Interdum stultus opportuna loquitur...

Wednesday, August 31, 2005

USRant: Infuriating...

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

Those of you who clicked on the WPL link in yesterday's OzRant will have noticed the closing sentences - that 

Crude Oil is well-overdue a significant pullback, at which time an awful lot of 'hot money' will leave the Energy sector. We will present the case for a significant pullback in Oil later in the week (by which time the pullback should already be underway).

The catalyst for a Crude pullback was purely technical, and based mostly on the ease with which da Boyz routinely take advantage of inexperienced news-traders. This session's price action in the Crude market reinforced why it pays to ignore most economic data - or at the very least, to wait for the initial nuffnuff over-reaction, and then position against it.

The Energy Department released its weekly Crude Oil inventories, which showed a 1.5 million barrel drawdown - and yet oil prices could not muster a move upwards after the data; once that happened, it was clear that the 'oil pullback' hypothesis was a winner (and oil dropped almost $2 during the session). 

The BubbleVision justification for the drawdown was that the numbers were affected by the hurricane - but of course the hurricane happened on the weekend, and the numbers were inventories as of last Wednesday. But who gives a crap about 'reality-based' things like time? If you want to see numbers that were affected by the hurricane, you'll have to wait for next week's release - by which time nobody will be watching the oil market anyhow, except to point out how good it is for the economy that oil prices are on the wane.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation: a $7.75billion, overnight repurchase with $1.792billion in T-backed collateral undertaken at a 1.1 basis point premium to the Fed Funds Rate (FFR). 

With the economic data quite mixed (GDP a teensy bit slower than expected, core GDP deflator also a tad lower, Mortgage Applications numbers soft, Chicago NAPM much much weaker than expected), there was no point looking to the new-look Fed to bail the markets out.

I say "new look" because Greensplatt has changed his tune YET AGAIN. Remember how for the last two years he's been saying not only is there no housing bubble, but that there is no risk of a housing bubble because of the localisation of housing markets? Well, the slimy prick jumped off that particular bandwagon recently - and now is trying to double-speak his way away from his former statements by 'sounding the alarm'.

It's like a salesman for an Open Barn Door policy suddenly lecturing folks about barn security, once the neighbours start reporting horses in their vegetable patches... or a crack dealer suddenly warning about the dangers of substance abuse.

Greensplatt and his central-wanking fogey chums have been the primo global enablers of what will turn out to be the biggest credit crisis since the 1920s; when 40% of new home-'owners' have equity less than 5% (and that ignores people using secondary loans to make their deposits), and almost half are using interest-only variable rate loans, and when almost a third of all home'owners' are spending more than a third of their disposable income on their housing, you just know you're in deeper shit than the Kelly Gang at Glenrowan... and Greenspan is the bloke who wrote the invitations to a sit-down dinner at the Glenrowan Pub. And now the prick has the gall to hector people about the how markets have dealt with people who absent themselves from risk calculations.

Major US Indices

The entire session was one of annoying non-provision of decent signals; I don't like having to make 'bold' decisions. If something is "there" I will declare it, but doing anything - whether in stocks or commodities - based on something that's nearly there is a recipe for disaster.

This session was full of 'nearly there' as far as my favourite indicator set is concerned... check out the chart.

Dow 15-minute intraday chart

There were three'half-signals' - 

  • first, what looked like a CCI divergence - but the Dow didn't actually make a higher high (the first point marked Bugger... is 0.5 Dow points below the prior swing high);
  • second, a higher intraday high with what looked like a lower CCI... until you checked and saw that the CCI was just higher; and 
  • third, a CCI divergence - but with no accompanying %R overbought.
Notice the divergence right at the close - a good indication that the afternoon momentum is already on the fade (evidence of a short-squeeze).

If you were desperately keen to plonk down a 'bet' (you should never be too eager), the best intraday mechanisms in the absence of a divergence is just to follow the 15-minute... rising highs and rising lows mean you try to enter long close to the previous-bar low (and scalp for a point at  a time) when shorter-term charts hit oversold; the reverse for falling highs and falling lows. Remember, the overall aim is just a point a night - which means you wait until the ducks line up.

And when - as with this session - there is no strong first-hour momentum, fade first-hour extremes. That means selling the first hour high when it's tested later in the session (always allowing a 'tease margin' as breakout traders get encouraged to jump in); there are a couple of other neat tricks, but I'm not writing a bloody book on trading first thing in the morning (Australian time).

The upshot was a session that effectively went nowhere until 1 p.m., during which time the S&P traded 3 points above, and 3 points below, its previous close. Then at 1 p.m. someone decided to scare some shorts, and stuck their foot on the accelerator. 

