Interdum stultus opportuna loquitur...

Thursday, July 28, 2005

USRant: Looks OK on the Surface, I Guess...

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

Do not let one-day figures foll you (in either direction) - this market has been range-bound for most of the month, and will be range-bound for a while yet, it seems. There is no upside catalyst once the last of the earnings reports trickle in, and although the 'no news' periods tend to be dominated by bullish waffle from CNBC and the rest of the hellspawn that dominate financial 'journalism', the market has priced in perfection for the next few decades, and will be disappointed.

On a different note, it seems that my 9.5%-ish forecast for aggregate earnings growth for the quarter was about right, and of course it included all manner of gross misrepresentations that, if performed by an average taxpayer, would see the perpetrator wearing an orange jumpsuit for half a decade.

It's all just dandy, isn't it? Somehow capital is trousering the supposed "productivity gains" (which ought to accrue to labour, at least in part), raising the Gross Operating Surplus share of GDP by income at the expense of the share going to wages, salaries and supplements. that is not a good sign - ideally, for an expansion to be self-sustaining, you need labour's share to be stable at least, and for profits still to be rising faster than inflation. And yet the labour share of GDP has been contracting for the last half-decade (and US real wages have gone backwards since 1970). Every skerrick of additional lifestyle enjoyed in the last generation has been the result of an increase in indebtedness - that is not sustainable, and sets up a very nasty endgame (basically ,where the US needs wars to keep its creditors at bay - a la Germany during the Weimar years).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $11billion, 14-day repurchase entirely in T-backed collateral undertaken at a 4.3 basis point premium to the Fed Funds Rate (FFR); and
  • a $5.25billion, overnight repurchase entirely in T-backed collateral, undertaken at a 1.6 basis point premium to the FFR.
Massive licks of repurchase money, but precious little discount to Fed Funds. Could be that the Fed is signalling its intention to raise rates at its next meeting. Anyhow, with almost no genuinely free money (i.e., repurchases issued at a decent discount to the FFR), there aren't going to be any 10 a.m. moonshots.

Major US Indices

The Dow Jones Industrial Average advanced 68.46 points (0.64%), closing out the day at 10705.55 points. As with yesterday, the index formed a little triangle after an opening squirt (the squirt was mostly brought on by Exxon-Mobil's earnings - even though they fell a penny short of expectations). The 15-minute chart tells the short-term story best:

Dow 15-minute chart

The little divergence that was beginning to play out yesterday afternoon, became completely evident after the opening 15 minutes - giving a short signal that only gave 30 Dow points' worth of play. I mentioned yesterday this idea of 'slipperiness' - notice how it took 45 minutes to fall 30-odd points, then bounced off half of those points in 15 minutes? That means that the market's slipperiness was to the upside (to put it another way, the white bars are long and the red bars are short - indicating that upmoves happen with more vigour than downmoves).

So the slipperiness idea indicated the likely direction of resolution from the triangle (shown in blue) that formed leading into midday NY time. the market stayed 'upwards slippery' all afternoon - notice that the moves upward happen all in one hit, then the retracements are very shallow and take ages to complete.

For a larger-term picture, the hourly chart - while crowded - gives an indication of just how dull this market has been; with the exception of a couple of sessions after the London bombings, there has been a trading range for most of July. Today's close dragged the markets back into overbought territory, and created a divergence on the CCI again.

Dow 60-minute chart

Anyhow - as I mentioned yesterday, the fact that my time window for a reversal (July 14-20) was hit precisely (although I expected it to happen at a slightly higher price), the pullback was too weak to give any real conviction to the bears; now - for the moment at least - the nuffies are in charge. Unless this recent divergence resolves itself downwards with some real venom tomorrow, the 10730 rally target posted three weeks or so ago is no longer valid.

Today the Dow hit an intraday high of 10710.48, and fell as low as 10629.68 during the session. within the blue-chip index, 25 stocks rose, the biggest gainers being Caterpillar (CAT, +3.14% to $54.45) - a new all time high - and Honeywell (HON, +2.55% to $38.99) after a Penguinage upgrade. these two sticks alone accounted for 21 Dow points between them. Losers in the Dow numbered 5 and were led by Hewlett Packard (HPQ, -1.17% to $24.49) and Boeing (BA, -1.05% to $66.00), 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 273.4m shares to 46.1m.

The broader S&P500 advanced 6.93 points (0.56%), ending the day at 1243.72 - a new 4-year high. Within the index, gainers numbered 381, while 111 S&P500 stocks fell for the day. Volume was tilted just under 2:1 in favour of the winners with 1135.95 million units traded in the winners as compared with 556.13 million traded in the losers .

