Interdum stultus opportuna loquitur...

Saturday, August 06, 2005

USRant: A Day That Should Live In Infamy...

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

Today is the anniversary of the sole time in human history when a genuine 'weapon of mass destruction' was deployed against an unarmed, defenceless civilian population. Despite assurances from his Joint Chiefs that Japan was already seeking to negotiate surrender, Harry Truman went ahead and sent the 'Enola Gay' to drop an atomic bomb on Hiroshima.

Do not let any of the 60th Anniversary propaganda deflect you from understanding this one salient fact - the dropping of the bomb did not hasten the end of the war. It did not save a single American soldier; in fact the '2 million saved' falsehood - spread by Truman after the war - is fully FIFTY TIMES the official estimates he was given regarding likely US casualties during a full-scale invasion of mainland Japan.And let's not forget - any GI killed during an invasion would have been a combatant, as opposed to the quarter-million dead Japanese civilians on August 6th and 8th, 1945.

It was a War Crime, and anyone who doesn't think it was done primarily to scare RUSSIA is a dupe. They should dig up Truman's corpse, piss on it, set it on fire, and bury the ashes on unconsecrated ground - the way the Catholic Church did to Wycliffe 100 years after his death (and that was just for writing an English translation of the Bible).

Same for FDR's remains, who deliberately goaded Japan into war through an oil blockade of the country (which is itself an act of war) as part of a predetermined plan to draw Japan into battle. Spare me the re-runs of his fake horror over Pearl Harbour - when Kimmel told FBR adout the risk (in January 1941) of Japanese attack at Pearl - as a retaliation for the oil embargo - and recommended returning the Pcific Fleet to San Diego, he was sacked and replaced by someone more malleable.

So December 7, 1941 is not the day that should live in infamy - it's August 6th, 1945... when firebombing was replaced by a genuine weapon of indiscriminate, mass destruction.

This is why, when US presidents babble on about how evil other countries are, I just retch. When they babble about how the US is the land of 'free' enterprise, I watch for events like the (Chevron-lobby-led) political furore over China's capitalist attempted takeover of Unocal. or Cheney's hip-deep-in-payola Energy Task Force. When they babble about 'freedom', I watch for new and interesting ways in which their Bill of Rights gets shredded by the new, improved (for the State) Patriot Act. And when they talk about 'spreading democracy', I look for yet another US stooge puppet in some faraway land.

As I started saying in 2001 - when all an Empire has left is its slogans, it is already finished. Lickspittles like John Howard and Tony B.Liar aside, the rest of the developed world already sees that. Sure, they look like they're posting good economic numbers, but like Enron there's some stuff in the accounting that nobody talks about... and besides, give me $2b a day in imported capital, and I reckon I could have a lifestyle that looked pretty wealthy too.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $7.5billion, weekend repurchase entirely in T-backed collateral undertaken at a 15 basis point premium to the Fed Funds Rate (FFR).

No discount means no guarantee of a boost at 10 a.m. NY time, and so it proved.

Major US Indices

Despite reasonable economic numbers (New Payrolls +207k compared with consensus of +175k, with wages growth at +0.4% compared with consensus of 0.3%), the technical medium-term overbought market condition is dominating. I wrote about a top that was due at about 10720-30 between July 14th and July 20th, and although the top formed on July 20th, a little 'blip' upwards was required to actually get within Coo-ee of the 10720 target (the actual swing high was 10717 on July 29th).

Today showed why fading the short-term trend, even contrary to the longer-term trend, is reasonably forgiving; the indices gave two RSI oversold/CCI divergent signals intraday... and despite the fact that neither worked particularly well, they didn't cost the earth... examine the chart:

Dow 15-minute chart

A few folks have asked why "4 bars make a swing" - i.e., why it's not a divergence if there aren't 4 bars between the swing extremes in price. Well, the straight answer is "It just IS", or "That's what works", but there's also some logic in it. Four bars on a 15-minute chart is an hour; traders give the market an hour to prove them wrong - if the market makes lower lows during that hour, they're not wrong and shouldn't change their bias.

The second divergence in particular had everything going for it; TICK < -900, and there was a confluence of 'important' numbers in support withing a breath - 10550 on the Dow, 1600 on the Nasdaq, and 1225 on the S&P (the  respective lows were:  10554.45, 1225.64 and 1600.25). But the point is this - if the trend is both overextended and the CCI has diverged, the likelihood of being forced to exit the trade with no profit whatsoever, is very low. Still, the best that you could have got out of it was less than 2 points - may as well write both of the signals off as zero-gainers.

By the close, the Dow Jones Industrial Average had shed 52.07 points (0.49%), closing out the day at 10558.03 points. The index hit an intraday high of 10610.81 (at the open), and fell as low as 10554.45 (at the swing low at 11:45 a.m.).

