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For a while there, it looked like my prognostication regarding the Crude Oil inventory data was going to pan out. The data was surprisingly strong (although Crude inventories fell, stocks of distillate and gasoline rose - which was not expected), but the damage inflicted on the oil price was not significant. The equity indices managed a very brief zig upwards (it was a couple of points, and I sure as hell wasn't on it... by that time the 'one point per day' target was safely in the account - from a long off the divergence that developed at the end of the first 15 minutes).
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation - a $2.25billion, overnight repurchase entirely in T-backed collateral, undertaken at a 9 basis point discount to the new prevailing FFR. Really the discount doesn't matter when the repurchase is that small.
Major US Indices
No chart today - I am not at my usual PC, so I don't have access to the wherewithal to produce the charts. I'll try to put one up when I get back home this afternoon.
One thing I will mention regarding last night's price action is this: the only divergence was a buying divergence which occurred on the first bar of the night (which was a gap down opening in all the indices), and buying at exactly the open of the next bar yielded the required one S&P point. The post-divergence move - which took over an hour - yielded a little over three points at its absolute best; that ought to have warned anyone who has eyes to see, even though there was no selling divergence.
That said, they ought already to have exited the long - for two reasons. Firstly, just take the point and be happy; and secondly, there was no telling what the market was going to do in the immediate aftermath of the Oil Inventories data. Never hold a scalp-method based trade in the period 2 minutes either side of an important data release - it's asking for your stop to be hit. Lastly, but not least-ly, the 'first hour range tease' approach made it clear that the first move outside the first-hour range was likely to be a fakeout... and that fakeout happened to the upside (you need to look at futures day-session only charts for this).
The S&P futures opened the day session at 1225 (with a 3-odd point gap down) - that was also the first-hour high. 90 minutes later - i.e., half an hour after the oil inventories data, and half an hour after the first hour had finished, the S&P futures traded 1225 again - the perfect entry for a 'false breakout' short entry. (Note: because the first divergence had already provided the day's desired point, this 'fade the first hour extreme' trade was entirely a "fielder's choice"). Anyhow - the basic point its this: that first hour high was tested (but not broken) after the oil inventories data, and from there the market fell back through the bottom of the first hour's range, and kept heading south. It was a night to sell rallies (if you were greedy enough to keep the targeting computer switched on).
There is a developing buying divergence evident right at the close (the market closed right on its low), which indicates that one should buy the open tomorrow. (Of course that's not advice... this is a purely academic exercise).
After the early attempt to close the opening gaps in the S&P and Nasdaq (the Dow rarely gaps because of the 'staggered open'), and the mandatory test of the first-hour high, it jsut got plain ugly. I've heard it referred to as 'dingo ugly', but frankly I don't understand why anybody would think a dingo is ugly. I've also heard the term 'coyote ugly', and while coytotres are less attractive than dingos, they're still not ugly in any genuine sense of the word. I prefer "George Bush's Soul" ugly or "Dick Cheney's mind" ugly... or (what the hell).. "Paul Wolfowitz ugly". (Seriously - is Wolfowitz a dead-set Ferengi or what?).
Anyhow - the longer the day got, the more worser it got. Since I declared that 10700 would be our latest swing top, the Dow has dropped over 300 points. I only say this as a naked boast...
The Dow Jones Industrial Average dipped 103.49 points (0.99%), closing out the day at 10378.03 points. The index hit an intraday high of 10484.55, and fell as low as 10375.24 during the session. Only 4 of the components of the blue-chip index rose, the biggest gainers being Exxon Mobil (XOM, +0.68% to $64.97) and Caterpillar (CAT, +0.53% to $57.11), which accounted for 6 Dow points between them. Losers in the Dow numbered 26 and were led by Mcdonalds (MCD, -3.68% to $31.42) and American Express (AXP, -2.56% to $57.00), with these two stocks contributing -21 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 320.8m shares to 81.7m.
The broader S&P500 dipped 11.14 points (0.91%), ending the day at 1210.2. Within the index, gainers numbered 86, while 404 S&P500 stocks fell for the day. Volume was tilted 3.5:1 in favour of the losers with 1612.49 million units traded in the losers as compared with 462.15 million traded in the winners .
Over at Times Square, the Nasdaq Composite declined 24.69 points (1.16%), to close at 2106.64, while larger-cap technology issues fared better with the Nasdaq100 losing 16.36 points (1.04%), to end at 1561.84 points. Within the tech benchmark, gainers numbered 22, while 75 Nasdaq100 stocks fell for the day. Volume was tilted 3.7:1 in favour of the losers with 563.14 million traded in the losers compared to 154.23 million in the winners .
