Interdum stultus opportuna loquitur...

Tuesday, August 09, 2005

USRant: Important Levels Broke, Others Held...

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

As if the US Administration didn't already have a lot on its plate... with its War Crime going sour in the Levant, the last thing it needed was for the Saudis to start to bet against the US. But that's what they did yesterday - declaring their intention to repatriate about $500 billion (Australian) from 'overseas' back to Saudi Arabia.

Given that the Saudi money is held overwhelmingly (a) in USD - thanks to the oil pricing scam that has benefited the USD for two generations; and (b) in US securities; there's no surprises about the ramifications.

Add to that, the global traction being gained by Iran's announcement of its euro-based oil bourse ,and you have a bevy of reasons why the US neoTrot movement is talking up war against Iran. As with Iraq, this is as much about preventing oil from being repriced away from USD, as it is about anything.

You see, for almost 50 years the US dollar has benefited from the requirement of nations to hold USD reserves in order ot pay for the commodities that run the planet - the energy commodities. If the Iranians are successful in moving OPEC away from petrodollars and towards petroeuros, the global reserve currency changes by default. That's becasue a huge chunk of the demand for USD has bugger-all to do with any view on US productivity or equity markets... at present, you gotta hold USD if you wanna buy the black stuff.

I noted two years ago that Saddam Hussein repriced Iraq's oil into euros ... on January 30th 2002. That, as it happened, was the day of the low in the Euro. It was also the day of the announcement of my then 'SuperTrade' (buy oil, buy Gold, buy Euro and sell the S&P) - but Saddam and I aren't "related", not even by the NewSpeak garbage of today's 'intelligence' services.

And last but not least, people are people finally working out (thanks to the unsealing of the indictments in the Franklin/AIPAC investigation a couple of days ago) that the Plame affair goes far beyond Joe Wilson and actually seems to have been an act in and of itself. That is, it was probably not motivated by Niger, but rather sought to scuttle Plame's WMD network to prevent its eventual disclosure that the Bush family is in it up to the eyeballs. That's why the indictments have bugger-all to do with the Intelligence Identities Protection Act and instead are issued under Title 18 USC 793 and 794. 794 is a death penalty offence. I wonder whether Dubya is nervous anough to want another in the series of overnight-stay big-manly-hug sessions from he-whore Jeff Gannon... not that there's anything wrong with that...

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $7billion, overnight repurchase with $6.8billion in T-backed collateral undertaken at a 20 basis point premium to the Fed Funds Rate (FFR).

No discount (a pretty huge premium, in fact), so no repo moonshot. It's also clear (and has been clear for some time) that the Fed is going to raise rates again this week. The Fed Funds futures are pricing in a 100% likelihood that they will tighten again in September. No suprises there; the fact that a rising-rate environment is hostle to equities (particularly when they are already overpriced by any reasonable measure) is something that is only starting to dawn on what Mencken might have called Boobus Investicans.

Major US Indices

The Dow Jones Industrial Average slid a measured 21.1 points (0.2%), closing out the day at 10536.93 points. The index managed - thanks to the usual Monday Morning orgasm - to creep past 10600 briefly in the first hour - hitting an intraday high at 10606.04, after about 35 minutes of trade.

From there it was largely one-wat traffic until just after 2 p.m. NY time, when the day's low was set at 10524.91 (10525-ish). At that point, Crude prices were retesting $64, and perhaps the hope was that they would pull back from there (not so - in the overnight session Crude is up to $64.25... but it's almost time for another nuffie-killing slide of a few bucks. Just not quite yet).

Within the blue-chip index, 7 stocks rose, the biggest gainers being Mcdonalds (MCD, +2.68% to $32.14) and Exxon Mobil (XOM, +1.31% to $58.85), which accounted for 13 Dow points between them. Losers in the Dow numbered 23 and were led by Microsoft (MSFT, -2.27% to $27.13) and Du Pont (DD, -1.10% to $42.24), with these two stocks contributing -9 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 231.6m shares to 52.5m.

The broader S&P500 shed 3.29 points (0.27%), closing at 1223.13. Within the index, gainers numbered 182, while 307 S&P500 stocks fell for the day. Volume was tilted 1.5:1 in favour of the losers with 902.10 million units traded in the losers as compared with 598.43 million traded in the winners .

