Interdum stultus opportuna loquitur...

Wednesday, July 20, 2005

USRant: Post-Repo Rebound Can't Last...

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

So. We're getting close to that 10730-ish target proposed here about a week ago, and the S&P futures have already hit 1240 (they did that today). The VIX has traded in single figures for the first time since December 1993, and we are supposed to believe (if we watch BubbleVision) that the market can move appreciably higher without giving the bulls a gut-wrenching pullback.

Citigroup's share price says that the bulls are wrong. C' price - which is the plaything of da Boyz since C is the most heavily-manipulated stock in the market - is a very good harbinger: when all around looks bleak but C isn't falling, you know that da Boyz are setting the nuffnuffs up for a short squeeze. When everything looks rosy but C is moribund, that's your dark cloud right there.

As I advocated yesterday, the Rant is long VIX futures as a result of the dip in the cash VIX below 10. We'll see how that plays out (it's a pretty thin market, I can tell you - only 134 contracts traded in the August VIX this session).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $9billion, overnight repurchase with $6.085billion in T-backed collateral. The repurchase was undertaken  a massive 11.1 basis points below the Fed Funds rate. Obviously with Greensplatt on the warble - his semi-annual waffle to the House Financial Services Committee - it was crucial for the markets to be properly able to kiss his flaccid aging private-sector-failing ass. So mucho repo was called for... and since he waffled about house prices, Fannie and Freddie's prices had to move up too... hence the repo for the asset-backed area.

Major US Indices

The Dow Jones Industrial Average posted a rise of 42.59 points (0.4%), closing out the day at 10689.15 points. But at 10 a.m. it was all the  way down at 10600-ish (and it dipped as low as 10581.12, registering that low at 10:15 a.m., NY time). From there, the Dow staged a 110-point move upwards on thin air.

The index hit an intraday high of 10691.3 with just under 20 minutes left in the session - the entire session post-Greenspan (and post a smaller-than-expected drawdown in Crude Oil inventories) was a short squeeze in stocks and a massive smackdown of longs in Crude, which dropped $2 in 2 hours following the release of the data.

Within the blue-chip index, 19 stocks rose, the biggest gainers being Honeywell (HON, +3.01% to $38.73) and Boeing (BA, +1.83% to $66.08), which accounted for 18 Dow points between them. Losers in the Dow numbered 10 and were led by Intel (INTC, -4.42% to $27.44) - didn't I say yesterday that those who bought INTC before its earnings - based on the whisper number - were in for a 'modest shock'? Just goes to show - start behaving like a 1999/2000 tech stock investor and the market will treat you like one. The other main downer for the Dow was Pfizer (PFE, -1.17% to $27.06). Volume traded was tilted in favour of the losers by 268.9m shares to 213.2m.

The broader S&P500 posted a rise of 5.85 points (0.48%), closing at 1235.2; the futures were stopped in their tracks by 1240 - that was the high (I mentioned yesterday that "...the S&P futures could jump to 1240 (or even a little higher)". The "look how little we give a shit" rally off the London-bombing pullback lows, is now getting towards 70 S&P points - in less than three weeks. Time to give the longs a scare, I think.

Within the S&P500, gainers numbered 346, while 139 S&P500 stocks fell for the day. Volume was tilted 1.5:1 in favour of the winners with 1260.01 million units traded in the winners as compared with 827.02 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 15.39 points (0.71%), to close at 2188.57, while larger-cap technology issues fared better with the Nasdaq100 adding 12.26 points (0.77%), to end at 1602.75 points. Within the tech benchmark, gainers numbered 68, while 27 Nasdaq100 stocks fell for the day. Volume was tilted 1.3:1 in favour of the winners with 544.90 million traded in the winners compared to 416.92 million in the losers .

NYSE Volume was super-chunky, with 2.04 billion shares changing hands, while Nasdaq Volume was also super-chunky (over 2 bill), with 2.01 billion shares being traded as everyone turns back the clock to 1999/2000.