NYSE Volume was super-chunky, with 2.53 billion shares changing hands, while Nasdaq Volume was chunky, with 1.77 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10378.03 | -103.49 | -0.99% |
| S&P500 | 1210.2 | -11.14 | -0.91% |
| Nasdaq Composite | 2106.64 | -24.69 | -1.16% |
| Nasdaq100 | 1561.84 | -16.36 | -1.04% |
| NYSE Volume | 2.53bn | - | - |
| Nasdaq Volume | 1.77bn | - | - |
Bellwethers
My 9-stock "bellwethers" group fell by an average of 0.96%
- General Electric (GE) -$0.29 (0.86%) to $33.55;
- Citigroup (C) -$0.33 (0.73%) to $44.82;
- Wal Mart (WMT) -$0.72 (1.67%) to $42.49;
- I.B.M. (IBM) -$1.14 (1.45%) to $77.56;
- Intel (INTC) +$0.02 (0.08%) to $24.50;
- Cisco Systems (CSCO) -$0.12 (0.67%) to $17.85;
- eBay (EBAY) +$0.14 (0.38%) to $36.85;
- Fannie Mae (FNM) -$0.96 (2.06%) to $45.70; and
- Freddie Mac (FRE) -$0.94 (1.63%) to $56.56.
Market Breadth & Internals
NYSE declining Issues beat out advancers by 2198 to 1107, for a single-day A/D reading of -1091; and Nasdaq losers exceeded gainers by 2282 to 772. The 10-day moving average of the A/D line fell to -481.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to -493.8.
On the NYSE declining volume was greater than volume in advancing issues by 1858.6 to 665.9 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1377 to 381.9 million shares.
192 NYSE-listed stocks rose to new 52-week highs, and 183 posted fresh 52-week lows, while on the Nasdaq there were 132 stocks that hit new 52-week highs, and 141 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 1107 | 772 |
| Decliners | 2198 | 2282 |
| Advancing Volume (m) | 665.85 | 381.91 |
| Declining Volume (m) | 1858.56 | 1377.02 |
| New Highs | 192 | 132 |
| New Lows | 183 | 141 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 13.83 | 1.19 | 9.41% |
| CBOE Nasdaq Volatility Index | 15.72 | 0.55 | 3.63% |
| Equity Put-Call Ratio | 0.98 | 0.18 | 22.5% |
| 10-day PCR | 0.52 | -0.09 | -14.75% |
| SPX-VIX Ratio | 87.5 | -9.09 | -9.41% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 4.9 bps to 4.47%. The 30-year bond futures rose 21/32 to close the day at 115-23/32 (the session high was 115-29/32).
The middle of the yield curve was broadly higher: five year yields fell to 4.007%, and ten-year yields fell to 4.188%.
The yield curve is still forecasting absolute disaster for the US economy; it's not inverted (not anywhere along its entire length) but look at the the gap between 2-year and 10-year yields. It's under 25 basis points; there is absolutely no compensation for longer duration. Do not believe anyone who tells you this is a reflection of reduced inflation expectations - the spread is a combination of inflationary expectations premium and compensation for time preference; the latter - priced sensibly - should be 75bps by itself.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 7.0 bps wider at 2.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 42.0 bps for 10-year AAA, and 77.0 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 10.0 bps looser at 47.0 basis points and the 10-year AAA-A spread 1.0 bps tighter at 16.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.342 | 0 | 0% |
| UST 2Y (yld) | 3.93 | -0.04 | -1.01% |
| UST 5Y (yld) | 4.007 | -0.043 | -1.06% |
| UST 10Y (yld) | 4.188 | -0.055 | -1.3% |
| UST 30Y (yld) | 4.47 | -0.049 | -1.08% |
The Banks Index lost 1.55 points (1.59%), to 96.2; within the index,
- North Fork Bancorp (NFB) -$0.66 (2.56%) to $25.17;
- State Street (STT) -$1.24 (2.52%) to $47.97;
- Golden West Financial (GDW) -$1.51 (2.5%) to $58.78;
- Bank Of NY (BK) -$0.69 (2.31%) to $29.18; and
- BB&T Corp (BBT) -$0.84 (2.1%) to $39.19.
