Interdum stultus opportuna loquitur...

Tuesday, August 30, 2005

USRant: Rollercoaster...

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

Sometimes I think "You know, I should just let bygones be bygones - why keep bringing up yesterday's news?" Then I keep thinking of the number of folks who are first-time Rant readers on any given day.

There is a myriad of click-loggers and eyeball trackers that accompany every website (seriously, you would be mortified at the extent to which webmasters can view your viewing habits). Thanks to those, I can see that about a third of all Rant readers on a given day are first-time viewers, many of whom were 'referred' via places like SafeHaven.. They are a large part of the reason that there have been over 100,000 individual 'viewers' of the Rant over its 1-year life (about 60% of which keep coming back). Rather than force new folks to scroll all the way down the page for yesterday's wisdom, I prefer to stick parts of yesterday into today.

Plus, I like it when I'm right, and I like to point out why I'm wrong when I'm wrong. Often, you learn more from knowing why your mistakes happened, than you do from analysing your wins.

Yesterday - classic case in point... what did I say about Monday's rally off the hurricane spike? To recap - 

The index hit an intraday high of 10487.5 at 3:05 p.m., at the same time as it registered a perfect selling divergence (I don't have time today to put up the chart).

and this, based on the weak volume...

More evidence that the move up was a squeeze and not the result of genuine buying.

Do I have to draw you a picture? OK... here's one I prepared earlier: yesterday's selling divergences worked perfectly, and today's buying divergences weren't too shabby neither. The coincidence of the MA resistance above (those lines aren't just there for cosmetic reasons), and the registering of a %R reading under 10, was literally the perfect exit signal off the first long (and for the super-adventurous, you could even short it... although the TICK only got up to 930). 

Dow Intraday chart

I've said this a dozen times now - snaffle one S&P point a day (net) and you're on your way to cake and couches. It's not rocket science.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a measly $3.25billion, overnight repurchase with $3.125billion in T-backed collateral undertaken at a 5.9 basis point premium to the Fed Funds Rate (FFR). That was never going to help.

Major US Indices

The Dow Jones Industrial Average slid 50.23 points (0.48%), closing out the day at 10412.82 points. The index's intraday high (10461.54) was set at the open, and fell as low as 10350 (now that's very "10350-ish"... another reason it bounced) in the mid afternoon.

Within the blue-chip index, 9 stocks rose, the biggest gainers being Hewlett Packard (HPQ, +1.54% to $27.10) and General Motors (GM, +1.20% to $34.45), which accounted for 7 Dow points between them. Losers in the Dow numbered 21 and were led by Mcdonalds (MCD, -2.32% to $32.40) and Home Depot (HD, -1.71% to $39.75), with these two stocks contributing -12 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 213m shares to 133.8m.

The broader S&P500 slid 3.87 points (0.32%), at 1208.41. Within the index, gainers numbered 147, while 331 S&P500 stocks fell for the day. Volume was tilted 1.6:1 in favour of the losers with 936.66 million units traded in the losers as compared with 603.22 million traded in the winners .

Over at Times Square, the Nasdaq Composite slid 7.89 points (0.37%), to close at 2129.76, in line with the decline in  larger-cap technology issues as the Nasdaq100 lost 5.79 points (0.37%) to end at 1565.73 points. Within the tech benchmark, gainers numbered 29, while 63 Nasdaq100 stocks fell for the day. Volume was tilted 1.1:1 in favour of the losers with 287.34 million traded in the losers compared to 267.74 million in the winners .

NYSE Volume was super-chunky, with 1.88 billion shares changing hands, while Nasdaq Volume was about average, with 1.44 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10412.82-50.23-0.48%
Nasdaq Composite2129.76-7.89-0.37%
NYSE Volume1.88bn--
Nasdaq Volume1.44bn--


My 9-stock "bellwethers" group fell by an average of 0.60%; notice how Citigroup is stabilising (almost a dollar too high, in my view)... odd.

