Interdum stultus opportuna loquitur...

Wednesday, October 05, 2005

URant: Late Day Fade-o-Rama...

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

The Fed's Open Market Operations desk performed 1 repurchase operation: a $6billion, overnight repurchase entirely in T-backed collateral undertaken at a 3.8 basis point discount to the Fed Funds Rate (FFR). Although that's large enough to be worthy of a jamjob, the discount was a little bit too small: all that one could reasonably expect would be that the repo would add to any upward momentum (or reduce any downward momentum) that existed at 10 a.m. NY time.

Major US Indices

Talk about infuriating; as the chart below shows, there was a 'near-divergence' in the Dow almost 2 hours after the end of the first hour. It coincided with the test of the first hour's high (denoted FHH on the chart below).

There's only one problem: the Dow didn't actually break the first hour's high, which was the crucial price point for the divergence to be valid. The only valid 'signal' that existed at the time, was the fact that on a low-momentum day the Dow was about to test its first-hour high (and as we all know by now... on a low momentum day, the first test/break is a tease... always).

For the record, the Dow came within a point of forming a valid divergence. The S&P fell short of divergence territory by 0.34 points. If you were giving yourself some slack you could have declared a double top on a strongly-declining CCI, but frankly that's not what we do here. 

We watch for divergences; all we had to go on was yesterday's buying divergence, which was still in force at the open (thereby retaining a buying bias). Recall that once we have our CCI-determined bias, we trade in that direction using %R on a shorter-term chart until CCI diverges in the opposite direction).

The intraday bias from yesterday meant that buying was the focus at the open, with oversold %R on shorter-term charts (85-tick and 3-minute are my favourites) serving as the gunsights.  As always, the objective - a measly 1 S&P point - was achieved with ease. 

Look at the 15-minute %R: at the end of the first 15 minutes of the session it was screaming "Buy Me" even before any requirement to move below our 'default' timescale - plus there was 10525 below as support. For the record, the first oversold on a 1-minute chart was 14 minutes in: moving to the shorter timeframe always helps, but in this case it didn't help by much (which is good, because it means I don't have to prepare another chart). Who cares, though? The point's in the bag.

Still, it would have been nice to see the decline coming later in the day.

Dow 15-minute chart

Sadly for us since we missed the day's big move, the Nasdaq indices (COMPX and the NDX) gave the heads-up for the short side. Both posted beautiful textbook CCI sell divergences - twice. The tech indices made new highs twice during the period that the Dow and S&P failed to do so, and both swings set up CCI sell divergences that presaged the afternoon debacle. So by the time the Dow and S&P had posted their 'near-divergences', the Nasdaq had shot up two "Short Me" flares - and we were left wondering what might have been if the bloody Dow had managed that one extra point. Check out the chart below:

Nasdaq Comp 15-minute chart

Note the one common feature of all the charts; the bias changed to buying later in the session thanks to a 'continuation divergence'. Personally I hate this particular setup; I like my divergences to occur between swings where a prior swing high (or low) has been established already. This afternoon divergence was established during a swing leg, but it has all the hallmarks - 

  • 4 or more bars in length;
  • a lower low;
  • %R oversold; and 
  • a rising CCI.

So we'll see how it goes - tomorrow should show some early strength, with the Dow at least attempting to get back to 10500.

Today though, it got a bit nasty: the Dow Jones Industrial Average opened looking reasonably solid. It spent two hours tickling 10550 without getting past that level in any meaningful way, then it acted like the James Gang: that is, it turned south and headed for the Mexican border. 

By the close it had dropped 94.37 points (0.9%), closing out the day at 10441.11 points. The index hit an intraday high of 10567.82 during the first hour of the session, and fell all afternoon, setting its session low at 10434.79 points, 6 minutes before the end of the session. 

Within the blue-chip index, 5 stocks rose, the biggest gainers being Walt Disney (DIS, +2.29% to $24.56) and Boeing (BA, +1.21% to $67.95), which accounted for 11 Dow points between them. Losers in the Dow numbered 23 and were led by Exxon Mobil (XOM, -3.10% to $60.55) and General Motors (GM, -3.09% to $30.08), with these two stocks contributing -23 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 431.8m shares to 48.1m.