The Broker-dealer Index shed 2.67 points (1.51%), closing at 173.74; the ticket clippers lined up as follows -
- Ameritrade (AMTD) -$0.59 (2.78%) to $20.67;
- Legg Mason (LM) -$2.80 (2.62%) to $103.90;
- E*Trade (ET) -$0.34 (2.03%) to $16.40;
- Merrill Lynch (MER) -$1.13 (1.86%) to $59.69; and
- Goldman Sachs (GS) -$2.15 (1.82%) to $115.90.
The Philadelphia SOX (Semiconductor) index lost 8.1 points (1.74%), to 458.16
- Advanced Micro Devices (AMD) -$0.90 (3.91%) to $22.10;
- National Semiconductors (NSM) -$0.69 (2.71%) to $24.77;
- Altera (ALTR) -$0.48 (2.49%) to $18.76;
- Maxim Integrated (MXIM) -$1.03 (2.41%) to $41.75; and
- Novellus Systems (NVLS) -$0.60 (2.33%) to $25.10.
Gold & Silver Markets
Gold rose $2.60 (0.56%) to close at $469.40 per ounce, with the session high hit at $470 precisely.
The Gold Bugs Index advanced 4.82 points (2.02%), at 243.22
- Golden Star (GSS) +$0.27 (7.8%) to $3.73;
- Hecla Mining (HL) +$0.30 (7.67%) to $4.21;
- Harmony Gold (HMY) +$0.56 (5.66%) to $10.46;
- Glamis Gold (GLG) +$1.09 (5.22%) to $21.99; and
- Eldorado Gold (EGO) +$0.18 (5.14%) to $3.68.
Silver rose $7.34 (9947.43%) to close at $7.42 per ounce. The Gold and Silver Index (XAU) gained 3.64 points (3.38%), closing at 111.49 points.
- Durban Rooderpoert Deep (DROOY) +$0.21 (15.67%) to $1.55;
- Harmony Gold (HMY) +$0.56 (5.66%) to $10.46;
- Meridian Gold (MDG) +$1.00 (4.75%) to $22.06; and
- Agnico Eagle (AEM) +$0.66 (4.58%) to $15.08.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 469.40 | 2.60 | 0.56% |
| Silver | 7.42 | 7.34 | 9947.43% |
| PHLX Gold and Silver Index | 111.49 | 3.64 | 3.38% |
| AMEX Gold BUGS Index | 243.22 | 10.11 | 4.34% |
Oil Market
Oil was firmer, rising by $0.60 per barrel, closing at $66.80 per barrel after rising to above $68 (well before the oil inventories data) on misplaced fears that the new Hurricane (Rita) will have the same impact on oil drilling and trans-shipment that Katrina had. Rita would have to do a 90-degree turn to come close to any decent sized chunk of oil infrastructure, but the moment 'news-traders' see stories about evacuation of Gulf drilling platforms, they buy the crap out of Crude.
The Oil and Gas Index (XOI) rose 5.58 points (0.52%), to end the session at 1085.13
- Sunoco (SUN) +$3.35 (4.48%) to $78.10;
- Marathon Oil (MRO) +$2.39 (3.49%) to $70.83; and
- ConocoPhillips (COP) +$1.53 (2.22%) to $70.43.
The Oil service stocks (OSX) Index gained 0.68 points (0.39%), to end the session at 176.29
- Global Industries (GLBL) +$0.46 (3.41%) to $13.95;
- National Oilwells/Varco (NOV) +$0.98 (1.51%) to $65.98; and
- GlobalSantaFe (GSF) +$0.49 (1.08%) to $46.00.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 324.95 | 0.73 | 0.23% |
| Crude Oil Light Sweet | 66.8 | 0.6 | 0.91% |
| Heating Oil | 2.0615 | 0.02 | 0.96% |
| Natural Gas | 12.594 | 10.1 | 405.38% |
| Unleaded Gas | 1.9738 | 0.05 | 2.4% |
| AMEX Oil Index | 1085.13 | 17.52 | 1.64% |
| Oil Service Index | 176.29 | 0.68 | 0.39% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 88.11 | -0.49 | -0.55% |
| Euro | 1.2217 | 0.0102 | 0.84% |
| Yen | 111.3 | -0.665 | -0.59% |
| Sterling | 1.8091 | 0.0109 | 0.61% |
| Australian Dollar | 0.7715 | 0.0051 | 0.67% |
| Swiss Franc | 1.2706 | -0.0117 | -0.91% |
| Canadian Dollar | 0.856 | 0.0018 | 0.21% |
