Interdum stultus opportuna loquitur...

Friday, July 08, 2005

USRant: Oil Home Run... Sowing and Reaping...

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Those who recall the IWL days, will recall my outrage when the US markets rose sharply after the Bali Bombings - basically I objected vehemently to the collective "who gives a shit?" from the US financial community in response to any act of terrorism that occurred outside the ten blocks between Battery Park and Wall Street.

Well, I hope Phony B.Liar takes a good look at the ticker for today; that shows him the extent of the solidarity between his government and the financial muscle behind the government of George the Turd, PUS.

Sure, the Fed flooded the market with liquidity - two big repos, both undertaken at substantial discounts to the Fed Funds Rate (FFR). But the reversal of US markets was actually rather unseemly given that it is primarily US foreign policy that is responsible for the action; it is only because B.Liar is such an arse-licker that the Poms poodled along with Bush's War Crimes.

The gall of B.Liar during his (obviously earpiece-driven) speechifying was beneath contempt; the idea that the people at Gleneagles were involved in a massive group masturbation was supposed to somehow cleanse them of the sins of western foreign policy - the public (who always bear the brunt of the effects of that policy) are supposed to forget who are the big-scale killers. It's like a mass murderer who complains when his victims' families set fire to his garden furniture while he's at church.

If I had to put money on who did this, it would not be on 'Al-Qaeda' - an organisation that doesn't really exist. Ask yourself:  why would they do anything given the recent stories of the UK formulating a plan to withdraw its troops from Iraq? This event virtually assures the retention of UK troops in the Middle East. So -as Cicero might have asked - who benefits?

I might point the finger at Iran, which are rightly pissed of at CIA sponsorship of MEK car-bombings in Teheran recently (but MEK are 'good' terrorists... do you see how that works and is completely consistent with the 'War on Terror"?). But pointing the finger at Iran is what Israel is already trying to do. What benefit would Iran gain?

Again, go back to Cicero. Cui Bono? Who gets the political capital out of this event? Whose projects get ever-greater green lights? Follow the money.

As usual, the High Priests of political wankery do not bear the blowback - that falls on the ordinary citizen. It is ever thus - whether it is in the form of citizens paying ever-increasing taxes to fund political waste of money, or citizens bearing the brunt of murderous foreign policy. The proles are the ones who always get screwed.

The Biblical aphorism "as ye sow, so shall ye reap" doesn't apply symmetrically: the political class sows discord and murder on a global scale, and their people suffer the consequences. That is why political life must be changed - by any means necessary. Government and civic society must be removed from the grasp of the political class - simple as that.

On a more market-related note, check out a chart of Crude Oil; I mentioned yesterday that any little burst should be shorted. Just after the London event, Crude spiked to above $62, and set up a perfect CCI divergence on an hourly chart (which as I said yesterday, was already formed). In the following 90 minutes, Crude fell as low as $57.20 - a gain of  US$4800 per $4050 margin (i.e., 118%) in under 2 hours.

Am I claiming that as a win for the Rant track-record? You bet your life. The directions couldn't have been clearer (from yesterday's Oil Special):

From there, I look to hourly charts to refine entries. I'm not going to stick in an hourly chart here, because I can't be bothered - but hourly charts finished overbought yesterday, and will likely open even more overbought today... and there's a divergence on the intraday CCI, too.

and yesterday's USRant (in the Energy Section)

Taken together, I reckon it's pretty safe to short any 'pop and reverse' in oil tomorrow; it will only be a short ride if it works (2-5 days, tops) but it should be a ripper. I doubt that $61.35 will be the right level to short from (because it occurred at the wrong time of the day).

All I am going to claim, is that the Rant entry point was above $61.35 (say, $61.50) and the Rant exit took place on a half of the position at the usual 100% profit mark (i.e., $57.45). (Note also: shows a spike up to $62.50 after the AEI data. that is not verified by other sources, including Futuresource and the NYMEX itself: those two other sources show the post-AEI data high as somewhere above $61, but nowhere near $62).

Federal Reserve Open Market Operations

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

  • a $10.25billion, overnight repurchase entirely in T-backed collateral; and
  • a $9billion, 14-day repurchase with $8.717billion in T-backed collateral.
That's the usual Fed response to 'crisis' - flood the market with liquidity and provide it at a discount to Fed Funds. It usually works, and it did today. Of course it is aided by the fact that nobody on Wall Street gives a flying rat's arse about what happens to some bunch of nobodies in some city they don't care about (i.e., anywhere outside their own neighbourhood).

Major US Indices

The Dow Jones Industrial Average managed to avoid even a single session blow 10250, despite the entire Anglophone portion of the global community being stunned by this latest blowback from poorly-run US foreign policy.

