Interdum stultus opportuna loquitur...

Wednesday, October 12, 2005

USRant: Above 10250 - Just. How Dodgy...

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ederal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation a $6.25billion, overnight repurchase with $2.242billion in Treasury-backed collateral undertaken at a 3.5 basis point discount to the Fed Funds Rate (FFR). That's far too little in T-backed to make a difference to the market's trajectory.

Major US Indices

The market is absolutely replete with old sayings - there are at least a dozen of which are genuinely worth knowing and understanding. One of my favourites is "make a bunch, then go to lunch". This session, we were in and out so quick that Macca's wouldn't even have switched to its regular menu; by 12:08 Australian time (10:08 NY time) our target point had been made.

The overnight market had jumped (primarily during the European session), driven primarily by Alcoa-induced euphoria from dumbasses who couldn't tell an earnings report from a kick in the teeth. And a kick in the teeth is precisely what they got - Alcoa trade up 2.47% in the pre-market, and dropped back to close the session with a single cent of gain; anyone who bought based on their supposed 'stellar' report got their arse kicked. That's the way it ought to be - anyone who trades news without a clue as to what to look for, deserves to get handed their head every time.

Anyhow - the day-session open was interesting - the Globex session was well off its highs, and the market opened with a bit of a roar; the Dow jumped about 50 points in the first five minutes, then spent the next 25 minutes thinking about an assault on 10300. When the first half-hour failed to break 10300 (the high during that period was 10293.4) there was a sharpish pullback - to 10282 within 5 minutes of the failure at 10300.

Given our intraday buying bias, that was our cue: the first oversold signal of the day (on an 85-tick chart). The trade resolved intself in our favour in about 3 minutes (it may have been 5 minutes - who's counting), and the rest of the day was now just an interesting academic exercise.

From that point the market continued to move upwards for a while (and of course it's annoying to watch extra points go by having just exited - but the plan is the plan). The first-hour high was set at the oh-so-annoying level of 10299.70, exactly at the end of the first half-hour.

From then on, every breach of that level resulted in a sharp (some would say nasty) pullback. There were no additional divergence signals of any type, but the mantra of 'fading first-hour extremes' worked like a charm for those prepared to live outside the one-point-a-day box. Even buying the false break of the first-hour low worked late in the day - and shorting the breach of the first-hour high (effectively, shorting any time the Dow got above 10300) was a cracker.

Sadly, the 'countdown to destruction' clock has to be reset - the bloody Dow closed just above 10250 - recall that the requirement was for two consecutive closes below 10250. I think that perhaps too many people are keying on that particular level. When you look at the depth and market internals, it seems massively unlikely that the Dow could possibly have finished the session in the green, but it managed (or more accurately, it was managed).

For the day, the Dow posted a rise of 14.41 points (0.14%), closing out the day at 10253.17 points. The index hit an intraday high of 10312.88, and fell as low as 10234.2 during the last half-hour of the session (thereby breaking yesterday's low - just).

Within the blue-chip index, 12 stocks rose, the biggest gainers being General Motors (GM, +3.69% to $26.42... just a bounce - GM will go Chapter 11 sometime this year or next) and International Business Machines (IBM, +2.39% to $83.19), which accounted for 23 Dow points between them. Losers in the Dow numbered 16 and were led by Boeing (BA, -1.77% to $66.70) and 3M (MMM, -1.18% to $70.55), with these two stocks contributing -16 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 223.7m shares to 137.2m.

The broader S&P500 slid 2.46 points (0.21%), at 1184.87. Within the index, gainers numbered 145, while 334 S&P500 stocks fell for the day. Volume was tilted 2.5:1 in favour of the losers with 1381.69 million units traded in the losers as compared with 556.02 million traded in the winners .

Over at Times Square, the Nasdaq Composite dipped 17.83 points (0.86%), to close at 2061.09, while larger-cap technology issues fared better with the Nasdaq100 losing 7.68 points (0.5%), to end at 1539.31 points. Within the tech benchmark, gainers numbered 24, while 71 Nasdaq100 stocks fell for the day. Volume was tilted 4.0:1 in favour of the losers with 580.08 million traded in the losers compared to 145.92 million in the winners .

So what can you read from the relative performance of the Dow versus the S&P and the tech indices? That the Dow was pushed to a close above 10250, that's what.

I mean look at the market internals (the A/D and A/D volume stats) - they were woeful.

NYSE Volume was super-chunky, with 2.3 billion shares changing hands, while Nasdaq Volume was chunky, with 1.89 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10253.1714.410.14%
Nasdaq Composite2061.09-17.83-0.86%
NYSE Volume2.3bn--
Nasdaq Volume1.89bn--


My 9-stock "bellwethers" group was unchanged on average, with big moves in IBM and WalMart being offfset by  large-ish declines in the absolute key bellwether (Citigroup) and GE.

  • General Electric (GE) -$0.19 (0.56%) to $33.80;
  • Citigroup (C) -$0.43 (0.95%) to $44.80;
  • Wal Mart (WMT) +$0.48 (1.08%) to $45.02;
  • I.B.M. (IBM) +$1.94 (2.39%) to $83.19;
  • Intel (INTC) -$0.00 (0%) to $23.42;
  • Cisco Systems (CSCO) -$0.30 (1.72%) to $17.19;
  • eBay (EBAY) -$0.00 (0%) to $40.46;
  • Fannie Mae (FNM) +$0.11 (0.26%) to $42.82; and
  • Freddie Mac (FRE) -$0.27 (0.46%) to $58.00.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2033 to 1247, for a single-day A/D reading of -786; and Nasdaq losers exceeded gainers by 2149 to 848. The 10-day moving average of the A/D line fell to -640.3 on the NYSE, while the 10dma of the Nasdaq A/D fell to -627.2.