Major Market Statistics
Dow Jones Industrial Average10689.1542.590.4%
Nasdaq Composite2188.5715.390.71%
NYSE Volume2.04bn--
Nasdaq Volume2.01bn--


My 9-stock "bellwethers" group fell by an average of 0.50% - note yet again that Citigroup did bugger-all... but the repo market ensured that Fannie and Freddie moved up.

  • General Electric (GE) -$0.03 (0.08%) to $35.30;
  • Citigroup (C) -$0.19 (0.43%) to $44.21;
  • Wal Mart (WMT) +$0.24 (0.48%) to $50.00;
  • I.B.M. (IBM) +$0.90 (1.08%) to $84.60;
  • Intel (INTC) -$1.27 (4.42%) to $27.44;
  • Cisco Systems (CSCO) -$0.05 (0.25%) to $20.12;
  • eBay (EBAY) -$0.50 (1.41%) to $34.87;
  • Fannie Mae (FNM) +$0.13 (0.22%) to $59.26; and
  • Freddie Mac (FRE) +$0.20 (0.3%) to $66.73.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2290 to 1019 for a single-day A/D reading of 1271; Nasdaq gainers trumped losers by 2012 to 1020. The 10-day moving average of the A/D line rose to 488.2 on the NYSE, while the 10dma of the Nasdaq A/D rose to 334.3.

NYSE advancing volume exceeded volume in decliners by 1300.8 to 708.4 million shares; Nasdaq advancing volume was greater than volume in decliners by 1220.6 to 736.9 million shares.

323 NYSE-listed stocks rose to new 52-week highs, and 18 posted fresh 52-week lows, while on the Nasdaq there were 208 stocks that hit new 52-week highs, and 18 which fell to fresh 52-week lows.

The VIX posted an intraday low of 9.88 - so we are notionally 'in' a long VIX futures position, based on yesterday's declaration that

If the VIX dips back towards 10, buying VIX futures (the symbol is VX or VIX depending on your data provider) would seem a no-brainer.

Often, things appear 'no-brainers' only to folks with no brain, but I'm reasonably confident that this is not such a time. The VIX crossed the 10 level at 11:37 a.m. NY time, at which time the VIX futures (basis the August contract) traded at 126.9 (remember it is denominated as 10x the VIX), which will be the basis for the trade we will follow in this section. By the close the VIX futures were down a further 1.4 points at 125.5 despite an upturn in the 'cash' VIX. This entry is showing us a loss of ($140) at this stage.

Market Breadth Statistics

Advancing Volume (m)1300.841220.64
Declining Volume (m)708.43736.93
New Highs323208
New Lows1818

Market Sentiment Statistics
CBOE Volatility Index10.23-0.2-1.92%
CBOE Nasdaq Volatility Index12.89-0.26-1.98%
Equity Put-Call Ratio0.70.0914.75%
10-day PCR0.530.011.92%
SPX-VIX Ratio120.72.882.44%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 4.1 bps to 4.392%. The 30-year T-bond future dipped as low as 115-14/32 before a humongous reversal which took the bond up over a point to 116-21/32 before it settled at 118-16/32.

The middle of the yield curve was broadly higher in price, too: five year yields fell to 3.984%, and ten-year yields fell to 4.177%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were tighter at -11.0 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 unchanged with the AAA-A spread on 20-years at 37.0 basis points and the 10-year AAA-A spread at 17.0 bps.

Treasury Yields
UST 13wk (yld)3.22800%
UST 2Y (yld)
UST 5Y (yld)3.984-0.005-0.13%
UST 10Y (yld)4.177-0.012-0.29%
UST 30Y (yld)4.392-0.041-0.92%

The Banks Index advanced 0.66 points (0.66%), ending the day at 101.24; within the index,

  • Comerica (CMA) +$3.14 (5.23%) to $63.21;
  • Bank Of NY (BK) +$1.51 (5.08%) to $31.25;
  • PNC Financial Services (PNC) +$1.47 (2.68%) to $56.37;
  • Northern Trust (NTRS) +$1.20 (2.44%) to $50.41; and
  • M&T Bank Corp (MTB) +$2.22 (2.02%) to $112.28.