  • General Electric (GE) -$0.36 (1.07%) to $33.24;
  • Citigroup (C) -$0.28 (0.64%) to $43.26;
  • Wal Mart (WMT) -$0.46 (1.01%) to $45.19;
  • I.B.M. (IBM) -$0.80 (0.98%) to $80.54;
  • Intel (INTC) -$0.16 (0.62%) to $25.57;
  • Cisco Systems (CSCO) -$0.13 (0.74%) to $17.51;
  • eBay (EBAY) +$0.23 (0.58%) to $39.70;
  • Fannie Mae (FNM) -$0.33 (0.65%) to $50.47; and
  • Freddie Mac (FRE) -$0.18 (0.3%) to $60.00.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1823 to 1422, for a single-day A/D reading of -401; and Nasdaq losers exceeded gainers by 1828 to 1173. The 10-day moving average of the A/D line fell to -92.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to -229.6.

On the NYSE declining volume was greater than volume in advancing issues by 1097.3 to 737.8 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 789 to 582.4 million shares.

116 NYSE-listed stocks rose to new 52-week highs, and 47 posted fresh 52-week lows, while on the Nasdaq there were 63 stocks that hit new 52-week highs, and 43 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)737.83582.38
Declining Volume (m)1097.27788.96
New Highs11663
New Lows4743

Market Sentiment Statistics
CBOE Volatility Index13.570.050.37%
CBOE Nasdaq Volatility Index15.330.030.2%
Equity Put-Call Ratio0.90.0911.11%
10-day PCR0.6300%
SPX-VIX Ratio89.1-0.62-0.69%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 5.7 bps to 4.307%. The 30-year is now so ripe for another short that I'm getting a headache jsut thinking about it. Since I declared that bonds had made or were making a low (back when the futures were trading under 114), the yield has dropped two dozen basis points - despite massive inflationary pressures building. 

The bond market is in two minds - on the one hand it realises that the US economy is screwed (don't shit me by trying to argue, it's screwed) and that Greensplatt and his merry band of central wankers will probably be forced to cut rates in early 2006 (too late, as usual) to try to shore up the housing bubble.

On the other hand, the US government is spending money like there's no tomorrow, which raises the prospect of massive new debt issuance (who are we kidding - the US is already issuing massive amounts of new debt) and therefoe a supply overhang. Remove $150bill a year in USD demand as a result of OPEC/Russian oil rebasing to Euro, and you've got a recipe for the end of dollar-recycling into bond markets.

Yep - a real conundrum... a political machine trying to save its ass (and legacy) versus reality. I will backreality every time. If you think the political machine can win in the long run, I've got news for you: Argentina is not a global powerhouse. If monetary policy worked, it would be.

But back to the bonds...

The middle of the yield curve was broadly higher in price: five year yields fell to 3.963%, and ten-year yields fell to 4.09%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps tighter at -5.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 52.0 bps for 10-year AAA, and 85.0 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 6.0 bps wider at 39.0 basis points and the 10-year AAA-A spread 3.0 bps wider at 1.0 bps.

Treasury Yields
UST 13wk (yld)3.47700%
UST 2Y (yld)3.93-0.11-2.72%
UST 5Y (yld)3.963-0.115-2.82%
UST 10Y (yld)4.09-0.083-1.99%
UST 30Y (yld)4.307-0.057-1.31%

The Banks Index declined 0.66 points (0.67%), ending the day at 97.21; within the index,

  • Golden West Financial (GDW) -$1.63 (2.63%) to $60.30;
  • Zions Bancorp (ZION) -$1.11 (1.59%) to $68.84;
  • Northern Trust (NTRS) -$0.65 (1.3%) to $49.53;
  • Keycorp (KEY) -$0.33 (1%) to $32.61; and
  • JPMorganChase (JPM) -$0.33 (0.97%) to $33.58.