Over at Times Square, the Nasdaq Composite shed 13.52 points (0.62%), to close at 2164.39, while larger-cap technology issues fared worse with the Nasdaq100 losing 11.62 points (0.73%), to end at 1589.97 points. Within the tech benchmark, gainers numbered 33, while 65 Nasdaq100 stocks fell for the day. Volume was tilted 2.1:1 in favour of the losers with 405.31 million traded in the losers compared to 191.92 million in the winners .

NYSE Volume was super-chunky, with 1.8 billion shares changing hands, while Nasdaq Volume was about average, with 1.5 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10536.93-21.1-0.2%
Nasdaq Composite2164.39-13.52-0.62%
NYSE Volume1.8bn--
Nasdaq Volume1.5bn--


My 9-stock "bellwethers" group fell by an average of 0.37%. I've mentioned Citigroup as the bellwether-of-bellwethers before. Keep an eye on it: if it doesn't bounce - and bounce hard - off the mid $42's, this market is going to get ugly.

  • General Electric (GE) -$0.05 (0.15%) to $33.76;
  • Citigroup (C) -$0.33 (0.76%) to $43.30;
  • Wal Mart (WMT) -$0.17 (0.34%) to $49.15;
  • I.B.M. (IBM) +$0.20 (0.24%) to $83.36;
  • Intel (INTC) -$0.06 (0.22%) to $26.71;
  • Cisco Systems (CSCO) -$0.05 (0.26%) to $19.25;
  • eBay (EBAY) -$0.13 (0.3%) to $43.21;
  • Fannie Mae (FNM) -$0.76 (1.38%) to $54.20; and
  • Freddie Mac (FRE) -$0.09 (0.15%) to $61.83.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2055 to 1210, for a single-day A/D reading of -845; and Nasdaq losers exceeded gainers by 1817 to 1213. The 10-day moving average of the A/D line fell to -410.3 on the NYSE, while the 10dma of the Nasdaq A/D fell to -359.4.

On the NYSE declining volume was greater than volume in advancing issues by 1002 to 772.9 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 963.3 to 509.5 million shares.

123 NYSE-listed stocks rose to new 52-week highs, and 42 posted fresh 52-week lows, while on the Nasdaq there were 82 stocks that hit new 52-week highs, and 35 which fell to fresh 52-week lows.

The VIX futures trade ominated here a couple of weeks ago is finally starting to get its groove going. I said at the time that it was going to be one of those trades that would make you wait for gratification... and it still hasn't really happened yet. Oh, it's up a couple of hundred bucks (on an outlay of $3500), but the real action is yet to be seen. We might (I stress, might) have seen the high for the year in the stock indices. If so, the decline may accelerate into something a bit breakneck, and that will turn this VIX exposure into a source of joy and boasting...

Market Breadth Statistics

Advancing Volume (m)772.91509.52
Declining Volume (m)1002.02963.25
New Highs12382
New Lows4235

Market Sentiment Statistics
CBOE Volatility Index13.210.735.85%
CBOE Nasdaq Volatility Index15.950.553.57%
Equity Put-Call Ratio0.6400%
10-day PCR0.5700%
SPX-VIX Ratio92.6-5.68-5.78%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 1.4 bps to 4.596%. the 30-year bond futures dipped another 8 ticks, but frankly the market is getting very bull, so I wouldn't want to be short the bond at these levels - but only because I think that there will be one last chance to re-enter (short) at better prices. Longer-term, the US long bond is going to be priced under 100.

The middle of the yield curve was broadly lower: five year yields rose to 4.269%, and ten-year yields rose to 4.419%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at -3.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 41.0 bps for 10-year AAA, and 77.5 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 widening by 10.0 bps to 28.0 basis points and the 10-year AAA-A spread 1.0 bps wider at 10.0 bps.

Treasury Yields
UST 13wk (yld)3.42800%
UST 2Y (yld)
UST 5Y (yld)4.2690.0340.8%
UST 10Y (yld)4.4190.0270.61%
UST 30Y (yld)4.5960.0140.31%

The Banks Index dipped 0.3 points (0.3%), closing at 98.58; within the index,

  • State Street (STT) -$0.61 (1.26%) to $47.74;
  • Citigroup (C) -$0.33 (0.76%) to $43.30 (watch C: it had better bounce - hard - off $42.30-ish);
  • JPMorganChase (JPM) -$0.26 (0.74%) to $34.99;
  • Bank Of America (BAC) -$0.31 (0.72%) to $42.94; and
  • Keycorp (KEY) -$0.24 (0.71%) to $33.68.