Over at Times Square, the Nasdaq Composite advanced 12.22 points (0.56%), to close at 2198.44 - another 4-year high - while larger-cap technology issues fared worse with the Nasdaq100 adding 6.69 points (0.42%), to end at 1618.64 points. Within the tech benchmark, gainers numbered 60, while 39 Nasdaq100 stocks fell for the day. Volume was tilted 1.4:1 in favour of the winners with 398.13 million traded in the winners compared to 278.19 million in the losers .

NYSE Volume was super-chunky, with 2 billion shares changing hands, while Nasdaq Volume was barely chunky, with 1.72 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10705.5568.460.64%
Nasdaq Composite2198.4412.220.56%
NYSE Volume2bn--
Nasdaq Volume1.72bn--


My 9-stock "bellwethers" group rose by an average of 0.39%. Note the lack of participation of Citigroup (yet again)

  • General Electric (GE) +$0.08 (0.23%) to $34.88;
  • Citigroup (C) -$0.09 (0.2%) to $43.86;
  • Wal Mart (WMT) +$0.02 (0.04%) to $49.82;
  • I.B.M. (IBM) -$0.07 (0.08%) to $83.80;
  • Intel (INTC) +$0.28 (1.03%) to $27.34;
  • Cisco Systems (CSCO) +$0.12 (0.63%) to $19.30;
  • eBay (EBAY) +$0.03 (0.07%) to $42.02;
  • Fannie Mae (FNM) +$0.60 (1.06%) to $57.30; and
  • Freddie Mac (FRE) +$0.48 (0.75%) to $64.76.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2441 to 874 for a single-day A/D reading of 1567, indicating mindless bullishness. Nasdaq gainers trumped losers by 1945 to 1109. The 10-day moving average of the A/D line rose to 321.6 on the NYSE, while the 10dma of the Nasdaq A/D rose to 154.1.

NYSE advancing volume exceeded volume in decliners by 1418.5 to 550 million shares; Nasdaq advancing volume was greater than volume in decliners by 1007.1 to 652.3 million shares.

417 NYSE-listed stocks rose to new 52-week highs, and 38 posted fresh 52-week lows, while on the Nasdaq there were 227 stocks that hit new 52-week highs, and 19 which fell to fresh 52-week lows.

The position in the August VIX that we are tracking, continues to disappoint; the VIX futures appear to be unwinding contango (the gap between the futures and the underlying index) rather than tracking the VIX itself - that's annoying in the extreme. It's not a biggie though.

Market Breadth Statistics

Advancing Volume (m)1418.471007.08
Declining Volume (m)550.04652.33
New Highs417227
New Lows3819

Market Sentiment Statistics
CBOE Volatility Index10.50.121.16%
CBOE Nasdaq Volatility Index12.61-0.17-1.33%
Equity Put-Call Ratio0.66-0.05-7.04%
10-day PCR0.570.035.56%
SPX-VIX Ratio118.4-0.7-0.59%

Bond Market Analysis

Yesterday - apropos of the 30-year bond futures, I said this:

It's pretty heavily oversold, but the price action is getting a bit boring: in other words, it's priming for a little nuffie-killing spike.

Timing, as they say, is everything in this game: last night, the 30-year bond rose from a session low of 115-13/32 to a session high of 116-15/32 - a move that would have taken 66% of margin off the average nuffie. It doesn't qualify as a 'spike' exactly - more of a potential  short squeezethat has yet to really prove itself.

Still, the previous day's chart gave you everything you needed to get in front of the move - just before midday Chicago time the bond dipped to a new intraday low, and posted yet another textbook CCI divergence.

The yield on the benchmark 30-year Treasury bond shed 7.3 bps to 4.401%.

The middle of the yield curve was broadly higher: five year yields fell to 4.044%, and ten-year yields fell to 4.196%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were unchanged at -3.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 42.0 bps for 10-year AAA, and 77.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were mixed with the AAA-A spread on 20-years 9.0 bps looser at 55.0 basis points and the 10-year AAA-A spread 6.0 bps tighter at 7.0 bps.

Treasury Yields
UST 13wk (yld)3.31500%
UST 2Y (yld)3.93-0.03-0.76%
UST 5Y (yld)4.044-0.053-1.29%
UST 10Y (yld)4.196-0.065-1.53%
UST 30Y (yld)4.401-0.073-1.63%

The Banks Index advanced 0.11 points (0.11%), to 100.91; within the index,

  • Mellon Financial (MEL) +$0.32 (1.06%) to $30.56;
  • Keycorp (KEY) +$0.30 (0.87%) to $34.83;
  • Northern Trust (NTRS) +$0.42 (0.83%) to $51.19;
  • PNC Financial Services (PNC) +$0.40 (0.73%) to $55.30; and
  • National City Corp (NCC) +$0.24 (0.64%) to $37.68.