As a result, the The Dow Jones Industrial Average went from being solidly underwater, to a closing gain of 68.78 points (0.66%), closing out the day at 10481.6 points. The index hit an intraday high of 10484.79 in the final minutes of trading, having  as low as 10356.87 (10350-ish) during the first hour (but notice - failing to penetrate the previous day's low). 

Within the blue-chip index, 26 stocks rose, the biggest gainers being Caterpillar (CAT, +3.18% to $55.49) and Hewlett Packard (HPQ, +2.44% to $27.76), which accounted for 19 Dow points between them. Losers in the Dow numbered 4 and were led by Alcoa (AA, -1.07% to $26.79) and General Motors (GM, -0.75% to $34.19), with these two stocks contributing -4 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 351.5m shares to 48m.

The broader S&P500 added 11.92 points (0.99%), ending the day at 1220.33. Within the index, gainers numbered 415, while 72 S&P500 stocks fell for the day. Volume was tilted 4.9:1 in favour of the winners with 1599.23 million units traded in the winners as compared with 325.92 million traded in the losers .

Over at Times Square, the Nasdaq Composite gained 22.33 points (1.05%), to close at 2152.09, while larger-cap technology issues fared worse with the Nasdaq100 adding 15.98 points (1.02%), to end at 1581.71 points. Within the tech benchmark, gainers numbered 80, while 16 Nasdaq100 stocks fell for the day. Volume was tilted 5.5:1 in favour of the winners with 571.29 million traded in the winners compared to 104.63 million in the losers .

NYSE Volume was super-duper-chunky, with 2.31 billion shares changing hands, while Nasdaq Volume was just plain chunky, with 1.7 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10481.668.780.66%
Nasdaq Composite2152.0922.331.05%
NYSE Volume2.31bn--
Nasdaq Volume1.7bn--


My 9-stock "bellwethers" group rose by an average of 0.76%; I mentioned Citigroup's strange defiance the otehr day, and it proved to be a decent harbinger yet again.

  • General Electric (GE) +$0.37 (1.11%) to $33.61;
  • Citigroup (C) +$0.51 (1.18%) to $43.77;
  • Wal Mart (WMT) -$0.23 (0.51%) to $44.96;
  • I.B.M. (IBM) +$0.08 (0.1%) to $80.62;
  • Intel (INTC) +$0.15 (0.59%) to $25.72;
  • Cisco Systems (CSCO) +$0.11 (0.63%) to $17.62;
  • eBay (EBAY) +$0.79 (1.99%) to $40.49;
  • Fannie Mae (FNM) +$0.57 (1.13%) to $51.04; and
  • Freddie Mac (FRE) +$0.38 (0.63%) to $60.38.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 2530 to 778 for a single-day A/D reading of 1752; Nasdaq gainers trumped losers by 2104 to 930. The 10-day moving average of the A/D line rose to 239.6 on the NYSE, while the 10dma of the Nasdaq A/D rose to 23.0.

NYSE advancing volume exceeded volume in decliners by 1897.4 to 406.7 million shares; Nasdaq advancing volume was greater than volume in decliners by 1261 to 347.5 million shares.

204 NYSE-listed stocks rose to new 52-week highs, and 37 posted fresh 52-week lows, while on the Nasdaq there were 113 stocks that hit new 52-week highs, and 39 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1897.441261
Declining Volume (m)406.74347.5
New Highs204113
New Lows3739

Market Sentiment Statistics
CBOE Volatility Index12.6-0.97-7.15%
CBOE Nasdaq Volatility Index14.71-0.62-4.04%
Equity Put-Call Ratio0.69-0.21-23.33%
10-day PCR0.6300%
SPX-VIX Ratio96.97.88.76%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 4.6 bps to 4.261%. the 30-year bond future rose to 118-12/32 and is now just begging to be shorted. Absolutely gagging for it, as your average London chancer might say; still, I'm not going to stand in front of the bond train just yet - I haven't even looked at a weekly T-bond chart since the bottom was in a couple of weeks back.

The middle of the yield curve was broadly higher in price: five year yields fell to 3.869%, and ten-year yields fell to 4.02%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at -6.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 53.0 bps for 10-year AAA, and 92.0 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 7.0 bps wider at 46.0 basis points and the 10-year AAA-A spread 3.0 bps wider at 4.0 bps.