The broader S&P500 shed 12.23 points (1%), to end the session at 1214.47. Within the index, gainers numbered 117, while 365 S&P500 stocks fell for the day. Volume was tilted 1.8:1 in favour of the losers with 1496.62 million units traded in the losers as compared with 844.46 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 16.07 points (0.75%), to close at 2139.36, while larger-cap technology issues fared better with the Nasdaq100 losing 10.05 points (0.63%), to end at 1595.54 points. Within the tech benchmark, gainers numbered 32, while 64 Nasdaq100 stocks fell for the day. Volume was tilted 1.2:1 in favour of the losers with 561.52 million traded in the losers compared to 475.89 million in the winners .

NYSE Volume was super-chunky, with 2.34 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill) as well, with 2.04 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10441.11-94.37-0.9%
Nasdaq Composite2139.36-16.07-0.75%
NYSE Volume2.34bn--
Nasdaq Volume2.04bn--


My 9-stock "bellwethers" group fell by an average of 1.26% - with most of the damage generated by the Toxic Twins. I've been banging on about Fannie and Freddie since before Franklin Raines was sacked (oops, I mean... resigned... yeah, that's right, resigned...) over the dodgy accounting at Fannie Mae. 

They are an absolute toxic sludge in the veins of the market - an enterprise whose sole raison d'etre is to introduce distortions into the free enterprise system. In so-called 'market loving' America, these are - like the Fed - Soviet-era market manipulators and interferers run by bureaucrats who couldn't get a job working in the private sector (as a side note - if you want to know why Greenspan was such a failure as a private sector consultant, read anything he wrote about S&L's in 1985... just before they all went toes-up: 15 of the 17 he identified as "solid" were bankrupt within 18 months).

  • General Electric (GE) -$0.38 (1.14%) to $32.85;
  • Citigroup (C) -$0.17 (0.37%) to $45.34 (note this: C is not that weak);
  • Wal Mart (WMT) +$0.09 (0.21%) to $43.85;
  • I.B.M. (IBM) -$0.34 (0.42%) to $80.11;
  • Intel (INTC) -$0.10 (0.41%) to $24.50;
  • Cisco Systems (CSCO) -$0.07 (0.39%) to $17.67;
  • eBay (EBAY) -$1.60 (3.83%) to $40.20;
  • Fannie Mae (FNM) -$1.89 (4.27%) to $42.41; and
  • Freddie Mac (FRE) -$0.40 (0.71%) to $55.56.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2155 to 1111, for a single-day A/D reading of -1044; and Nasdaq losers exceeded gainers by 1833 to 1192. The 10-day moving average of the A/D line fell to -275.7 on the NYSE, while the 10dma of the Nasdaq A/D fell to -213.7.

On the NYSE declining volume was greater than volume in advancing issues by 1628.7 to 677.5 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1115 to 882.9 million shares.

223 NYSE-listed stocks rose to new 52-week highs, and 90 posted fresh 52-week lows, while on the Nasdaq there were 147 stocks that hit new 52-week highs, and 43 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)677.49882.93
Declining Volume (m)1628.651115.02
New Highs223147
New Lows9043

Market Sentiment Statistics
CBOE Volatility Index13.20.745.94%
CBOE Nasdaq Volatility Index14.910.946.73%
Equity Put-Call Ratio0.710.1629.09%
10-day PCR0.6000%
SPX-VIX Ratio92-6.45-6.55%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 1.8 bps to 4.603%.

The middle of the yield curve was broadly higher in price: five year yields fell to 4.239%, and ten-year yields fell to 4.376%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 11.0 bps wider at 14.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 48.0 bps for 10-year AAA, and 75.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly tighter with the AAA-A spread on 20-years 16.0 bps tighter at 35.0 basis points and the 10-year AAA-A spread 9.0 bps tighter at 10.0 bps.

Treasury Yields
UST 13wk (yld)3.5350.051.43%
UST 2Y (yld)
UST 5Y (yld)4.239-0.006-0.14%
UST 10Y (yld)4.376-0.01-0.23%
UST 30Y (yld)4.603-0.018-0.39%

The Banks Index declined 1.17 points (1.22%), to end the session at 95.06; within the index,

  • North Fork Bancorp (NFB) -$0.67 (2.64%) to $24.71;
  • Regions Financial (RF) -$0.81 (2.61%) to $30.23;
  • Comerica (CMA) -$1.24 (2.09%) to $58.22;
  • National City Corp (NCC) -$0.69 (2.03%) to $33.27; and
  • BB&T Corp (BBT) -$0.78 (1.99%) to $38.41.

