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Friday, September 09, 2005

USRant: Wasn't Hard to Forecast That...

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Oil bounced from a low which was less than 50 cents a barrel above the key 'breakdown' level identified here yesterday; I don't think it's turned up on any sustained basis, though. This technical bounce was foreseeable (and I done foreseed it yesterday, Cleetus)...

You might be tempted to try to play a bounce in Crude (it's deeply oversold) but I would caution against it. It will be another couple of sessions before the now-startled nuffies get swayed by the "oil capacity coming back online" news gets them twitterpated about the long side again. Once bitten, as the saying goes.

Also, if Crude manages a break below $62.75 on this first downmove, it will develop some real downward momentum - probably to below $60 before any meaningful bounce.

Federal Reserve Open Market Operations

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

  • a $13billion, 14-day repurchase entirely in T-backed collateral undertaken at an 0.8 basis point premium to the Fed Funds Rate (FFR); and
  • a $5.25billion, overnight repurchase with $3.664billion in T-backed collateral undertaken at a 2 basis point discount to the FFR.

Although taking each of the repurchases in isolation -

  • the first repo was big enough but not at a discount, and
  • the second was at a discount but not big enough...
    the combined effect was to give da Boyz some leftover discounted cash to play with. And no surprise, the swing low - which was a 'sweet chariot' to ride for an hour (boom boom!) - occurred at 10:00 a.m. NY time. The markets had several things in their favour at that point - intraday oversold (on the basis of %R), 10600 support, plus all that repurchase dough. You dont' get many instances of a 'lay down Misère' in this game - but it still required some courage.

Why 'courage' if the technical setup was so obvious? Well, 10:00 a.m. was a halfhour before the release of the Petroleum Status report - the first EIA report that covered a 'post-Katrina' timeframe. It seldom pays to have a handful of anything when important data gets released, due to the 'stop tickling' shenanigans that happen.

The EIA report looked pretty bad  -  

  • a 6.3 million barrel drawdown in Crude Oil inventories;
  • a 4.3 million barrel drawdown in 'gasoline' inventories; and 
  • a 0.8 million barrel increase in distillate inventories

Importantly though, it was not as bad as folks thought it might be. You had about 15 seconds to take that in after the report was released: the market took off on its one 'long white bar' for the session, during which the major stock indices sighed with pleasure and relief - like he-whore Jeff Gannon at a White House sleepover. (Leave aside for the moment the fact that the Crude market - after dipping all the way down to $63.10 - had a $1.50 bounce from that level - that's just a storey of newly-lured nuffie shorts).

But those who read yesterday's USRant knew that the intraday downside action could not yet be complete... after all, yesterday was explicit...

There were a couple of divergences on the 15-minute chart today, which point to the likelihood that the Dow pulls back to 10550-ish before getting through 10700.

That's a pretty clear statement of direction... and the day's low was 10569 (not really low enough, frankly). IF tomorrow is a down day (which appears likely) and the Dow finishes below 10500 Friday and Monday, the tentative 10700 target should be taken off the table.

Major US Indices

One thing you will notice from the chart below, is how 'forgiving' the divergence-fade mechanism is. (Unwieldy grammar, but you get the point). That is, if you take a position based on the CCI divergence, the chances of getting out at a gain is very high - even if you have to wait a while for it.

Yesterday's two selling divergences are marked in red on the chart below - and althought both 'worked' on a very short-term timescale intraday yesterday, you can also notice that today was an opportunity to exit either at a profit (in fact today requiredan exit of short positions, since there were buy divergences). 

Today's two buy divergence signals worked (marked in green) - the second of which happened at the exact low bar of the day and worked right through until the close. But notice something else - that the close was above the entry level of the first buying divergence. Like I said - forgiving.

Dow 15-minute intraday chart

The Dow Jones Industrial Average slid 37.57 points (0.35%), closing out the day at 10595.93 points. The index opened at it high (10636.49), and fell hard in the first half-hour, eventually hitting its low of 10569.34 at 10 a.m. NY time (just before the repo hit the veins). 

within the blue-chip index, 5 stocks rose, the biggest gainers being Altria Group (MO, +2.08% to $72.54) and Intel (INTC, +1.68% to $26.09), which accounted for 15 Dow points between them. Losers in the Dow numbered 24 and were led by General Motors (GM, -1.82% to $32.40) and Home Depot (HD, -1.79% to $41.18), with these two stocks contributing -11 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 214.5m shares to 109.3m.

