Interdum stultus opportuna loquitur...

Wednesday, September 14, 2005

USRant: Scalping Was Enough...

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Pre market data was fairly shocking at the headline level - Retail Sales dropped 2.1% compared to expectations of a 1% fall. However the entire drop was due to a massive drop in car sales - down 12% for the month due to the expiration of yet another round of profit-slaughtering incentives. Ford , GM and DaimlerChrysler no longer make any money off their actual vehicles: they are effectively huge leveraged producers of CDOs who provide the debtors with a car - at a loss to the company - as an excuse to write a loan.

Anyhow... excluding the sharp fall in vehicle sales, retail sales rose 1%; this compared favourably with the consensus guess consensus of a 0.5% rise. It's still a 'glass half empty' story though - more than half of the gain was from gasoline sales. In other words, 0.5% of the increase in retail sales was due solely to the inability of consumers to substitute away from much-more-expensive gasoline.

Apart from the retail sales numbers, the Mortgage Bankers' Association weekly purchase index rose 2.9%, but the refinancing portion dropped another 6%. Maybe the house-as-ATM paradigm is changing (I note that mortgage rates ticked up 8 basis points last week).

And to top it off, there was data on Industrial Production and Capacity Utilisation. IP rose 0.1% (consensus was for 0.2%) and the capacity utilisation rate remained below 80% at 79.8%.

The Fed's dingbats were quick to assert that Hurricane Katrina was to blame (yawn... here we go - bureaucrats grasping at straws). They 'estimated' that Hurricane Katrina lopped 0.3% off the growth rate. Let's get this straight: something that affected 3 business days (12% of the days of the month) caused IP to drop 0.3%? That means that for those days, the entire production machine of the United States was 2.4% less productive, on average. 

In other words, they are claiming that 2.4% of the national capital stock was in the hurricane's path. Bullshit. there is more productive capacity left in Detroit than in the entire Gulf Coast - even including the oil rigs; and that's after two decades of hollowing-out of the industrial base of the country.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $6billion, overnight repurchase with $5.015billion in T-backed collateral undertaken at a 6.2 basis point discount to the Fed Funds Rate (FFR). That met the notional cutoff for a 'repo pump'-worthy move starting at 10 a.m., and yet... zilch. Nuthin'. Zero. Nichts. Nada. Rien. Doughnut. Bubkus.

The culprit was that retail sales number - if the number itself is to be believed, it means that the Fed will continue tightening, because they will view aggregate demand growth as excessive (because they are all bastard-Keynesians - like all bureaucrats). Industrial Production and Capacity Utilisation numbers show an economy that is moribund - something we have known from watching the Non-Defence Capex ex Aircraft numbers in the Durables reports - and yet the Fed will  continue to act to try and stem credit-fuelled consumption spending... that shows how 'supply side' these turd-blossoms really are.

Major US Indices

Talk about annoying. Yet again, and early signal that gained almost no traction. This time it was a full-blown CCI divergence. It 'worked' - it yielded the sought-after single S&P point - but it ought to have been a little more spectacular than that. After all, it coincided with the end of the first hour: the first hour closed within a bee's thingy of its low, and the very next bar dipped below that low by a point (giving the secondary justification for a long position - fading the first-hour extremes).

However for some reason the market behaved as if 10625 was a concrete ceiling. Two and a half hours later, the market had tested 10625 from below three times and failed every time. Then it all went 'crap-tacular' - but never gave any solid precursor that gave a trader an excuse to short. (The 'DWMS?' marked on the chart stands for "Dude, Where's My Signal?")... and what do you know - a buying divergence right near the close. In fact, entry based on the second divergence was up by over a point at the close - that's an S&P point, I mean - which is good enough.

Grit your teeth, coz this one might just sting a bit, what with 10550 broken and all... if there's an early bounce tomorrow, I would be grabbing any profitable exit with both hands, thanking Crom and Odin for the bounty, and looking for a short signal at the top of any bounce.  

Dow intraday chart

After trying to bounce in the first 15 minutes (and actually getting above 10625 by enough to make the nuffies stampede onto the long side) the Dow Jones Industrial Average softened, accelerating in the afternoon to an eventual loss of 52.54 points (0.5%) for the session, closing out the day at 10544.9 points. 

The index hit an intraday high of 10633.19 after almost exactly five minutes of trade. It managed to retain contact with 10600 for the first four hours of the session, but eventually fell apart, dropping all the way to 10536.62 with an hour left in the session. 

