Interdum stultus opportuna loquitur...

Friday, September 23, 2005

USRant: Of COURSE, Dumbass...

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

  • a $9billion, 14-day repurchase with $6.75billion in T-backed collateral undertaken at a 10.3 basis point discount to the Fed Funds Rate (FFR); and
  • a $6.25billion, overnight repurchase with $5.215billion in T-backed collateral undertaken at a 10 basis point discount to the Fed Funds Rate (FFR).
Two repos, both at substantial discounts to the FFR; you might have expected a decent moonshot at 10 a.m., mightn't you? Well, that didn't occur; the 10a.m. move was less than 2 points. A long entry initiated at 10 a.m. was never underwater by even so much as a tick, but it also never gave much joy either. The session was a shearing session on both sides of the market.

Major US Indices

I mentioned yesterday that the market had formed a textbook divergence at the close, and that the open was a buying opportunity; it panned out pretty damn well, even if I do say so myself.

Examine the chart below - I've marked yesterday's divergence (note: the arrow isn't meant to touch the first bar of today - I was trying to show what was known as of yesterday afternoon). The first 15 minutes of today's session was a strange one; buying at exactly the open gave a 2-point possibility in the S&P immediately, as the Dow raced towards 10400 only to stall at 10395 after exactly 5 minutes. The S&P futures opened the day session at 1215.25 and hit 1217 after almost exactly eight minutes; by the 'take your point and be happy' paradigm that I advocate, your day was done and it was time to go to bed.

But let's assume you were greedy; you decided you were going to play every trick that I've covered in these pages.

Well, you had the entire hit parade; after those who bought the open had 'made their point' (get it?) the thing sagged for the remainder of the first 15 minutes - but there was still a divergence in force, so the greedy amongst us fade traders would still have held long. At the end of the first 15 you might have felt like a dill, because the Dow had reversed off the early failed attempt at 10400 and was trading at.... any guesses? 10350-ish.

Joy... a 'quarter'. Saved. In fact as anyone who was listening can readily attest, the opening was obviously 'bleh' (which is why I advocated ignoring the 'buy the open' trade at the time). But at the end of that first 15 minutes, boy oh boy...everything on the targeting computer yelled 'Take the shot' (and the S&P was down at 1212 - we got set at 1213 and got out at 1214).

From the open to the end of the (weak) repo-pump was a move of 4.75 S&P points; from the end of the first quarter-hour to the end of the repo pump was - count 'em - eight points (at 10:10 NY time, the S&P hit 1220). That coincided with the day's first test of Dow 10425 (a hint to take the long off, but not a signal to do so).

From there, the pullback gave a second, perfect CCI buying divergence: this divergence also had all the bells and whistles... the first test of the first hour low... a 'tease tick' below the first hour low.... a 'quarter' (10350 again) - what more does the market have to give you before you pull the trigger?

And the bounce was even more better than the first bounce: it got the market all the way to a %R overbought (now the market wasn't hinting that you took the long trade off... it was declaring that you do so: %R overbought, CCI at a 'short it if you feel like it' extreme (the red bubble): nobody had any business holding a long in the face of that technical setup. 

And finally - after the 'CCI solo' short worked for a weensy gain - there was a full-blown, picture perfect selling divergence just to close out the day.

As I said, this was one of those days when the 'take every trade' folks would look witheringly at people who use the '"I've made my point, Mr Market - I'm not going to argue anymore" approach. What doo fuses the one-pointers look, in the face of a day that offered over a dozen points bookable profits to anyone who took every signal.

As I've said before, it depends on what your aim is. If your aim is to do this sort of thing to grow a small egg to a great big egg in the space of a year, then booking that point is the way to go. Once you've gone from one contract to 40, by all means be a gunslinger: trade your 40-lot for the mandatory one point, then trade a 1-lot for the rest of the session and use whatever you gain to buy gifts for your kin.  

Dow intraday chart

Overall, the market showed significant stupidity in the face of the new natural menace to Bush's America (Hurricane Rita). Clearly the average American 'investor' sees all broken windows as a jobs for the glazier, not costs to the householder: Bastiat's fallacy as a national investment policy. 

I guess that helps explain why the US has spent the last century contributing to mass slaughter and destruction of civilian assets in foreign lands - they were only trying to help the natives generate faster GDP growth.

The Dow Jones Industrial Average - after some early indecision - decided to ignore the Cat5 hurricane that the Flying Spaghetti Monster (through his subordinate, God) has sent to remind the American people that HE had nothing whatsoever to do with convincing Bush to invade Iraq. 

The hurricane that devastated Naowlins confused some folks... the FSM (via God) did to the US what the US does to small defenceless countries: decided he didn't care much for it, so sent a wave of destruction that cripples civilian infrastructure, damages the means of distribution of exports (by wrecking the largest ports) and kills loads of people who've done nothing wrong.