Within the blue-chip index, 6 stocks rose, the biggest gainers being Microsoft (MSFT, +1.61% to $27.76) and Merck (MRK, +1.05% to $30.66), which accounted for 6 Dow points between them. Losers in the Dow numbered 24 and were led by General Motors (GM, -2.39% to $35.19) and Altria Group (MO, -1.81% to $66.33), with these two stocks contributing -17 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 211.2m shares to 118.9m.

The broader S&P500 shed 9.44 points (0.76%), closing at 1226.42. Within the index, gainers numbered 78, while 414 S&P500 stocks fell for the day. Volume was tilted 3.3:1 in favour of the losers with 1219.36 million units traded in the losers as compared with 373.98 million traded in the winners .

Over at Times Square, the Nasdaq Composite declined 13.41 points (0.61%), to close at 2177.91, while larger-cap technology issues fared better with the Nasdaq100 losing 7.15 points (0.44%), to end at 1601.59 points. Within the tech benchmark, gainers numbered 27, while 70 Nasdaq100 stocks fell for the day. Volume was tilted 2.3:1 in favour of the losers with 394.64 million traded in the losers compared to 170.61 million in the winners .

NYSE Volume was super-chunky, with 1.93 billion shares changing hands, while Nasdaq Volume was about average, with 1.52 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10558.03-52.07-0.49%
Nasdaq Composite2177.91-13.41-0.61%
NYSE Volume1.93bn--
Nasdaq Volume1.52bn--


My 9-stock "bellwethers" group fell by an average of 0.75%

  • General Electric (GE) -$0.20 (0.59%) to $33.81;
  • Citigroup (C) -$0.29 (0.66%) to $43.63;
  • Wal Mart (WMT) +$0.03 (0.06%) to $49.32;
  • I.B.M. (IBM) +$0.24 (0.29%) to $83.36;
  • Intel (INTC) -$0.24 (0.89%) to $26.77;
  • Cisco Systems (CSCO) -$0.13 (0.67%) to $19.30;
  • eBay (EBAY) -$0.49 (1.12%) to $43.34;
  • Fannie Mae (FNM) -$0.91 (1.63%) to $54.96; and
  • Freddie Mac (FRE) -$1.00 (1.59%) to $61.92.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2531 to 736, for a single-day A/D reading of -1795; and Nasdaq losers exceeded gainers by 2041 to 987. The 10-day moving average of the A/D line fell to -314.8 on the NYSE, while the 10dma of the Nasdaq A/D fell to -305.7.

On the NYSE declining volume was greater than volume in advancing issues by 1511.4 to 394.2 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1014.3 to 470.9 million shares.

80 NYSE-listed stocks rose to new 52-week highs, and 35 posted fresh 52-week lows, while on the Nasdaq there were 68 stocks that hit new 52-week highs, and 31 which fell to fresh 52-week lows.

the VIX futures long that we initiated when VIX went below 10, is finally showing a profit (of about $150... big whoop), despite VIX itself being more than 20% higher. Damn you, contango!!!

Market Breadth Statistics

Advancing Volume (m)394.15470.87
Declining Volume (m)1511.431014.29
New Highs8068
New Lows3531

Market Sentiment Statistics
CBOE Volatility Index12.48-0.06-0.48%
CBOE Nasdaq Volatility Index15.40.312.05%
Equity Put-Call Ratio0.64-0.3-31.91%
10-day PCR0.5700%
SPX-VIX Ratio98.3-0.28-0.29%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 6.0 bps to 4.582%. The 30-year bond future staggered to 114-06/32 by the close, after getting as low as 114-01/32 a couple of times during he session.

The middle of the yield curve was broadly lower: five year yields rose to 4.235%, and ten-year yields rose to 4.392%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps wider at -2.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 41.0 bps for 10-year AAA, and 82.5 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 14.0 bps tighter at 18.0 basis points and the 10-year AAA-A spread 2.0 bps tighter at 9.0 bps.

Treasury Yields
UST 13wk (yld)3.43700%
UST 2Y (yld)
UST 5Y (yld)4.2350.0862.07%
UST 10Y (yld)4.3920.0731.69%
UST 30Y (yld)4.5820.061.33%

The Banks Index lost 1.07 points (1.07%), ending the day at 98.88; within the index,

  • Wachovia (WB) -$1.53 (3%) to $49.44;
  • Golden West Financial (GDW) -$1.55 (2.39%) to $63.40;
  • National City Corp (NCC) -$0.74 (2%) to $36.27;
  • State Street (STT) -$0.76 (1.55%) to $48.35; and
  • Regions Financial (RF) -$0.51 (1.53%) to $32.90.