Within the blue-chip index, 9 stocks rose, the biggest gainers being Exxon Mobil (XOM, +0.97% to $62.47) and Altria Group (MO, +0.86% to $71.63), which accounted for 10 Dow points between them. Losers in the Dow numbered 21 and were led by Walt Disney (DIS, -2.82% to $24.11) and Mcdonalds (MCD, -2.29% to $32.36), with these two stocks contributing -12 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 251.5m shares to 82.4m.

The broader S&P500 declined 4.04 points (0.33%), closing at 1227.16. 1225 seems to have been the important number for this session. Within the index, gainers numbered 152, while 333 S&P500 stocks fell for the day. Volume was tilted 1.9:1 in favour of the losers with 1168.48 million units traded in the losers as compared with 618.16 million traded in the winners .

Over at Times Square, the Nasdaq Composite shed 22.42 points (1.03%), to close at 2149.33, while larger-cap technology issues fared worse with the Nasdaq100 losing 17.75 points (1.1%), to end at 1589.63 points (note the breach of 1600). Within the tech benchmark, gainers numbered 14, while 81 Nasdaq100 stocks fell for the day. Volume was tilted 4.3:1 in favour of the losers with 558.53 million traded in the losers compared to 128.95 million in the winners .

NYSE Volume was super-chunky, with 1.98 billion shares changing hands, while Nasdaq Volume was chunky, with 1.73 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10544.9-52.54-0.5%
Nasdaq Composite2149.33-22.42-1.03%
NYSE Volume1.98bn--
Nasdaq Volume1.73bn--


My 9-stock "bellwethers" group fell by an average of 0.42%

  • General Electric (GE) -$0.23 (0.67%) to $34.05;
  • Citigroup (C) -$0.12 (0.27%) to $44.98;
  • Wal Mart (WMT) -$0.37 (0.82%) to $44.70;
  • I.B.M. (IBM) -$0.27 (0.33%) to $80.48;
  • Intel (INTC) -$0.41 (1.65%) to $24.49;
  • Cisco Systems (CSCO) -$0.41 (2.25%) to $17.84;
  • eBay (EBAY) -$0.62 (1.62%) to $37.66;
  • Fannie Mae (FNM) +$0.66 (1.39%) to $48.18; and
  • Freddie Mac (FRE) +$1.42 (2.44%) to $59.65.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2047 to 1211, for a single-day A/D reading of -836; and Nasdaq losers exceeded gainers by 2013 to 989. The 10-day moving average of the A/D line fell to -47.5 on the NYSE, while the 10dma of the Nasdaq A/D fell to -146.6.

On the NYSE declining volume was greater than volume in advancing issues by 1154.4 to 795 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1167.7 to 491.3 million shares.

85 NYSE-listed stocks rose to new 52-week highs, and 42 posted fresh 52-week lows, while on the Nasdaq there were 79 stocks that hit new 52-week highs, and 36 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)794.99491.3
Declining Volume (m)1154.421167.69
New Highs8579
New Lows4236

Market Sentiment Statistics
CBOE Volatility Index12.910.524.2%
CBOE Nasdaq Volatility Index15.570.64.01%
Equity Put-Call Ratio0.78-0.02-2.5%
10-day PCR0.6000%
SPX-VIX Ratio95.1-4.32-4.34%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 3.1 bps to 4.453%. the 30-year bond futures dipped 12 ticks to close at 115-30/32 (the session low was 115-28/32).

The middle of the yield curve was broadly lower in price: five year yields rose to 3.958%, and ten-year yields rose to 4.168%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 16.0 bps wider at 14.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 40.0 bps for 10-year AAA, and 76.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly looser with the AAA-A spread on 20-years increasing 2.0 bps to 36.0 basis points and the 10-year AAA-A spread widening 7.0 bps to 14.0 bps.

Treasury Yields
UST 13wk (yld)3.34500%
UST 2Y (yld)3.59-0.26-6.75%
UST 5Y (yld)3.9580.0270.69%
UST 10Y (yld)4.1680.0340.82%
UST 30Y (yld)4.4530.0310.7%

The Banks Index lost 0.2 points (0.2%), to end the session at 97.8; within the index,

  • Fifth Third Bancorp (FITB) -$0.84 (2.03%) to $40.52;
  • North Fork Bancorp (NFB) -$0.38 (1.43%) to $26.22;
  • Bank Of NY (BK) -$0.27 (0.89%) to $29.95;
  • Wells Fargo (WFC) -$0.41 (0.69%) to $59.19; and
  • National City Corp (NCC) -$0.17 (0.48%) to $35.24.

