (GE) -$0.33 (0.93%) to $35.20;
  • Citigroup (C) -$1.42 (3.06%) to $45.00;
  • Wal Mart (WMT) -$0.26 (0.52%) to $49.99;
  • I.B.M. (IBM) -$0.57 (0.69%) to $81.81;
  • Intel (INTC) -$0.07 (0.25%) to $28.23;
  • Cisco Systems (CSCO) -$0.24 (1.21%) to $19.65;
  • eBay (EBAY) -$0.18 (0.51%) to $34.90;
  • Fannie Mae (FNM) -$0.38 (0.64%) to $59.42; and
  • Freddie Mac (FRE) -$0.10 (0.15%) to $66.45.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1993 to 1273, for a single-day A/D reading of -720; and Nasdaq losers exceeded gainers by 1897 to 1151. The 10-day moving average of the A/D line fell to 102.9 on the NYSE, while the 10dma of the Nasdaq A/D fell to -2.9.

On the NYSE declining volume was greater than volume in advancing issues by 1033.7 to 510.1 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 830 to 443.2 million shares.

151 NYSE-listed stocks rose to new 52-week highs, and 24 posted fresh 52-week lows, while on the Nasdaq there were 102 stocks that hit new 52-week highs, and 17 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)510.06443.21
Declining Volume (m)1033.65829.98
New Highs151102
New Lows2417

Market Sentiment Statistics
CBOE Volatility Index10.850.575.54%
CBOE Nasdaq Volatility Index13.860.584.37%
Equity Put-Call Ratio0.750.0913.64%
10-day PCR0.5200%
SPX-VIX Ratio112.5-6.9-5.78%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 6.2 bps to 4.467%. the 30-year bond future dove to 115-21/32 and sett a low of 115-14/32.

The middle of the yield curve was broadly lower in price: five year yields rose to 4.018%, and ten-year yields rose to 4.223%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were unchanged at -5.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 35.0 bps for 10-year AAA, and 73.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were stable, with the AAA-A spread on 20-years unchanged at 37.0 basis points and the 10-year AAA-A spread unchanged at 17.0 bps.

Treasury Yields
UST 13wk (yld)3.1800%
UST 2Y (yld)3.8400%
UST 5Y (yld)4.0180.0411.03%
UST 10Y (yld)4.2230.0481.15%
UST 30Y (yld)4.4670.0621.41%

The Banks Index dipped 1.14 points (1.12%), to 100.75; within the index,

  • Citigroup (C) -$1.42 (3.06%) to $45.00;
  • Bank Of America (BAC) -$0.90 (1.96%) to $45.08;
  • Comerica (CMA) -$1.04 (1.73%) to $58.97;
  • US Bancorp (USB) -$0.51 (1.66%) to $30.13; and
  • Fifth Third Bancorp (FITB) -$0.70 (1.66%) to $41.52.

The Broker-dealer Index added 0.73 points (0.43%), to 169.2; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.63 (4.95%) to $13.37;
  • Raymond James (RJF) +$0.61 (1.99%) to $31.23;
  • Ameritrade (AMTD) +$0.23 (1.18%) to $19.75;
  • E*Trade (ET) +$0.07 (0.47%) to $15.00; and
  • A G Edwards (AGE) +$0.04 (0.09%) to $46.65.

The Philadelphia SOX (Semiconductor) index slid 2.8 points (0.6%), to 460.84

  • Freescale Semiconductors (FSL-B) -$0.49 (1.94%) to $24.79;
  • Teradyne (TER) -$0.25 (1.81%) to $13.55;
  • ST Microelectronic (STM) -$0.31 (1.73%) to $17.59;
  • Taiwan Semiconductors (TSM) -$0.14 (1.5%) to $9.22; and
  • KLA-Tencor (KLAC) -$0.72 (1.49%) to $47.75.

Gold & Silver Markets

Gold fell by $0.50 (0.12%) to close at $421 per ounce. Gold longs are sitting like deer in headlights at the moment - until the USD makes a decisive break one way ort'other, Gold's goin' nowhere.

Gold Bugs Index dipped 0.95 points (0.49%), to end the session at 193.13

  • Kinross Gold (KGC) -$0.17 (2.79%) to $5.93;
  • Hecla Mining (HL) -$0.07 (1.73%) to $3.97;
  • Iamgold (IAG) -$0.11 (1.62%) to $6.66;
  • Coeur d'Alene (CDE) -$0.05 (1.47%) to $3.36; and
  • Eldorado Gold (EGO) -$0.03 (1.17%) to $2.54.

Silver rose $0.02 (0.22%) to close at $6.98 per ounce. The Gold and Silver Index (XAU) lost 0.25 points (0.28%), to 89.84 points.

  • Kinross Gold (KGC) -$0.17 (2.79%) to $5.93;
  • Barrick Gold (ABX) -$0.20 (0.84%) to $23.55;
  • Meridian Gold (MDG) -$0.13 (0.76%) to $17.01; and
  • Anglogold Ashanti (AU) -$0.16 (0.45%) to $35.53.
Precious Metals and Indices
PHLX Gold and Silver Index89.84-0.25-0.28%
AMEX Gold BUGS Index193.13-0.95-0.49%

Oil Market

Oil lost ground, shedding another $1.05 per barrel, closing at $57.04 per barrel and at one stage trading below $57. I didn't write anything about Crude yesterday (like I said I would last Thursday), because there was nothing to add to the previous analysis - Oil was headed down and was oversold on the CCI (which is what enabled a bounce to $59-ish), but there was no sign of a multi-day rise in the offing.

At present, however, there is a CCI divergence and a CCI oversold... of which, more later.

The Oil and Gas Index (XOI) dipped 3.74 points (0.41%), closing at 912.78

  • Unocal (UCL) -$0.83 (1.26%) to $64.82;
  • Marathon Oil (MRO) -$0.54 (0.98%) to $54.69; and
  • Sunoco (SUN) -$1.04 (0.87%) to $117.98.

The Oil service stocks (OSX) Index dipped 0.46 points (0.31%), to 146.51

  • Global Industries (GLBL) -$0.32 (3.44%) to $8.99;
  • Rowan Companies (RDC) -$0.27 (0.91%) to $29.40; and
  • Smith International (SII) -$0.45 (0.69%) to $64.46.
Energy Complex
Reuters CRB311.28-1.9-0.61%
Crude Oil Light Sweet57.04-1.05-1.81%
Heating Oil1.6295-0.03-1.96%
Natural Gas7.57-0.28-3.55%
Unleaded Gas1.6441-0.04-2.62%
AMEX Oil Index912.78-3.74-0.41%
Oil Service Index146.51-0.46-0.31%

Currency Markets

USD Exchange Rates
US Dollar Index89.67-0.05-0.06%
Australian Dollar0.75380.00440.59%
Swiss Franc1.294-0.001-0.08%
Canadian Dollar0.82150.00220.27%