After a genuinely massive downdraft (the FTSE was down 180 points at one stage, and the CAC and DAX were down similar percentages) during Globex, the US markets opened with a gap downwards... and started reversing within ten minutes. Ten minutes is how long the US markets could give a shit about the rest of humanity: Ward Churchill's "Little Eichmanns" got on with their business.

By the close the Dow was showing an advance of 31.61 points (0.31%), closing out the day at 10302.29 points. The index hit an intraday high of 10310.04 five minutes before the close, after dipping to 10175.4 during the first ten minutes (maybe folks were slightly worried that there would be another blowback event within the Tri-State area).

Within the blue-chip index, 15 stocks rose, the biggest gainers being Caterpillar (CAT, +2.15% to $97.35) and International Business Machines (IBM, +2.07% to $77.38), which accounted for 28 Dow points between them. Losers in the Dow numbered 15 and were led by Merck (MRK, -1.90% to $29.98) and Walt Disney (DIS, -1.37% to $24.45), with these two stocks contributing -7 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 253.1m shares to 153.9m.

The broader S&P500 advanced 2.93 points (0.25%), to 1197.87. Within the index, gainers numbered 281, while 210 S&P500 stocks fell for the day. Volume was very marginally in favour of the winners, with 947.46 million units traded in the winners as compared with 926.02 million traded in the losers .

Over at Times Square, the Nasdaq Composite advanced 7.01 points (0.34%), to close at 2075.66, while larger-cap technology issues fared better in percentage terms with the Nasdaq100 adding 5.73 points (0.38%), to end at 1503.78 points. Within the tech benchmark, gainers numbered 54, while 43 Nasdaq100 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 392.64 million traded in the winners compared to 321.01 million in the losers .

NYSE Volume was super-chunky, with 1.95 billion shares changing hands, while Nasdaq Volume was solid, with 1.62 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10302.2931.610.31%
Nasdaq Composite2075.667.010.34%
NYSE Volume1.95bn--
Nasdaq Volume1.62bn--


My 9-stock "bellwethers" group rose by an average of 0.67%

  • General Electric (GE) -$0.14 (0.41%) to $34.18;
  • Citigroup (C) -$0.03 (0.06%) to $46.27;
  • Wal Mart (WMT) +$0.13 (0.26%) to $49.51;
  • I.B.M. (IBM) +$1.57 (2.07%) to $77.38;
  • Intel (INTC) +$0.06 (0.23%) to $26.56;
  • Cisco Systems (CSCO) +$0.02 (0.11%) to $18.84;
  • eBay (EBAY) +$0.53 (1.58%) to $34.09;
  • Fannie Mae (FNM) +$0.73 (1.25%) to $59.15; and
  • Freddie Mac (FRE) +$0.65 (1%) to $65.65.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1784 to 1452 for a single-day A/D reading of 332; Nasdaq gainers trumped losers by 1527 to 1482. The 10-day moving average of the A/D line rose to 277.6 on the NYSE, while the 10dma of the Nasdaq A/D fell to 81.0.

NYSE advancing volume exceeded volume in decliners by 963.9 to 956.1 million shares; Nasdaq advancing volume was greater than volume in decliners by 923.5 to 637 million shares.

189 NYSE-listed stocks rose to new 52-week highs, and 43 posted fresh 52-week lows, while on the Nasdaq there were 89 stocks that hit new 52-week highs, and 30 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)963.93923.51
Declining Volume (m)956.12637.03
New Highs18989
New Lows4330

Market Sentiment Statistics
CBOE Volatility Index12.490.221.79%
CBOE Nasdaq Volatility Index15.140.372.51%
Equity Put-Call Ratio0.910.1722.97%
10-day PCR0.580.011.75%
SPX-VIX Ratio95.9-1.48-1.52%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.8 bps to 4.302%. Sadly the post-London spike in bonds topped out at 118-30/32, triggering the stop I indicated yesterday (118-24/32) and closing the second half of the bond short with a profit of just 11 ticks (22% of margin) before reversing back down - and hard, too. The 30-year closed at 117-19/32... it would've been really easy to pick a re-entry point for the short, but I was asleep). Oh well, can't be helped.

The middle of the yield curve was broadly higher in price too: five year yields fell to 3.829%, and ten-year yields fell to 4.031%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 2.0 bps tighter at -6.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 56.0 bps for 10-year AAA, and 95.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly wider with the AAA-A spread on 20-years 18.0 bps tighter at 31.0 basis points and the 10-year AAA-A spread 17.0 bps tighter at 2.0 bps.