The broader S&P500 dipped 4.69 points (0.38%), to end the session at 1231.67. Within the index, gainers numbered 132, while 353 S&P500 stocks fell for the day. Volume was tilted 1.4:1 in favour of the losers with 1057.55 million units traded in the losers as compared with 734.79 million traded in the winners .

Over at Times Square, the Nasdaq Composite shed 6 points (0.28%), to close at 2166.03, while larger-cap technology issues fared better with the Nasdaq100 losing 2.18 points (0.14%), to end at 1597.68 points. Within the tech benchmark, gainers numbered 37, while 58 Nasdaq100 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 410.40 million traded in the losers compared to 342.96 million in the winners .

NYSE Volume was super-chunky, with 1.93 billion shares changing hands, while Nasdaq Volume was solid, with 1.63 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10595.93-37.57-0.35%
Nasdaq Composite2166.03-6-0.28%
NYSE Volume1.93bn--
Nasdaq Volume1.63bn--


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

  • General Electric (GE) -$0.16 (0.47%) to $33.85;
  • Citigroup (C) -$0.02 (0.04%) to $44.44;
  • Wal Mart (WMT) -$0.00 (0%) to $45.86;
  • I.B.M. (IBM) -$0.18 (0.22%) to $80.80;
  • Intel (INTC) +$0.43 (1.68%) to $26.09;
  • Cisco Systems (CSCO) -$0.03 (0.16%) to $18.37;
  • eBay (EBAY) -$1.53 (3.78%) to $38.93;
  • Fannie Mae (FNM) -$0.44 (0.9%) to $48.50; and
  • Freddie Mac (FRE) +$0.06 (0.1%) to $57.96.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2004 to 1242, for a single-day A/D reading of -762; and Nasdaq losers exceeded gainers by 1783 to 1208. The 10-day moving average of the A/D line fell to 190.2 on the NYSE, while the 10dma of the Nasdaq A/D fell to 15.2.

On the NYSE declining volume was greater than volume in advancing issues by 1209.2 to 692.4 million shares; Nasdaq advancing volume was greater than volume in decliners by 800.9 to 797 million shares.

158 NYSE-listed stocks rose to new 52-week highs, and 24 posted fresh 52-week lows, while on the Nasdaq there were 112 stocks that hit new 52-week highs, and 35 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)692.39800.93
Declining Volume (m)1209.24797.01
New Highs158112
New Lows2435

Market Sentiment Statistics
CBOE Volatility Index12.930.413.27%
CBOE Nasdaq Volatility Index14.7-0.2-1.34%
Equity Put-Call Ratio0.710.034.41%
10-day PCR0.6300%
SPX-VIX Ratio95.3-3.49-3.54%

Bond Market Analysis

Bonds fell yet again at the long end, with the yield on the benchmark 30-year Treasury bond rising 0.3 bps to 4.422%. The 30-year bond futures finished unchanged at 116-09/32 after bouncing early to as high as 116-22/32 - more evidence that the short bias is working.

The middle of the yield curve was broadly lower in price: five year yields rose to 3.943%, and ten-year yields rose to 4.139%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 6.0 bps wider at -2.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 57.0 bps for 10-year AAA, and 86.5 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 4.0 bps wider at 43.0 basis points and the 10-year AAA-A spread 11.0 bps tighter at -2.0 bps.

Treasury Yields
UST 13wk (yld)3.39800%
UST 2Y (yld)3.860.020.52%
UST 5Y (yld)3.9430.0070.18%
UST 10Y (yld)4.1390.0010.02%
UST 30Y (yld)4.4220.0030.07%

The Banks Index slid 0.71 points (0.72%), to end the session at 98.55; within the index,

  • Golden West Financial (GDW) -$1.20 (1.94%) to $60.70;
  • State Street (STT) -$0.86 (1.72%) to $49.03;
  • North Fork Bancorp (NFB) -$0.43 (1.57%) to $26.99;
  • Comerica (CMA) -$0.78 (1.26%) to $61.00; and
  • BB&T Corp (BBT) -$0.49 (1.2%) to $40.33.

The Broker-dealer Index declined 0.19 points (0.11%), to 172.99; the ticket clippers lined up as follows -

  • Raymond James (RJF) -$0.54 (1.77%) to $29.96;
  • Charles Schwab (SCH) -$0.15 (1.1%) to $13.51;
  • Bear Stearns (BSC) -$0.71 (0.68%) to $103.91;
  • Ameritrade (AMTD) -$0.08 (0.4%) to $20.13; and
  • Jeffries Group (JEF) -$0.04 (0.1%) to $40.80.

