Interdum stultus opportuna loquitur...

Thursday, August 25, 2005

USRant: Well, I Didn't Say MUCH Higher...

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

Note to those who tried to examine the RantPro Index Component Summary yesterday - somehow I picked the exact time that my hosting company had a seizure - meaning that the page was unavailable for about two hours (and here was me, trying to meet a bloody deadline, too!)... That said, I would never 'dis' the support crew at my webhosts - they do a magnificent job and provide fast and helpful feedback. Chalk this down to an annoying concatenation of circumstances. (Note I've put the link back up for those who wish to have a gander: I know of no other site that has this type of Summary).

Well, I said yesterday that the wensy divergence that was becoming apparent on the Nasdaq100 chart (and the S&P) near the close yesterday was an indicator that today would see higher prices. 

To recap exactly what I said:

Note the microdivergence near the close of the NDX - which is also present in the S&P (but not the Dow). Likely outcome: higher prices tomorrow.

Hard to imagine how I could have said it less ambiguously, bearing in mind the non-advisory nature of the Rant remarks. 

Well, the microdivergence blossomed into a full-blown divergence (which was present on the Dow) and sure as eggs, the markets moved up easier than they moved down.

Granted, the 'higher prices' turned out not to be much higher, but if you can snaffle an S&P point a day (net) by having the right intraday bias, you're on your way to a life of couches and cake (1 pt a day is 2.5% - i.e., raw doubling of money in 40 sessions: there are 250 sessions in a trading year).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $10.25billion, overnight repurchase entirely in T-backed collateral undertaken at a 2.1 basis point premium to the Fed Funds Rate (FFR); and
  • a $12billion, 14-day repurchase with $10.576billion in T-backed collateral undertaken at a 2.9 basis point discount to the FFR.

Major US Indices

Today was what folks call a 'narrow range' day, or a 'volatility contraction' day. The entire day's trade took place in a 37 point range - basically crawling sideways across the page, with one significant move (a break of the first-hour range, to lure in breakout longs... of course it then went back far enough to try and trigger the breakout-traders' stops).

Here's a free hint: if the first hour's range sucks ass like today's did, switch to a 5-minute chart and look for shorter-timeframe divergences; if you see one, use a really short-term chart (say, an 85-tick) to trade from %R overbought to %R oversold (and vice versa for 5-minute buying divergences) hinging off the 5-minute divergences. Works a treat in trendless markets, and if the market suddenly breaks the likelihood of breaking against the run of play is actually reasonably low (but it's not zero).

The Dow Jones Industrial Average advanced 15.76 points (0.15%), closing out the day at 10450.63 points (10450-ish). The index hit an intraday high of 10465.36 at 3 p.m. (precisely the wrong time for a break of the first hour high), and fell as low as 10428.34 (10425-ish) just before 10 a.m. NY time. 

Within the blue-chip index, 16 stocks rose, the biggest gainers being Mcdonalds (MCD, +0.97% to $33.30) and Microsoft (MSFT, +0.82% to $27.03), which accounted for 4 Dow points between them. Losers in the Dow numbered 14 and were led by Walt Disney (DIS, -0.79% to $25.20) and Pfizer (PFE, -0.76% to $24.87), with these two stocks contributing -3 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 141m shares to 134.5m.

The broader S&P500 gained 2.78 points (0.23%), ending the day at 1212.37. Within the index, gainers numbered 319, while 167 S&P500 stocks fell for the day. Volume was tilted 1.3:1 in favour of the winners with 757.00 million units traded in the winners as compared with 583.17 million traded in the losers .

Over at Times Square, the Nasdaq Composite added 5.46 points (0.26%), to close at 2134.37, while larger-cap technology issues fared better with the Nasdaq100 adding 4.17 points (0.27%), to end at 1565.88 points. Within the tech benchmark, gainers numbered 64, while 32 Nasdaq100 stocks fell for the day. Volume was tilted 1.3:1 in favour of the winners with 295.72 million traded in the winners compared to 219.65 million in the losers .