Treasury Yields
UST 13wk (yld)3.0800%
UST 2Y (yld)3.71-0.04-1.07%
UST 5Y (yld)3.829-0.034-0.88%
UST 10Y (yld)4.031-0.044-1.08%
UST 30Y (yld)4.302-0.028-0.65%

The Banks Index gained 0.01 points (0.01%), to end the session at 98.56; within the index,

  • Golden West Financial (GDW) +$1.04 (1.63%) to $64.79;
  • Zions Bancorp (ZION) +$0.90 (1.31%) to $69.57;
  • North Fork Bancorp (NFB) +$0.31 (1.09%) to $28.67;
  • M&T Bank Corp (MTB) +$0.61 (0.58%) to $105.74; and
  • Regions Financial (RF) +$0.11 (0.32%) to $34.16.

The Broker-dealer Index gained 1.64 points (1.01%), at 163.71; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.70 (5.84%) to $12.68;
  • E*Trade (ET) +$0.73 (5.05%) to $15.18;
  • A G Edwards (AGE) +$0.43 (0.94%) to $46.13;
  • Lehman Brothers (LEH) +$0.91 (0.92%) to $99.84; and
  • Legg Mason (LM) +$0.72 (0.67%) to $107.59.

The Philadelphia SOX (Semiconductor) index posted a rise of 1.56 points (0.36%), ending the day at 431.89

  • Applied Materials (AMAT) +$0.22 (1.36%) to $16.34;
  • Altera (ALTR) +$0.26 (1.26%) to $20.91;
  • Advanced Micro Devices (AMD) +$0.22 (1.19%) to $18.73;
  • Xilinx (XLNX) +$0.28 (1.06%) to $26.74; and
  • National Semiconductors (NSM) +$0.23 (1.02%) to $22.86.

Gold & Silver Markets

Gold rose $0.80 (0.19%) to close at $425.40 per ounce. At one stage immediately following the London bombings, Gold was up almost $5, but couldn't hold it.

The Gold Bugs Index advanced 1.98 points (1%), to end the session at 200.22

  • Kinross Gold (KGC) +$0.21 (3.54%) to $6.14;
  • Iamgold (IAG) +$0.20 (2.98%) to $6.92;
  • Golden Star (GSS) +$0.08 (2.72%) to $3.02;
  • Hecla Mining (HL) +$0.11 (2.57%) to $4.39; and
  • Harmony Gold (HMY) +$0.18 (2.14%) to $8.61.

Silver rose $0.03 (0.48%) to close at $6.96 per ounce. The Gold and Silver Index (XAU) gained 0.39 points (0.42%), to 92.16 points.

  • Durban Rooderpoert Deep (DROOY) +$0.06 (6.59%) to $0.97;
  • Kinross Gold (KGC) +$0.21 (3.54%) to $6.14;
  • Harmony Gold (HMY) +$0.18 (2.14%) to $8.61; and
  • Meridian Gold (MDG) +$0.30 (1.73%) to $17.68.
Precious Metals and Indices
PHLX Gold and Silver Index92.160.390.42%
AMEX Gold BUGS Index200.221.981%

Oil Market

Oil lost ground, shedding $0.60 per barrel, closing at $60.65 per barrel - as I outlined in the opening remarks, that is less than half the story. There were 2 distinct short trades off intraday overbought levels - the first gained 100% of margin and was detailed in the opening remarks, the second gained about $2 (the spike after the AEI data, which, as it turns out, was released after all).

The Oil and Gas Index (XOI) rose 10.29 points (1.12%), at 929.26

  • Amerada Hess (AHC) +$3.19 (2.87%) to $114.26;
  • Occidental Petroleum (OXY) +$1.73 (2.16%) to $81.79; and
  • Sunoco (SUN) +$2.33 (1.97%) to $120.89.

The Oil service stocks (OSX) Index rose 0.08 points (0.05%), to 150.64

  • Rowan Companies (RDC) +$0.28 (0.89%) to $31.59;
  • Smith International (SII) +$0.58 (0.88%) to $66.50; and
  • Halliburton (HAL) +$0.29 (0.6%) to $49.00.
Energy Complex
Reuters CRB314.91-0.23-0.07%
Crude Oil Light Sweet60.65-0.6-0.98%
Heating Oil1.768-0.03-1.61%
Natural Gas7.4-0.29-3.82%
Unleaded Gas1.8050.020.87%
AMEX Oil Index929.2610.291.12%
Oil Service Index150.640.080.05%

Currency Markets

USD Exchange Rates
US Dollar Index90.28-0.07-0.08%
Australian Dollar0.73960.00040.05%
Swiss Franc1.2981-0.0042-0.32%
Canadian Dollar0.81430.00610.75%