The Broker-dealer Index shed 0.96 points (0.57%), at 167.1; the ticket clippers lined up as follows -

  • Legg Mason (LM) -$2.41 (2.27%) to $103.82;
  • Jeffries Group (JEF) -$0.51 (1.29%) to $38.89;
  • Bear Stearns (BSC) -$0.92 (0.92%) to $99.32;
  • Ameritrade (AMTD) -$0.16 (0.8%) to $19.95; and
  • Merrill Lynch (MER) -$0.45 (0.78%) to $57.01.

The Philadelphia SOX (Semiconductor) index shed 1.62 points (0.34%), at 468.63

  • Infineon Tech (IFX) -$0.23 (2.41%) to $9.30;
  • Advanced Micro Devices (AMD) -$0.47 (2.26%) to $20.37;
  • National Semiconductors (NSM) -$0.39 (1.56%) to $24.60;
  • Novellus Systems (NVLS) -$0.36 (1.29%) to $27.50; and
  • Maxim Integrated (MXIM) -$0.48 (1.12%) to $42.42.

Gold & Silver Markets

Gold got flogged, dropping by $5.80 (1.32%) to close at $432.50 per ounce. It seems like only a week or so ago that I was writing about how $450 looked like K2. (K2 is a big mountain - a tough climb, a big ask, hard to conquer... hell, it was a metaphor...).

The Gold Bugs Index dipped 3.8 points (1.88%), ending the day at 198.79

  • Golden Star (GSS) -$0.13 (4.38%) to $2.84;
  • Hecla Mining (HL) -$0.13 (3.75%) to $3.34;
  • Meridian Gold (MDG) -$0.60 (3.2%) to $18.14;
  • Glamis Gold (GLG) -$0.58 (3.03%) to $18.56; and
  • Kinross Gold (KGC) -$0.18 (2.86%) to $6.11.

Silver fell by $0.04 (0.58%) to close at $6.69 per ounce. The Gold and Silver Index (XAU) lost 1.12 points (1.18%), closing at 93.43 points.

  • Meridian Gold (MDG) -$0.60 (3.2%) to $18.14;
  • Kinross Gold (KGC) -$0.18 (2.86%) to $6.11;
  • Harmony Gold (HMY) -$0.19 (2.56%) to $7.22; and
  • Barrick Gold (ABX) -$0.46 (1.76%) to $25.68.
Precious Metals and Indices
PHLX Gold and Silver Index93.43-1.12-1.18%
AMEX Gold BUGS Index198.79-4.18-2.06%

Oil Market

Oil was firmer, rising by $2.61 per barrel, closing at $69.81 per barrel and defying predictions of its demise. This still looks technical to me - whereas smart money had been engineering sharp pullbacks to use nuffie-stops to re-set isntitutional longs, it's now the case that the reverse is happening. The sharp spikes upwards are engineered to take out nuffie short-stops, enabling the bigger fish to reset shorts at better prices. The CoT doesn't lie, and it has been saying smart money is exiting, for two weeks.

The Oil and Gas Index (XOI) added 17.56 points (1.82%), to end the session at 984.92

  • Sunoco (SUN) +$3.80 (5.85%) to $68.75;
  • Marathon Oil (MRO) +$1.90 (3.16%) to $61.99; and
  • ConocoPhillips (COP) +$1.34 (2.12%) to $64.41.

The Oil service stocks (OSX) Index added 3.22 points (1.98%), to 165.93

  • Global Industries (GLBL) +$0.98 (8.15%) to $13.00;
  • Tidewater (TDW) +$1.90 (4.85%) to $41.08; and
  • Halliburton (HAL) +$2.04 (3.53%) to $59.84.
Energy Complex
Reuters CRB318.443.191.01%
Crude Oil Light Sweet69.812.613.88%
Heating Oil2.0850.157.8%
Natural Gas11.6590.524.67%
Unleaded Gas2.19970.2311.81%
AMEX Oil Index984.9218.541.92%
Oil Service Index165.933.221.98%

Currency Markets

USD Exchange Rates
US Dollar Index88.330.080.09%
Australian Dollar0.7479-0.0048-0.64%
Swiss Franc1.26840.00150.12%
Canadian Dollar0.83930.00450.54%