Treasury Yields
UST 13wk (yld)3.4300%
UST 2Y (yld)3.8-0.13-3.31%
UST 5Y (yld)3.869-0.094-2.37%
UST 10Y (yld)4.02-0.07-1.71%
UST 30Y (yld)4.261-0.046-1.07%

The Banks Index gained 0.96 points (0.99%), ending the day at 98.17; within the index,

  • North Fork Bancorp (NFB) +$0.59 (2.19%) to $27.49;
  • National City Corp (NCC) +$0.60 (1.67%) to $36.63;
  • Keycorp (KEY) +$0.51 (1.56%) to $33.12;
  • PNC Financial Services (PNC) +$0.86 (1.55%) to $56.23; and
  • Zions Bancorp (ZION) +$1.02 (1.48%) to $69.86.

The Broker-dealer Index rose 1.35 points (0.81%), at 168.45; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.22 (1.65%) to $13.53;
  • A G Edwards (AGE) +$0.69 (1.55%) to $45.21;
  • Jeffries Group (JEF) +$0.59 (1.52%) to $39.48;
  • Raymond James (RJF) +$0.45 (1.51%) to $30.33; and
  • Goldman Sachs (GS) +$1.34 (1.22%) to $111.18.

The Philadelphia SOX (Semiconductor) index advanced 5.12 points (1.09%), at 473.75

  • Micron Technology (MU) +$0.60 (5.31%) to $11.91;
  • Freescale Semiconductors (FSL-B) +$0.96 (4.15%) to $24.08;
  • Advanced Micro Devices (AMD) +$0.40 (1.96%) to $20.77;
  • Xilinx (XLNX) +$0.48 (1.74%) to $28.08; and
  • Teradyne (TER) +$0.28 (1.69%) to $16.80.

Gold & Silver Markets

Gold rose $2.60 (0.6%) to close at $435.10 per ounce. The USD had a soft day, Gold had a good one. No need to even bother connecting the dots.

The Gold Bugs Index gained 7.2 points (3.62%), to 205.99

  • Coeur d'Alene (CDE) +$0.25 (7.35%) to $3.65;
  • Hecla Mining (HL) +$0.22 (6.59%) to $3.56;
  • Gold Fields (GFI) +$0.57 (5.23%) to $11.46;
  • Harmony Gold (HMY) +$0.35 (4.85%) to $7.57; and
  • Golden Star (GSS) +$0.13 (4.58%) to $2.97.

Silver rose $0.09 (1.35%) to close at $6.78 per ounce. The Gold and Silver Index (XAU) gained 2.34 points (2.5%), closing at 95.77 points.

  • Gold Fields (GFI) +$0.57 (5.23%) to $11.46;
  • Harmony Gold (HMY) +$0.35 (4.85%) to $7.57;
  • Meridian Gold (MDG) +$0.75 (4.13%) to $18.89; and
  • Goldcorp (GG) +$0.70 (4.03%) to $18.06.
Precious Metals and Indices
PHLX Gold and Silver Index95.772.342.5%
AMEX Gold BUGS Index205.997.23.62%

Oil Market

Oil lost ground despite the drawdown in crude inventories mentioned in the opening remarks: by the close it posted a drop of $0.87 per barrel to $68.94 per barrel, but it was down as low as $67.80 before bouncing at 1 p.m. NY time. The bounce was just a corrective - intraday momentum had reached a real crescendo (althoug prices reached a decrescendo).

The Oil and Gas Index (XOI) added 32.38 points (3.29%), to end the session at 1017.3

  • Sunoco (SUN) +$3.95 (5.75%) to $72.70;
  • Marathon Oil (MRO) +$2.32 (3.74%) to $64.31; and
  • TotalFinaElf S.A. (TOT) +$4.69 (3.69%) to $131.84.

The Oil service stocks (OSX) Index rose 5.92 points (3.57%), to 171.85

  • Tidewater (TDW) +$3.46 (8.42%) to $44.54;
  • National Oilwells/Varco (NOV) +$4.34 (7.25%) to $64.21; and
  • Global Industries (GLBL) +$0.77 (5.92%) to $13.77.
Energy Complex
Reuters CRB318.990.550.17%
Crude Oil Light Sweet68.94-0.87-1.25%
Heating Oil2.080-0.24%
Natural Gas11.23-0.43-3.68%
Unleaded Gas2.25530.062.53%
AMEX Oil Index1017.332.383.29%
Oil Service Index171.855.923.57%

Currency Markets

USD Exchange Rates
US Dollar Index87.61-0.72-0.82%
Australian Dollar0.75520.00730.98%
Swiss Franc1.2529-0.0155-1.22%
Canadian Dollar0.84230.0030.36%