The Broker-dealer Index rose 0.83 points (0.48%), to 172.49; the ticket clippers lined up as follows -

  • Legg Mason (LM) +$3.26 (2.9%) to $115.57;
  • Merrill Lynch (MER) +$1.00 (1.72%) to $58.98;
  • Jeffries Group (JEF) +$0.48 (1.18%) to $41.28;
  • Charles Schwab (SCH) +$0.07 (0.51%) to $13.83; and
  • Morgan Stanley (MWD) +$0.24 (0.45%) to $53.75.

The Philadelphia SOX (Semiconductor) index gained 7.98 points (1.7%), to end the session at 476.73

  • Teradyne (TER) +$2.59 (18.89%) to $16.30;
  • Novellus Systems (NVLS) +$1.86 (6.82%) to $29.13;
  • KLA-Tencor (KLAC) +$2.33 (4.79%) to $50.98;
  • Applied Materials (AMAT) +$0.70 (3.96%) to $18.39; and
  • ST Microelectronic (STM) +$0.27 (1.5%) to $18.29.

Gold & Silver Markets

Gold rose $3.20 (0.76%) to close at $423.40 per ounce, despite little action in the US Dollar; it seems that the gold bulls are getting bold. The axiom tells us what happens to bold traders - there are old traders and there are bold traders, but there are no old, bold traders.

The Gold Bugs Index gained 2.17 points (1.12%), at 196.1

  • Randgold Resources (GOLD) +$0.41 (3.14%) to $13.46;
  • Hecla Mining (HL) +$0.11 (2.72%) to $4.16;
  • Kinross Gold (KGC) +$0.15 (2.53%) to $6.08;
  • Coeur d'Alene (CDE) +$0.08 (2.37%) to $3.46; and
  • Freeport McMoran (FCX) +$0.87 (2.24%) to $39.63.

Silver was unchanged at $6.96 per ounce. The Gold and Silver Index (XAU) gained 0.66 points (0.73%), to 90.95 points.

  • Kinross Gold (KGC) +$0.15 (2.53%) to $6.08;
  • Freeport McMoran (FCX) +$0.87 (2.24%) to $39.63;
  • Barrick Gold (ABX) +$0.29 (1.22%) to $24.10; and
  • Gold Fields (GFI) +$0.08 (0.73%) to $10.97.
Precious Metals and Indices
PHLX Gold and Silver Index90.950.660.73%
AMEX Gold BUGS Index196.12.171.12%

Oil Market

Oil lost ground, shedding $0.88 per barrel to close at $56.72 per barrel, after spiking up to $58.20 a barrel prior to the release of the Crude Oil inventories data. The Oil and Gas Index (XOI) posted a rise of 1.51 points (0.16%), at 925.17

  • Sunoco (SUN) +$1.56 (1.31%) to $120.65;
  • ChevronTexaco (CVX) +$0.30 (0.52%) to $57.60; and
  • Marathon Oil (MRO) +$0.27 (0.49%) to $55.91.

The Oil service stocks (OSX) Index dipped 0.14 points (0.09%), ending the day at 151.82

  • Baker Hughes (BHI) -$0.91 (1.7%) to $52.50;
  • Transocean (RIG) -$0.61 (1.07%) to $56.34; and
  • GlobalSantaFe (GSF) -$0.37 (0.85%) to $43.22.
Energy Complex
Reuters CRB307.01-1.12-0.36%
Crude Oil Light Sweet56.72-0.88-1.53%
Heating Oil1.5995-0.04-2.41%
Natural Gas7.56-0.05-0.64%
Unleaded Gas1.67800.18%
AMEX Oil Index925.171.510.16%
Oil Service Index151.82-0.14-0.09%

Currency Markets

USD Exchange Rates
US Dollar Index89.43-0.45-0.5%
Australian Dollar0.75540.00420.56%
Swiss Franc1.2874-0.0121-0.93%
Canadian Dollar0.8189-0.0014-0.17%