Interdum stultus opportuna loquitur...

Tuesday, August 02, 2005

USRant: Soft, Rather Than Weak...

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

First, a note to new subscribers to the subscription site - I've made a rod for my own back by maintaining a near-paranoid aversion to automating the creation and distribution of usernames and passwords. I'm building a batch-mail that will send out all passwords - you should already have got an e-mail that asked you to nominate a user ID.

It's a long-winded way to go about it, but I am keen not to compromise the password-generation process; security is important.

If the password-generation is not completed by today, it will be done by the close tomorrow at the latest. And of course, the time on the subscription does not start to elapse until the first time you log in to one of the useful areas of the site. As I say, it's verging on the paranoid, especially since there will of course be a facility to change your password if you wish to. Still, 'data security' is my number one priority - it's part of the reason I don't want to hold any credit card information (hence the use of PayPal). 'Compartmentalising' datastreams is the first thing you learn about, so that's what I've done on the password front.

Before the market opened, there were several pieces of news - economic and political - each of which had countervailing effects. The first interesting thing that happened was the death of the long-suffering 'King' Fahd 'al'-Saud (in reality, neither honorific - 'King' or 'al' - is justified, since the 'House' of Saud is just another bunch of Western satraps who were 'ennobled' thanks to ARAMCO's mercenaries). He is succeeded by 'Crown Prince' Adbullah (who has been the de facto ruler for years) - no surprises there.

Oil markets took the news relatively calmly - that's also not too surprising, since the 'Crown Prince' has all the right credentials; chief among them is willingness to use harsh internal repression to make the place safe for Western oil companies... via a security personnel that rivals SAVAK, the NKVD and the Gestapo for brutality.

The Saud family's history is interesting - much typing has been wasted trying to exculpate them as direct and proximate causes of pan-Arab extremism. I read something today that claimed that it was Fahd's "toleration' of Islamic fundamentalists that radicalised them... since when does someone become radicalised by being tolerated by a power elite? Rather, I would look to the fact that the Saud family turned quisling after the appalling betrayal of their fellow-travelers (the Ikhwan) by the British. The Arab mind isn't locked in to a 24-hour news cycle, you see - they still think about things like early 20th century promises not kept, and it makes their ears burn.

I still think that there is going to be some real behind-the-scenes struggling going on in the halls of power in Saudi Arabia - none of the 'Princes' are genuinely hostile to western interests (they know that withut US patronage they would be back living as nomads if they could make it out of Riyadh alive), but the risk of a complete overthrow is non-trivial. The odds that they evict US armed forces - like the Uzbeks did three days ago - is low unless that happens, but until that happens, Salafi clerics will continue to have a "Crusader in our midst" talking-point.

Apart from the Saudi 'monarch', the other news included Construction Spending which fell 0.3% as opposed to consensus expectations of a rise of 0.5%.  Most of the fall was caused by a 1.2% contraction in public-sector construction - both residential (-0.4%) and non-residential (+0.2%) private sector construction were weaker than expected.

The Institute for Supply Management (formerly the National Association of Purchasing Managers) runs their pointless Manufacturing survey every month, and this month is no exception. The meaningless number produced was 56.6 (consensus was for 54.5). The NAPM Index has never been interesting, because it's not correlated with anything. Also, I hate organisations that 'rebrand' themselves simply because they've reached critical mass in terms of the layer of bullshit-artists in the 'management' ranks - the 'we have to be seen to be doing something' brigades that are a bane of all business. And when organisations like this peak body for glorified order clerks rebadge their trade association as an 'Institute', it just gets me wild. It rivals the Ponds Institute for fatuousness.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.5billion, overnight repurchase entirely in T-backed collateral undertaken at a 4.8 basis point premium to the Fed Funds Rate (FFR).

Major US Indices

The Dow Jones Industrial Average dipped 17.76 points (0.17%), closing out the day at 10623.15 points. The index hit an intraday high of 10672.36 after about 5 minutes, and fell as low as 10610.89 with the low set at about 11:10 a.m. NY time. It was a pretty forgiving day for 'fade' traders, and yet another kick in the teeth for 'breakout' traders. The Chart below provides a clue:

Dow 15-minute chart

Yet again, the green arrows point out a divergence on the CCI that accompanied the morning decline to oversold on the %R. Folks who trade the breakout of the first hour range (a very popular method) got their hopes up after until 11:30, but the market had no downside traction - those red bars look pretty long, but they are only about 15 Dow points each.

Within the blue-chip index, 13 stocks rose, the biggest gainers being Microsoft (MSFT, +1.21% to $25.92) and Johnson & Johnson (JNJ, +0.84% to $64.50), which accounted for 7 Dow points between them. Losers in the Dow numbered 17 and were led by Home Depot (HD, -1.49% to $42.86) and United Technology (UTX, -1.34% to $50.02), with these two stocks contributing -11 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 159.7m shares to 138.2m.