The Broker-dealer Index advanced 0.93 points (0.55%), to 170.66; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.28 (2.05%) to $13.91;
  • E*Trade (ET) +$0.32 (2.05%) to $15.92;
  • Ameritrade (AMTD) +$0.19 (0.97%) to $19.69;
  • Lehman Brothers (LEH) +$0.55 (0.52%) to $106.92; and
  • Goldman Sachs (GS) +$0.52 (0.48%) to $109.67.

The Philadelphia SOX (Semiconductor) index added 0.39 points (0.08%), to end the session at 474.28

  • Freescale Semiconductors (FSL-B) +$0.41 (1.59%) to $26.12;
  • Intel (INTC) +$0.28 (1.03%) to $27.34;
  • Applied Materials (AMAT) +$0.17 (0.94%) to $18.28;
  • Taiwan Semiconductors (TSM) +$0.08 (0.93%) to $8.67; and
  • Teradyne (TER) +$0.14 (0.91%) to $15.47.

Gold & Silver Markets

Gold rose $2.70 (0.63%) to close at $427.90 per ounce. Gold is getting a bit bolder now that the USD has stopped at the 90 rally target that I gave way back (when the US dollar was at 85 on the way down to an 82-80 target I had previously given). Frankly, although I think that the USD is going the way of the 1929 Reichsmark, it would not surprise me to see it defy gravity - just to help the market do its job (which is, as we know, taking money from nuffnuffs). The only thing that makes me nervous about such a contrarian bet at the moment is that I'm far too aware of just how bad the 'Kinezi Supermove" (the Yuan rebasing) is for the USD.

Gold Bugs Index rose 0.26 points (0.13%), at 197.16

  • Eldorado Gold (EGO) +$0.04 (1.49%) to $2.72;
  • Meridian Gold (MDG) +$0.26 (1.45%) to $18.21;
  • Goldcorp (GG) +$0.20 (1.27%) to $16.01;
  • Coeur d'Alene (CDE) +$0.03 (0.86%) to $3.52; and
  • Freeport McMoran (FCX) +$0.34 (0.86%) to $40.01.

Silver rose $0.16 (2.27%) to close at $7.18 per ounce. The Gold and Silver Index (XAU) lost 0.16 points (0.18%), closing at 90.97 points.

  • Durban Rooderpoert Deep (DROOY) -$0.08 (7.84%) to $0.94;
  • Placer Dome (PDG) -$0.72 (4.88%) to $14.04;
  • Agnico Eagle (AEM) -$0.22 (1.77%) to $12.24; and
  • Kinross Gold (KGC) -$0.08 (1.38%) to $5.70.
Precious Metals and Indices
PHLX Gold and Silver Index90.97-0.16-0.18%
AMEX Gold BUGS Index197.160.260.13%

Oil Market

Oil was firmer, rising by $0.83 per barrel, closing at $59.94 per barrel. Sounds fun - especially since the black stuff stuck its nose above $60 during the late part of the session after spiking down to $58.80 just after midday NY time (part of the catalyst that helped stocks break that triangle - what happened in the oil market after that was irrelevant), and giving a lovely big (-270). 'long on this basis alone' reading on the CCI.

The Oil and Gas Index (XOI) rose 6.96 points (0.74%), closing at 949.27

  • Sunoco (SUN) +$2.38 (1.93%) to $125.69;
  • Marathon Oil (MRO) +$1.11 (1.92%) to $58.99; and
  • ConocoPhillips (COP) +$1.09 (1.75%) to $63.35.

The Oil service stocks (OSX) Index gained 0.34 points (0.21%), ending the day at 162.43

  • Tidewater (TDW) +$0.93 (2.33%) to $40.78;
  • Rowan Companies (RDC) +$0.52 (1.58%) to $33.52; and
  • Weatherford International (WFT) +$0.36 (0.57%) to $63.08.
Energy Complex
Reuters CRB313.53.451.11%
Crude Oil Light Sweet59.940.831.4%
Heating Oil1.6390.021.36%
Natural Gas7.64700%
Unleaded Gas1.7250.021.17%
AMEX Oil Index949.276.960.74%
Oil Service Index162.430.340.21%

Currency Markets

USD Exchange Rates
US Dollar Index89.32-0.46-0.51%
Australian Dollar0.76030.00410.54%
Swiss Franc1.2849-0.0094-0.73%
Canadian Dollar0.81320.00450.56%