The Broker-dealer Index lost 1.21 points (0.68%), ending the day at 175.95; the ticket clippers lined up as follows -

  • E*Trade (ET) -$0.74 (4.27%) to $16.60;
  • Legg Mason (LM) -$1.93 (1.78%) to $106.74;
  • Goldman Sachs (GS) -$1.30 (1.11%) to $115.90;
  • A G Edwards (AGE) -$0.48 (1.04%) to $45.85; and
  • Raymond James (RJF) -$0.29 (0.95%) to $30.36.

The Philadelphia SOX (Semiconductor) index slid 4.09 points (0.85%), to end the session at 478.11

  • Teradyne (TER) -$0.43 (2.52%) to $16.65;
  • Marvell Tech Group (MRVL) -$1.10 (2.36%) to $45.57;
  • Novellus Systems (NVLS) -$0.58 (2.17%) to $26.18;
  • Broadcom (BRCM) -$0.99 (2.12%) to $45.78; and
  • Intel (INTC) -$0.41 (1.65%) to $24.49.

Gold & Silver Markets

Gold rose $3.70 (0.83%) to close at $450.70 per ounce - finishing within a half-dollar of the session high at $451. A close above $450 is reasonably important, but I wouldn't get my hopes up about a rapid rise in Gold in the near term.

The Gold Bugs Index added 10.54 points (4.9%), at 225.59

  • Kinross Gold (KGC) +$0.63 (9.18%) to $7.49;
  • Golden Star (GSS) +$0.22 (7.19%) to $3.28;
  • Gold Fields (GFI) +$0.82 (7.08%) to $12.40;
  • Eldorado Gold (EGO) +$0.19 (6.03%) to $3.34; and
  • Iamgold (IAG) +$0.42 (5.9%) to $7.54.

Silver rose $0.04 (0.57%) to close at $7.05 per ounce. The Gold and Silver Index (XAU) gained 4.02 points (3.99%), ending the day at 104.7 points.

  • Kinross Gold (KGC) +$0.63 (9.18%) to $7.49;
  • Gold Fields (GFI) +$0.82 (7.08%) to $12.40;
  • Durban Rooderpoert Deep (DROOY) +$0.08 (6.5%) to $1.31; and
  • Newmont Mining (NEM) +$2.20 (5.27%) to $43.94.
Precious Metals and Indices
PHLX Gold and Silver Index104.74.023.99%
AMEX Gold BUGS Index225.5910.544.9%

Oil Market

I mentioned yesterday that the fact that oil wasn't managing to get blow $62.75 on any sustained basis was a good reason to expect a bounce. Well, today Oil was much firmer, thanks to another 6.6 million barrel fall in the latest Crude Oil Inventories report. (Note though - Gasoline and Distillate inventories actually rose  - and yet as the table below shows, these elements of the Energy matrix also went berserk... in other words, this was a technical event rather than anything related to Crude supply).

The thing went nutso, rising by $2.00 per barrel and closing at $65.11 per barrel. This was the bounce I wrote about on Monday - although I expected the bounce itself to happen on Tuesday, not Wednesday.

The Oil and Gas Index (XOI) posted a rise of 12.04 points (1.16%), ending the day at 1054.02

  • Amerada Hess (AHC) +$3.26 (2.44%) to $136.88;
  • Occidental Petroleum (OXY) +$1.74 (2.07%) to $85.88; and
  • ConocoPhillips (COP) +$1.28 (1.93%) to $67.48.

The Oil service stocks (OSX) Index rose 2.27 points (1.35%), to end the session at 170.22

  • GlobalSantaFe (GSF) +$1.20 (2.77%) to $44.56;
  • Rowan Companies (RDC) +$0.92 (2.6%) to $36.31; and
  • Transocean (RIG) +$1.25 (2.16%) to $59.18.
Energy Complex
Reuters CRB319.651.870.59%
Crude Oil Light Sweet65.1123.17%
Heating Oil1.92490.084.6%
Natural Gas11.190.433.97%
Unleaded Gas1.93730.052.42%
AMEX Oil Index1054.0212.041.16%
Oil Service Index170.222.271.35%

Currency Markets

USD Exchange Rates
US Dollar Index87.63-0.12-0.14%
Australian Dollar0.77160.00320.42%
Swiss Franc1.2579-0.0035-0.28%
Canadian Dollar0.84660.00030.04%