NYSE Volume was chunky, with 1.57 billion shares changing hands, while Nasdaq Volume was actually pretty soft, with 1.34 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10450.6315.760.15%
Nasdaq Composite2134.375.460.26%
NYSE Volume1.57bn--
Nasdaq Volume1.34bn--


My 9-stock "bellwethers" group fell by an average of 0.09%

  • General Electric (GE) -$0.04 (0.12%) to $33.50;
  • Citigroup (C) +$0.22 (0.52%) to $43.27;
  • Wal Mart (WMT) -$0.26 (0.57%) to $45.29;
  • I.B.M. (IBM) -$0.22 (0.27%) to $81.10;
  • Intel (INTC) -$0.07 (0.27%) to $25.46;
  • Cisco Systems (CSCO) -$0.04 (0.23%) to $17.48;
  • eBay (EBAY) -$0.08 (0.21%) to $38.88;
  • Fannie Mae (FNM) +$0.27 (0.53%) to $50.97; and
  • Freddie Mac (FRE) -$0.09 (0.15%) to $60.34.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1899 to 1325 for a single-day A/D reading of 574; Nasdaq gainers trumped losers by 1627 to 1382. The 10-day moving average of the A/D line rose to 13.8 on the NYSE, while the 10dma of the Nasdaq A/D rose to -101.1.

NYSE advancing volume exceeded volume in decliners by 928.5 to 613.2 million shares; Nasdaq advancing volume was greater than volume in decliners by 735.6 to 573.8 million shares.

78 NYSE-listed stocks rose to new 52-week highs, and 31 posted fresh 52-week lows, while on the Nasdaq there were 60 stocks that hit new 52-week highs, and 38 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)928.49735.57
Declining Volume (m)613.15573.84
New Highs7860
New Lows3138

Market Sentiment Statistics
CBOE Volatility Index13.73-0.41-2.9%
CBOE Nasdaq Volatility Index15.35-0.11-0.71%
Equity Put-Call Ratio0.68-0.1-12.82%
10-day PCR0.6300%
SPX-VIX Ratio88.32.763.22%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 3.3 bps to 4.365%. The bounce I foresaw (when the 30-year bond futures were trading just under 114) is just about spent, with the 30-year futures hitting 117-03 intraday today before settling at 117.

The middle of the yield curve was broadly higher in price: five year yields fell to 4.038%, and ten-year yields fell to 4.16%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps tighter at -7.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 49.0 bps for 10-year AAA, and 85.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly tighter with the AAA-A spread on 20-years 3.0 bps tighter at 36.0 basis points and the 10-year AAA-A spread 3.0 bps tighter at 3.0 bps.

Treasury Yields
UST 13wk (yld)3.43500%
UST 2Y (yld)3.980.010.25%
UST 5Y (yld)4.038-0.007-0.17%
UST 10Y (yld)4.16-0.019-0.45%
UST 30Y (yld)4.365-0.033-0.75%

The Banks Index gained 0.28 points (0.29%), ending the day at 98.37; within the index,

  • Suntrust Banks (STI) +$1.01 (1.44%) to $71.02;
  • Northern Trust (NTRS) +$0.46 (0.92%) to $50.69;
  • JPMorganChase (JPM) +$0.27 (0.8%) to $34.12;
  • M&T Bank Corp (MTB) +$0.79 (0.74%) to $107.18; and
  • National City Corp (NCC) +$0.19 (0.53%) to $36.31.

The Broker-dealer Index shed 0.26 points (0.15%), to 168.31; the ticket clippers lined up as follows -

  • E*Trade (ET) -$0.30 (1.8%) to $16.37;
  • Charles Schwab (SCH) -$0.06 (0.44%) to $13.61;
  • Ameritrade (AMTD) -$0.08 (0.39%) to $20.18;
  • Legg Mason (LM) -$0.40 (0.38%) to $105.32; and
  • Jeffries Group (JEF) -$0.07 (0.18%) to $39.52.