The Broker-dealer Index advanced 1.01 points (0.61%), closing at 167.56; the ticket clippers lined up as follows -

  • E*Trade (ET) +$1.24 (8.34%) to $16.10;
  • Charles Schwab (SCH) +$0.34 (2.56%) to $13.62;
  • Jeffries Group (JEF) +$0.19 (0.47%) to $40.58;
  • Merrill Lynch (MER) +$0.20 (0.35%) to $57.93; and
  • Goldman Sachs (GS) +$0.21 (0.19%) to $109.91.

The Philadelphia SOX (Semiconductor) index lost 5.33 points (1.13%), to end the session at 465.86

  • Maxim Integrated (MXIM) -$1.37 (3.03%) to $43.80;
  • KLA-Tencor (KLAC) -$1.31 (2.6%) to $49.05;
  • Micron Technology (MU) -$0.30 (2.53%) to $11.56;
  • Novellus Systems (NVLS) -$0.52 (1.85%) to $27.60; and
  • Linear Technology (LLTC) -$0.70 (1.78%) to $38.56.

Gold & Silver Markets

Gold fell by $2.60 (0.59%) to close at $437.10 per ounce. I've been talking recently abut how the Gold community is starting to get cocky. I've also poitned out heaps of times that Gold struggles any time it gets above $440.

Shorting Gold above $440 will stop working at some stage, but this stage ain't it. It has worked half a dozen times in the last five months - but I haven't taken a single dip at it, simply because I know that once Gold gets through $445 it will be at $460 and $500 before you know it. There are markets that you short on bounces (bonds, stocks) and tehre are markets you buy on dips (oil, Gold, Euro). At stages in their trajectories there are some markets that give you a really good indication to play a serious counter trend (likethe July 7th "short oil" call made in this very blog), but I wouldn't short Gold between now and the eventual dismantling of the USD hegemony. As the Blackadder quote goes, it would be like fitting wheels to a tomato - time consuming, but ultimately pointless...

The Gold Bugs Index lost 2.9 points (1.41%), at 203

  • Eldorado Gold (EGO) -$0.15 (5.14%) to $2.77;
  • Golden Star (GSS) -$0.12 (3.69%) to $3.13;
  • Harmony Gold (HMY) -$0.23 (2.74%) to $8.15;
  • Kinross Gold (KGC) -$0.16 (2.6%) to $5.99; and
  • Goldcorp (GG) -$0.38 (2.22%) to $16.75.

Silver fell by $0.14 (2%) to close at $7.02 per ounce. The Gold and Silver Index (XAU) lost 0.83 points (0.87%), at 94.04 points.

  • Durban Rooderpoert Deep (DROOY) -$0.03 (3.19%) to $0.91;
  • Harmony Gold (HMY) -$0.23 (2.74%) to $8.15;
  • Kinross Gold (KGC) -$0.16 (2.6%) to $5.99; and
  • Goldcorp (GG) -$0.38 (2.22%) to $16.75.
Precious Metals and Indices
PHLX Gold and Silver Index94.04-0.83-0.87%
AMEX Gold BUGS Index203-2.9-1.41%

Oil Market

Oil was firmer, rising by $1.63 per barrel, closing at $63.94 per barrel. The Oil and Gas Index (XOI) advanced 18.02 points (1.88%), to 977.28

  • Kerr Mcgee (KMG) +$3.03 (3.7%) to $85.01;
  • Amerada Hess (AHC) +$4.38 (3.64%) to $124.74; and
  • Marathon Oil (MRO) +$1.45 (2.42%) to $61.41.

The Oil service stocks (OSX) Index advanced 2.17 points (1.31%), to 167.78

  • Global Industries (GLBL) +$0.48 (4.59%) to $10.94;
  • National Oilwells/Varco (NOV) +$2.02 (3.54%) to $59.02; and
  • GlobalSantaFe (GSF) +$0.76 (1.65%) to $46.88.
Energy Complex
Reuters CRB317.02-0.65-0.2%
Crude Oil Light Sweet63.941.632.62%
Heating Oil1.78940.063.36%
Natural Gas8.684-0.02-0.18%
Unleaded Gas1.8570.021.35%
AMEX Oil Index977.2818.021.88%
Oil Service Index167.782.171.31%

Currency Markets

USD Exchange Rates
US Dollar Index87.92-0.14-0.16%
Australian Dollar0.7642-0.0038-0.49%
Swiss Franc1.261-0.0006-0.05%
Canadian Dollar0.82310.0010.12%