Still, that was a bit 'nuanced' for your average evangelical: they managed to convince themselves that God was making a point about poofs and niggers. So the FSM had reiterate, but to make it more obvious - sending the next wave to a much more specific set of targets that are inexplicably tied in with the nation's oil infrastructure, and not a poor black man in sight (Texas is one of the whitest states in the Union, and they keep their homosexuality hidden under a facade of manly cowboy boots and swagger - you know, the stuff that looks so, like, totally gay to the rest of the world).

What I'm sayin' is that if you want to believe in a God (who is the local agent for the Flying Spaghetti Monster), then be honest with yourself - if God's doin' this, it's anti-war activism and it's a wake-up call to get a country to stop being a global vampire... it's not about poofs, niggers or abortion.

Dammit,, I'm digressing again.

For the session the Dow rose - as you might expect since I gave the all-clear for a buying bias yesterday. It added 44.02 points (0.42%), closing out the day at 10422.05 points. The index hit an intraday high of 10444.51 (near enough to 10450-ish), and fell as low as 10350.96 (10350-ish). 

Within the blue-chip index, 14 stocks rose, the biggest gainers being Mcdonalds (MCD, +5.32% to $33.09) and Wal Mart (WMT, +1.65% to $43.19), which accounted for 19 Dow points between them. Losers in the Dow numbered 15 and were led by General Motors (GM, -0.88% to $30.43) and Honeywell (HON, -0.84% to $36.59), with these two stocks contributing -5 Dow points worth of downward pressure on the index. Despite the headline gain, Volume traded was tilted in favour of the losers by 204.4m shares to 171.6m.

The broader S&P500 posted a rise of 4.42 points (0.37%), to end the session at 1214.62. Within the index, gainers numbered 290, while 196 S&P500 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 1090.82 million units traded in gainers as compared with 878.07 million traded in the losers .

Over at Times Square, the Nasdaq Composite gained 4.14 points (0.2%), to close at 2110.78, while larger-cap technology issues fared better with the Nasdaq100 adding 5.52 points (0.35%), to end at 1567.36 points. Within the tech benchmark, gainers numbered 47, while 49 Nasdaq100 stocks fell for the day. Volume was pretty evenly split, with the honours going to the losers with 345.18 million traded in the losers compared to 337.59 million in the winners .

NYSE Volume was super-chunky, with 2.42 billion shares changing hands, while Nasdaq Volume was chunky, with 1.74 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10422.0544.020.42%
Nasdaq Composite2110.784.140.2%
NYSE Volume2.42bn--
Nasdaq Volume1.74bn--


My 9-stock "bellwethers" group rose by an average of 0.87%

  • General Electric (GE) -$0.03 (0.09%) to $33.30;
  • Citigroup (C) +$0.36 (0.8%) to $45.18;
  • Wal Mart (WMT) +$0.70 (1.65%) to $43.19;
  • I.B.M. (IBM) +$0.65 (0.84%) to $78.21;
  • Intel (INTC) +$0.06 (0.24%) to $24.56;
  • Cisco Systems (CSCO) +$0.26 (1.46%) to $18.11;
  • eBay (EBAY) +$0.87 (2.36%) to $37.72;
  • Fannie Mae (FNM) +$0.31 (0.68%) to $46.01; and
  • Freddie Mac (FRE) -$0.06 (0.11%) to $56.50.

Market Breadth & Internals

Despite the headline index gain, breadth was not strong: NYSE declining Issues beat out advancers by 1847 to 1453, for a single-day A/D reading of -394 and Nasdaq losers exceeded gainers by 1586 to 1435. The 10-day moving average of the A/D line rose to -465.7 on the NYSE, while the 10dma of the Nasdaq A/D rose to -432.1.

NYSE advancing volume exceeded volume in decliners by 1203.6 to 1193.8 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 842.2 to 836.9 million shares.

134 NYSE-listed stocks rose to new 52-week highs, and 206 posted fresh 52-week lows, while on the Nasdaq there were 110 stocks that hit new 52-week highs, and 143 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1203.59836.92
Declining Volume (m)1193.79842.21
New Highs134110
New Lows206143

Market Sentiment Statistics
CBOE Volatility Index13.33-0.5-3.62%
CBOE Nasdaq Volatility Index15.3-0.42-2.67%
Equity Put-Call Ratio1.330.3535.71%
10-day PCR0.610.0917.31%
SPX-VIX Ratio91.13.624.14%

Bond Market Analysis

Bonds rose marginally at the long end, with the yield on the benchmark 30-year Treasury bond shedding 0.9 bps to 4.461%.