The Broker-dealer Index slid 2.15 points (1.19%), to 179.11; the ticket clippers lined up as follows -

  • Lehman Brothers (LEH) -$3.00 (2.55%) to $114.73;
  • Goldman Sachs (GS) -$2.73 (2.24%) to $118.92;
  • Charles Schwab (SCH) -$0.31 (2.15%) to $14.13;
  • E*Trade (ET) -$0.36 (2.05%) to $17.24; and
  • Legg Mason (LM) -$1.70 (1.56%) to $107.35.

The Philadelphia SOX (Semiconductor) index dipped 5.19 points (1.09%), closing at 472.92

  • Texas Instruments (TXN) -$1.87 (5.52%) to $32.01;
  • Advanced Micro Devices (AMD) -$1.30 (5.07%) to $24.36;
  • Altera (ALTR) -$0.49 (2.52%) to $18.97;
  • Micron Technology (MU) -$0.31 (2.27%) to $13.33; and
  • Teradyne (TER) -$0.27 (1.63%) to $16.29.

Gold & Silver Markets

Gold rose $3.20 (0.69%) to close at $469.30 per ounce. I still haven't finished the Gold Report, but I will do so reasonably soon. Short answer is I don't think we've missed anything significant.

The Gold Bugs Index shed 5.82 points (2.4%), at 236.89

  • Hecla Mining (HL) -$0.24 (5.69%) to $3.98;
  • Coeur d'Alene (CDE) -$0.18 (4.23%) to $4.08;
  • Eldorado Gold (EGO) -$0.13 (3.8%) to $3.29;
  • Harmony Gold (HMY) -$0.40 (3.67%) to $10.50; and
  • Randgold Resources (GOLD) -$0.49 (3.12%) to $15.22.

Silver fell by $0.03 (0.4%) to close at $7.43 per ounce. The Gold and Silver Index (XAU) lost 2.14 points (1.9%), at 110.21 points.

  • Durban Rooderpoert Deep (DROOY) -$0.06 (4.35%) to $1.32;
  • Harmony Gold (HMY) -$0.40 (3.67%) to $10.50;
  • Freeport McMoran (FCX) -$1.23 (2.55%) to $46.99; and
  • Kinross Gold (KGC) -$0.18 (2.41%) to $7.29.
Precious Metals and Indices
PHLX Gold and Silver Index110.21-2.14-1.9%
AMEX Gold BUGS Index236.89-5.82-2.4%

Oil Market

Oil lost ground, shedding $1.57 per barrel, closing at $63.90 per barrel (its session low was $63.00 neat). It still has to fall another $1.50 (closing basis) and close under that level for two days, in order to break that neckline I've been writing about for two weeks (I've been writing about it since before the right shoulder even formed). Target is still sub-$58.

The Oil and Gas Index (XOI) lost 35.15 points (3.27%), to end the session at 1039.04

  • Marathon Oil (MRO) -$4.35 (6.29%) to $64.86;
  • Occidental Petroleum (OXY) -$3.98 (4.66%) to $81.42; and
  • Kerr Mcgee (KMG) -$3.75 (3.9%) to $92.39.

The Oil service stocks (OSX) Index lost 6 points (3.42%), ending the day at 169.31

  • Rowan Companies (RDC) -$1.80 (5.2%) to $32.80;
  • Smith International (SII) -$1.60 (4.79%) to $31.80; and
  • National Oilwells/Varco (NOV) -$2.93 (4.4%) to $63.59.
Energy Complex
Reuters CRB335.01-0.12-0.04%
Crude Oil Light Sweet63.9-1.57-2.4%
Heating Oil2.0497-0.03-1.5%
Natural Gas14.2240.211.48%
Unleaded Gas2.0157-0.05-2.25%
AMEX Oil Index1039.04-35.15-3.27%
Oil Service Index169.31-6-3.42%

Currency Markets

USD Exchange Rates
US Dollar Index90-0.14-0.16%
Australian Dollar0.76350.00070.09%
Swiss Franc1.30170.00010.01%
Canadian Dollar0.8526-0.005-0.58%