The Broker-dealer Index shed 1.98 points (1.17%), closing at 166.55; the ticket clippers lined up as follows -

  • E*Trade (ET) -$0.31 (2.04%) to $14.86;
  • Charles Schwab (SCH) -$0.24 (1.78%) to $13.28;
  • Lehman Brothers (LEH) -$1.77 (1.68%) to $103.39;
  • Bear Stearns (BSC) -$1.72 (1.66%) to $101.66; and
  • Legg Mason (LM) -$1.70 (1.62%) to $103.25.

The Philadelphia SOX (Semiconductor) index dipped 1.35 points (0.29%), to end the session at 471.19

  • Infineon Tech (IFX) -$0.21 (2.11%) to $9.76;
  • Freescale Semiconductors (FSL-B) -$0.47 (1.87%) to $24.64;
  • Texas Instruments (TXN) -$0.59 (1.85%) to $31.31;
  • Advanced Micro Devices (AMD) -$0.24 (1.19%) to $19.91; and
  • Taiwan Semiconductors (TSM) -$0.09 (1.04%) to $8.56.

Gold & Silver Markets

Gold fell by $0.50 (0.11%) to close at $437.20 per ounce; rising bond yields (and the prospect of even faster-rising yields) gave USD bulls something to hope about (interest arbitrage... as if they understand it), which helped the USD index... to the very slight detriment of now-excited gold bulls.

The reason I say "as if they understand it" is because interest arbitrage implies that a currency will depreciate so long as there is an 'uncovered' interest differential.

Put another way: if US interest rates are below European ones, the rate of appreciation of the USD will always be negative until those rates are realigned (under UIP). A reduction in interest rate differentials will only change the rate of depreciation - it will not cause an appreciation until there is a reversal of the rate differential.

The Gold Bugs Index shed 3.11 points (1.49%), ending the day at 205.9

  • Hecla Mining (HL) -$0.34 (8.35%) to $3.73;
  • Eldorado Gold (EGO) -$0.10 (3.31%) to $2.92;
  • Coeur d'Alene (CDE) -$0.10 (2.62%) to $3.71;
  • Freeport McMoran (FCX) -$0.76 (1.82%) to $41.02; and
  • Glamis Gold (GLG) -$0.33 (1.74%) to $18.60.

Silver fell by $0.09 (1.29%) to close at $7.14 per ounce. The Gold and Silver Index (XAU) lost 0.9 points (0.94%), to 94.87 points.

  • Anglogold Ashanti (AU) -$0.71 (1.99%) to $34.95;
  • Freeport McMoran (FCX) -$0.76 (1.82%) to $41.02;
  • Agnico Eagle (AEM) -$0.21 (1.58%) to $13.08; and
  • Gold Fields (GFI) -$0.14 (1.25%) to $11.09.
Precious Metals and Indices
PHLX Gold and Silver Index94.87-0.9-0.94%
AMEX Gold BUGS Index205.9-3.11-1.49%

Oil Market

Oil was firmer, rising by $0.93 per barrel, closing at $62.31 per barrel - close to the high of the day ($62.45) but below the $62.50 level hit a couple of sessions ago.

Don't be surprised to see another little 'nuffie-slaughter' on Monday if the contract breaks its swing high ($62.89, set on July 7th - the day of the London Bombing, which was also the day after I called that oil would blip up the following session, and then rip ferociously downwards).

The Oil and Gas Index (XOI) shed 3.91 points (0.41%), to end the session at 959.26

  • Occidental Petroleum (OXY) -$1.47 (1.77%) to $81.37;
  • TotalFinaElf S.A. (TOT) -$1.46 (1.14%) to $126.86; and
  • Exxon Mobil (XOM) -$0.43 (0.73%) to $58.09.

The Oil service stocks (OSX) Index lost 1.64 points (0.98%), to 165.61

  • Rowan Companies (RDC) -$0.75 (2.15%) to $34.20;
  • Global Industries (GLBL) -$0.18 (1.69%) to $10.46; and
  • Transocean (RIG) -$0.94 (1.58%) to $58.64.
Energy Complex
Reuters CRB317.67-0.79-0.25%
Crude Oil Light Sweet62.310.931.52%
Heating Oil1.73120.021.37%
Natural Gas8.70.232.7%
Unleaded Gas1.83220.031.66%
AMEX Oil Index959.26-3.91-0.41%
Oil Service Index165.61-1.64-0.98%

Currency Markets

USD Exchange Rates
US Dollar Index88.060.250.28%
Australian Dollar0.768-0.0049-0.63%
Swiss Franc1.26160.00350.28%
Canadian Dollar0.8221-0.0016-0.19%