The Philadelphia SOX (Semiconductor) index gained 3.08 points (0.66%), closing at 467.05

  • National Semiconductors (NSM) +$0.57 (2.35%) to $24.82;
  • Teradyne (TER) +$0.32 (2.01%) to $16.22;
  • Micron Technology (MU) +$0.19 (1.7%) to $11.35;
  • Advanced Micro Devices (AMD) +$0.34 (1.65%) to $20.99; and
  • Novellus Systems (NVLS) +$0.40 (1.48%) to $27.41.

Gold & Silver Markets

Gold rose $0.9 (0.2%) to close at $440 per ounce after dipping early to the high-438's.

The Gold Bugs Index gained 1.13 points (0.56%), closing at 201.29

  • Iamgold (IAG) +$0.16 (2.34%) to $7.00;
  • Eldorado Gold (EGO) +$0.05 (1.76%) to $2.89;
  • Glamis Gold (GLG) +$0.28 (1.54%) to $18.50;
  • Coeur d'Alene (CDE) +$0.05 (1.44%) to $3.53; and
  • Goldcorp (GG) +$0.24 (1.4%) to $17.37.

Silver fell by $0.09 (1.3%) to close at $6.83 per ounce and now looks like some genuine technical damage has been done. Will be interesting to see if Silver's technical picture starts to influence Gold. 

The Gold and Silver Index (XAU) gained 0.65 points (0.69%), closing at 94.26 points.

  • Durban Rooderpoert Deep (DROOY) +$0.04 (4.19%) to $1.02;
  • Barrick Gold (ABX) +$0.50 (1.96%) to $26.05;
  • Goldcorp (GG) +$0.24 (1.4%) to $17.37; and
  • Kinross Gold (KGC) +$0.08 (1.27%) to $6.37.
Precious Metals and Indices
PHLX Gold and Silver Index94.260.650.69%
AMEX Gold BUGS Index201.291.130.56%

Oil Market

Oil was firmer, rising by $0.13 per barrel, closing at $67.45 per barrel after dipping as low as $66.40: the flood of nuffnuffs certainly didn't happen today - give it time. There is a genuine need of a new bunch of dumb, new, inexperienced longs in this market - the cleanout last week got rid of quite a few, I'm picking. 

All those banner ads pleading with newcomers to have a dip at commodities trading always lure in the folks who try and jump on a stale trend. If you do that with stocks, you may get to live another day... do it in the commodities markets and you will get gutted.

Don't get me wrong - I think everybody should trade commodities. But they should do it sensibly - which mens that you are always looking to enter long when it looks like people are slamming everything on the sell, and look to short when the market's going parabolic. First few times, it takes a bit of courage - then you discover that it's really not that hard. Think of it as Buffettology on micro-timescales.

The Oil and Gas Index (XOI) lost 2.16 points (0.22%), at 967.11

  • Marathon Oil (MRO) -$0.58 (0.96%) to $59.56;
  • Repsol YPF (REP) -$0.27 (0.92%) to $29.01; and
  • Kerr Mcgee (KMG) -$0.65 (0.75%) to $86.50.

The Oil service stocks (OSX) Index declined 0.31 points (0.19%), to 163.47

  • Tidewater (TDW) -$0.71 (1.76%) to $39.61;
  • Rowan Companies (RDC) -$0.58 (1.64%) to $34.70; and
  • Halliburton (HAL) -$0.89 (1.52%) to $57.67.
Energy Complex
Reuters CRB311.89-1.83-0.58%
Crude Oil Light Sweet67.450.130.19%
Heating Oil1.907800.23%
Natural Gas9.77-0.21-2.14%
Unleaded Gas1.87790.020.95%
AMEX Oil Index967.11-2.16-0.22%
Oil Service Index163.47-0.31-0.19%

Currency Markets

USD Exchange Rates
US Dollar Index87.74-0.15-0.17%
Australian Dollar0.75930.0030.4%
Swiss Franc1.2568-0.0078-0.62%
Canadian Dollar0.8391-0.0014-0.17%