The Philadelphia SOX (Semiconductor) index gained 5.41 points (1.14%), at 478.81

  • National Semiconductors (NSM) +$1.44 (5.85%) to $26.05;
  • Advanced Micro Devices (AMD) +$0.53 (2.35%) to $23.08;
  • Marvell Tech Group (MRVL) +$0.92 (1.98%) to $47.38;
  • Micron Technology (MU) +$0.24 (1.97%) to $12.40; and
  • Taiwan Semiconductors (TSM) +$0.14 (1.73%) to $8.23.

Gold & Silver Markets

Gold rose $1.70 (0.38%) to close at $447.70 per ounce. It spiked early to $451 and then the nuffies got smacked by a $4 reversal. then later in the day it spiked to $451 again, and.... the nuffies got smacked by a $4 reversal. Are you beginning to see a pattern?

This is why it's essential to get positioned in an asset class - whatever asset class you choose - before it becomes the favourite "can't lose" asset class of choice for idiots.  Because once those dumbasses turn up, you've got to have some existing profit to your position to weather the storm as the nuffies get slaughtered time ater time, after time, after time.

Frankly, having made the "long gold" call in late January 2002, I'm allowed to be smug as dickwads try to get long Gold on breakouts at above $400. Getting long on breakouts at a key resistance level? Why wouldn't you just stick needles in your leg and make a habit of propositioning lesbians, if you wanted to experience pain, frustration and failure?  

Gold was $270 when I lumped it in with Oil (at $19) and the Euro (at $0.85) as genuine "this can't lose" plays. Admittedly, the S&P - which was the short leg - has risen 100 points since then, but at one stage it had declined 330 points.

The Gold Bugs Index posted a rise of 4.04 points (1.91%), to end the session at 215.06

  • Hecla Mining (HL) +$0.17 (4.79%) to $3.72;
  • Golden Star (GSS) +$0.14 (4.64%) to $3.16;
  • Eldorado Gold (EGO) +$0.12 (3.8%) to $3.28;
  • Glamis Gold (GLG) +$0.67 (3.4%) to $20.39; and
  • Kinross Gold (KGC) +$0.22 (3.33%) to $6.83.

Silver fell by $0.09 (1.26%) to close at $7.03 per ounce. The Gold and Silver Index (XAU) gained 1.68 points (1.71%), to end the session at 100.04 points.

  • Durban Rooderpoert Deep (DROOY) +$0.13 (11.61%) to $1.25;
  • Kinross Gold (KGC) +$0.22 (3.33%) to $6.83;
  • Goldcorp (GG) +$0.55 (2.95%) to $19.20; and
  • Placer Dome (PDG) +$0.39 (2.61%) to $15.33.
Precious Metals and Indices
PHLX Gold and Silver Index100.041.681.71%
AMEX Gold BUGS Index215.064.041.91%

Oil Market

Oil finished higher, rising by $0.12 per barrel to close at $64.49 per barrel - but not before dipping to $63.10; that was pretty much the perfect position from which to have a crack at a bounce if you were that way inclined (since it would have put your stop at the key pivot identified here yesterday - i.e., $62.75). 

The Oil and Gas Index (XOI) rose 0.75 points (0.07%), at 1046.49

  • Kerr Mcgee (KMG) +$1.43 (1.58%) to $91.70;
  • Occidental Petroleum (OXY) +$0.87 (1.04%) to $84.77; and
  • ConocoPhillips (COP) +$0.52 (0.78%) to $67.20.

The Oil service stocks (OSX) Index declined 1.02 points (0.59%), ending the day at 170.49

  • Global Industries (GLBL) -$0.19 (1.46%) to $12.81;
  • Transocean (RIG) -$0.71 (1.2%) to $58.40; and
  • Rowan Companies (RDC) -$0.43 (1.18%) to $36.00.
Energy Complex
Reuters CRB321.740.130.04%
Crude Oil Light Sweet64.490.120.19%
Heating Oil1.9296-0.03-1.67%
Natural Gas11.3470.151.3%
Unleaded Gas2.03550.010.66%
AMEX Oil Index1046.490.750.07%
Oil Service Index170.49-1.02-0.59%

Currency Markets

USD Exchange Rates
US Dollar Index87.070.130.15%
Australian Dollar0.77290.00720.94%
Swiss Franc1.24450.00120.1%
Canadian Dollar0.84650.00490.58%