The middle of the yield curve was broadly higher in price: five year yields fell to 3.986%, and ten-year yields fell to 4.176%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 9.0 bps wider at 10.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 42.0 bps for 10-year AAA, and 73.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were mixed with the AAA-A spread on 20-years 8.0 bps wider at 42.0 basis points and the 10-year AAA-A spread 4.0 bps tighter at 14.0 bps.

Treasury Yields
UST 13wk (yld)3.380.0381.14%
UST 2Y (yld)3.9300%
UST 5Y (yld)3.986-0.021-0.52%
UST 10Y (yld)4.176-0.012-0.29%
UST 30Y (yld)4.461-0.009-0.2%

The Banks Index posted a rise of 0.36 points (0.37%), at 96.56; within the index,

  • Zions Bancorp (ZION) +$1.08 (1.54%) to $71.33;
  • Golden West Financial (GDW) +$0.82 (1.4%) to $59.60;
  • Citigroup (C) +$0.36 (0.8%) to $45.18;
  • BB&T Corp (BBT) +$0.31 (0.79%) to $39.50; and
  • Mellon Financial (MEL) +$0.25 (0.79%) to $32.09.

The Broker-dealer Index dipped 2.15 points (1.22%), closing at 174.26; the ticket clippers lined up as follows -

  • A G Edwards (AGE) -$1.88 (4.1%) to $44.00;
  • Raymond James (RJF) -$0.67 (2.15%) to $30.48;
  • Jeffries Group (JEF) -$0.09 (0.22%) to $41.32;
  • E*Trade (ET) +$0.03 (0.18%) to $16.43; and
  • Charles Schwab (SCH) +$0.03 (0.21%) to $14.05.

The Philadelphia SOX (Semiconductor) index lost 1.05 points (0.23%), to end the session at 457.11

  • Marvell Tech Group (MRVL) -$1.74 (3.85%) to $43.49;
  • Taiwan Semiconductors (TSM) -$0.20 (2.46%) to $7.94;
  • ST Microelectronic (STM) -$0.30 (1.77%) to $16.62;
  • Freescale Semiconductors (FSL-B) -$0.34 (1.5%) to $22.32; and
  • Micron Technology (MU) -$0.18 (1.47%) to $12.06.

Gold & Silver Markets

Gold fell by $2.40 (0.51%) to close at $467 per ounce. Gold is now overcooked, and I will write something about that today or tomorrow.

Silver fell by $0.01 (0.07%) to close at $7.42 per ounce. The Gold and Silver Index (XAU) lost 1.04 points (0.93%), closing at 110.45 points.

  • Durban Rooderpoert Deep (DROOY) -$0.08 (5.16%) to $1.47;
  • Gold Fields (GFI) -$0.40 (2.83%) to $13.71;
  • Kinross Gold (KGC) -$0.18 (2.39%) to $7.35; and
  • Meridian Gold (MDG) -$0.50 (2.27%) to $21.56.
Precious Metals and Indices
PHLX Gold and Silver Index110.45-1.04-0.93%
AMEX Gold BUGS Index238.76-4.46-1.83%

Oil Market

Oil lost ground, shedding $0.30 per barrel, closing at $66.50 per barrel. The full-court press in the media about Hurricane Rita is a complete furphy; it will hit landfall in Texas, do fuck-all damage to oil infrastructure, and oil will drop like an anvil on news-traders' heads on Monday. 

Cut this out and stick it to the fridge: any time four or more journalists are writing the same tune about any major move, the move is over and it's time to take the opposite side.

The Oil and Gas Index (XOI) dipped 2.45 points (0.23%), closing at 1077.1

  • Kerr Mcgee (KMG) -$2.06 (2.13%) to $94.65;
  • Amerada Hess (AHC) -$2.57 (1.84%) to $136.81; and
  • Occidental Petroleum (OXY) -$0.92 (1.04%) to $87.46.

The Oil service stocks (OSX) Index dipped 2.29 points (1.3%), to end the session at 174

  • National Oilwells/Varco (NOV) -$1.74 (2.64%) to $64.24;
  • Rowan Companies (RDC) -$0.86 (2.3%) to $36.55; and
  • Tidewater (TDW) -$0.92 (2%) to $44.98.
Energy Complex
Reuters CRB324.9500%
Crude Oil Light Sweet66.5-0.3-0.45%
Heating Oil2.063400.09%
Natural Gas12.790.21.56%
Unleaded Gas2.03880.073.29%
AMEX Oil Index1077.1-8.03-0.74%
Oil Service Index174-2.29-1.3%

Currency Markets

USD Exchange Rates
US Dollar Index88.1100%
Australian Dollar0.7626-0.0089-1.15%
Swiss Franc1.27850.00790.62%
Canadian Dollar0.8534-0.0026-0.3%