The broader S&P500 rose 1.17 points (0.09%), to end the session at 1235.35. Within the index, gainers numbered 241, while 250 S&P500 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 849.03 million units traded in the losers as compared with 682.22 million traded in the winners.

Over at Times Square, the Nasdaq Composite advanced 10.55 points (0.48%), to close at 2195.38, while larger-cap technology issues fared worse with the Nasdaq100 adding 4.97 points (0.31%), to end at 1610.11 points. Within the tech benchmark, gainers numbered 47, while 51 Nasdaq100 stocks fell for the day. Volume was tilted 1.1:1 in favour of the winners with 316.75 million traded in the losers compared to 275.79 million in the winners .

NYSE Volume was chunky, with 1.72 billion shares changing hands, while Nasdaq Volume was about average, with 1.49 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10623.15-17.76-0.17%
Nasdaq Composite2195.3810.550.48%
NYSE Volume1.72bn--
Nasdaq Volume1.49bn--


My 9-stock "bellwethers" group rose by an average of 0.59%.

  • General Electric (GE) -$0.25 (0.72%) to $34.25;
  • Citigroup (C) +$0.20 (0.46%) to $43.72;
  • Wal Mart (WMT) +$0.18 (0.36%) to $49.53;
  • I.B.M. (IBM) -$0.03 (0.04%) to $83.43;
  • Intel (INTC) -$0.03 (0.11%) to $27.11;
  • Cisco Systems (CSCO) +$0.11 (0.57%) to $19.26;
  • eBay (EBAY) +$1.83 (4.38%) to $43.61;
  • Fannie Mae (FNM) -$0.01 (0.02%) to $55.85; and
  • Freddie Mac (FRE) +$0.24 (0.38%) to $63.52.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1783 to 1472 for a single-day A/D reading of 311; Nasdaq gainers trumped losers by 1717 to 1390. The 10-day moving average of the A/D line rose to 183.9 on the NYSE, while the 10dma of the Nasdaq A/D rose to 130.3.

NYSE advancing volume exceeded volume in decliners by 1002.3 to 690.6 million shares; Nasdaq advancing volume was greater than volume in decliners by 892.2 to 580.8 million shares.

312 NYSE-listed stocks rose to new 52-week highs, and 15 posted fresh 52-week lows, while on the Nasdaq there were 243 stocks that hit new 52-week highs, and 17 which fell to fresh 52-week lows.

The 'spot' VIX is now up 20% from my declaration that a VIX at or under 10 was a time to 'buy volatility', however the VIX futures are only just back to breakeven. At the time of the call, the contango between the spot VIX and front-month futures was almost 2 full VIX points... it's now less than half a point. I hate it when that happens. Still, the 'trade' is now looking healthier.

Market Breadth Statistics

Advancing Volume (m)1002.31892.16
Declining Volume (m)690.56580.83
New Highs312243
New Lows1517

Market Sentiment Statistics
CBOE Volatility Index12.080.514.41%
CBOE Nasdaq Volatility Index14.380.513.68%
Equity Put-Call Ratio0.63-0.11-14.86%
10-day PCR0.5700%
SPX-VIX Ratio102.3-4.41-4.13%

Bond Market Analysis

Bonds fell yet again at the long end, with the yield on the benchmark 30-year Treasury bond rising 3.6 bps to 4.51%.The 30-year bond future dropped to 114-31/32 at the close, having been as low as 114-14/32; that intraday reversal (over half a point - nothing to sneeze at) was yet another CCI divergence and %R oversold combination. And t hat's not to mention that the initial CCI low was below -300; that's an intraday 'scalp' buy signal all by itself.

The middle of the yield curve was broadly lower in price: five year yields rose to 4.157%, and ten-year yields rose to 4.319%.

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 36.0 bps for 10-year AAA, and 72.5 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 6.0 bps to 39.0 basis points and the 10-year AAA-A spread 11.0 bps wider at 13.0 bps.

Treasury Yields
UST 13wk (yld)3.35500%
UST 2Y (yld)
UST 5Y (yld)4.1570.0320.78%
UST 10Y (yld)4.3190.0330.77%
UST 30Y (yld)4.510.0360.8%

The Banks Index gained 0.21 points (0.21%), at 100.09; within the index,

  • BB&T Corp (BBT) +$0.43 (1.03%) to $42.25;
  • National City Corp (NCC) +$0.34 (0.92%) to $37.25;
  • Zions Bancorp (ZION) +$0.55 (0.77%) to $72.03;
  • North Fork Bancorp (NFB) +$0.18 (0.66%) to $27.57; and
  • Citigroup (C) +$0.20 (0.46%) to $43.72.

The Broker-dealer Index rose 1 points (0.59%), to end the session at 169.42; the ticket clippers lined up as follows -

  • Ameritrade (AMTD) +$0.34 (1.74%) to $19.87;
  • E*Trade (ET) +$0.27 (1.74%) to $15.78;
  • Charles Schwab (SCH) +$0.20 (1.46%) to $13.90;
  • Bear Stearns (BSC) +$1.04 (1.02%) to $103.15; and
  • Jeffries Group (JEF) +$0.42 (1.02%) to $41.75.

The Philadelphia SOX (Semiconductor) index declined 0.07 points (0.01%), to end the session at 474.37

  • KLA-Tencor (KLAC) -$0.77 (1.49%) to $50.93;
  • Altera (ALTR) -$0.31 (1.42%) to $21.56;
  • Applied Materials (AMAT) -$0.24 (1.3%) to $18.24;
  • Teradyne (TER) -$0.20 (1.29%) to $15.33; and
  • Xilinx (XLNX) -$0.22 (0.78%) to $28.13.

Gold & Silver Markets

Gold rose $2.20 (0.51%) to close at $432.1 per ounce, thanks to weakness in the US dollar. Some or other bunch of bureaucrats (the IMF, I think) said that the USD is overvalued.

Well, hush mah mouth... really? Overvalued, you say? Well thanks for that.

Where were these clowns with the USDX at 120? Doing what bureaucrats always do - sitting on their padded arses, kissing any hand more powerful than their own. IF I wasn't already bearish USD myself, I would take this as a contrarian signal - after all, there is a reason why the IMF and World Bank are used as conduits for useless half-wits like Paul Wolfowitz - they are quangoes for half-smart bureaucrats, and nothing more. They do far more damage to the global economy than most people are aware of, because vermin like Wolfowitz are always prepared to give the powerful exactly what they want; he is a short man, pure and simple - and the entire IMF is a "short man" institution.

Gold Bugs Index added 0.17 points (0.09%), to 196.94

  • Kinross Gold (KGC) +$0.12 (2.16%) to $5.68;
  • Hecla Mining (HL) +$0.05 (1.2%) to $4.20;
  • Golden Star (GSS) +$0.03 (0.99%) to $3.05;
  • Freeport McMoran (FCX) +$0.27 (0.67%) to $40.55; and
  • Randgold Resources (GOLD) +$0.08 (0.6%) to $13.38.

Silver rose $0.04 (0.59%) to close at $7.28 per ounce. The Gold and Silver Index (XAU) gained 0.22 points (0.24%), to 90.98 points.

  • Kinross Gold (KGC) +$0.12 (2.16%) to $5.68;
  • Placer Dome (PDG) +$0.13 (0.94%) to $14.00;
  • Freeport McMoran (FCX) +$0.27 (0.67%) to $40.55; and
  • Agnico Eagle (AEM) +$0.05 (0.41%) to $12.27.
Precious Metals and Indices
PHLX Gold and Silver Index90.980.220.24%
AMEX Gold BUGS Index196.940.170.09%

Oil Market

Oil was firmer, rising by $1.00 per barrel, closing at $61.57 per barrel and putting in an appearance at above $62 during the session. The session high was way up at $62.30 - but that's not a contract high for the September contract, which hit $62.89 the day London was bombed.

The Oil and Gas Index (XOI) added 10.34 points (1.1%), ending the day at 953.19

  • Royal Dutch Shell (RD) +$1.47 (2.4%) to $62.81;
  • Marathon Oil (MRO) +$1.31 (2.24%) to $59.67; and
  • Sunoco (SUN) +$2.37 (1.88%) to $128.10.

The Oil service stocks (OSX) Index gained 2.15 points (1.33%), ending the day at 163.53

  • Global Industries (GLBL) +$0.47 (4.79%) to $10.28;
  • National Oilwells/Varco (NOV) +$1.59 (3.04%) to $53.94; and
  • Transocean (RIG) +$1.46 (2.59%) to $57.89.
Energy Complex
Reuters CRB317.782.540.81%
Crude Oil Light Sweet61.5711.65%
Heating Oil1.71690.084.93%
Natural Gas8.1540.516.63%
Unleaded Gas1.74710.010.48%
AMEX Oil Index953.1910.341.1%
Oil Service Index163.532.151.33%

Currency Markets

USD Exchange Rates
US Dollar Index88.89-0.46-0.51%
Australian Dollar0.76160.00550.73%
Swiss Franc1.2795-0.0095-0.74%
Canadian Dollar0.82520.00760.93%