On the NYSE declining volume was greater than volume in advancing issues by 1455.6 to 805.2 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1425.6 to 389.4 million shares.

32 NYSE-listed stocks rose to new 52-week highs, and 192 posted fresh 52-week lows, while on the Nasdaq there were 44 stocks that hit new 52-week highs, and 128 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)805.23389.43
Declining Volume (m)1455.61425.59
New Highs3244
New Lows192128

Market Sentiment Statistics
CBOE Volatility Index15.630.080.51%
CBOE Nasdaq Volatility Index17.15-0.13-0.75%
Equity Put-Call Ratio1.010.2126.25%
10-day PCR0.6100%
SPX-VIX Ratio75.8-0.55-0.72%

Bond Market Analysis

Bonds fell a little at the long end, with the yield on the benchmark 30-year Treasury bond rising 2.1 bps to 4.59%.

The middle of the yield curve was broadly lower: five year yields rose to 4.262%, and ten-year yields rose to 4.384%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 10.0 bps wider at 14.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 50.0 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 5.0 bps looser at 38.0 basis points and the 10-year AAA-A spread 0.0 bps looser at 6.0 bps.

Treasury Yields
UST 13wk (yld)3.560.0270.76%
UST 2Y (yld)
UST 5Y (yld)4.2620.0270.64%
UST 10Y (yld)4.3840.0230.53%
UST 30Y (yld)4.590.0210.46%

The Banks Index dipped 0.59 points (0.63%), ending the day at 93.66; within the index,

  • Comerica (CMA) -$0.87 (1.52%) to $56.23;
  • North Fork Bancorp (NFB) -$0.33 (1.37%) to $23.78;
  • Fifth Third Bancorp (FITB) -$0.44 (1.23%) to $35.23;
  • Northern Trust (NTRS) -$0.55 (1.11%) to $49.02; and
  • Mellon Financial (MEL) -$0.32 (1.02%) to $31.04.

The Broker-dealer Index shed 2.64 points (1.5%), to end the session at 172.93; the ticket clippers lined up as follows -

  • A G Edwards (AGE) -$1.04 (2.44%) to $41.55;
  • Jeffries Group (JEF) -$1.05 (2.41%) to $42.45;
  • E*Trade (ET) -$0.39 (2.27%) to $16.77;
  • Charles Schwab (SCH) -$0.25 (1.83%) to $13.40; and
  • Lehman Brothers (LEH) -$1.99 (1.78%) to $109.80.

The Philadelphia SOX (Semiconductor) index slid 7.44 points (1.67%), at 438.71

  • Freescale Semiconductors (FSL-B) -$0.92 (4.03%) to $21.93;
  • Altera (ALTR) -$0.69 (3.84%) to $17.26;
  • Teradyne (TER) -$0.48 (3.16%) to $14.69;
  • Xilinx (XLNX) -$0.70 (3.07%) to $22.07; and
  • Broadcom (BRCM) -$1.33 (2.98%) to $43.35.

Gold & Silver Markets

Gold rose $1.80 (0.38%) to close at $479.80 per ounce.

The Gold Bugs Index declined 1.83 points (0.75%), at 240.73

  • Harmony Gold (HMY) -$0.29 (2.58%) to $10.97;
  • Randgold Resources (GOLD) -$0.38 (2.48%) to $14.92;
  • Coeur d'Alene (CDE) -$0.10 (2.36%) to $4.13;
  • Gold Fields (GFI) -$0.32 (2.16%) to $14.49; and
  • Golden Star (GSS) -$0.06 (1.97%) to $2.99.

Silver rose $0.03 (0.38%) to close at $7.88 per ounce. The Gold and Silver Index (XAU) lost 0.35 points (0.31%), to 112.45 points.

  • Durban Rooderpoert Deep (DROOY) -$0.07 (4.83%) to $1.38;
  • Harmony Gold (HMY) -$0.29 (2.58%) to $10.97;
  • Gold Fields (GFI) -$0.32 (2.16%) to $14.49; and
  • Goldcorp (GG) -$0.18 (0.89%) to $20.10.
Precious Metals and Indices
PHLX Gold and Silver Index112.45-0.35-0.31%
AMEX Gold BUGS Index240.73-1.83-0.75%

Oil Market

Oil was firmer, rising by $1.73 per barrel, closing at $63.53 per barrel. This appears to be more than a bounce to the neckline (remember I warned that downside targets from $67-ish were unlikely to be reached? Well, that appears to include my downside target - the bloody thing never got below $60).

The Oil and Gas Index (XOI) rose 19.31 points (1.96%), to end the session at 1004.85

  • Sunoco (SUN) +$2.75 (3.76%) to $75.94;
  • ChevronTexaco (CVX) +$1.82 (3.02%) to $62.15; and
  • Amerada Hess (AHC) +$3.53 (2.99%) to $121.64.

The Oil service stocks (OSX) Index gained 2.22 points (1.38%), closing at 162.51

  • Smith International (SII) +$0.78 (2.53%) to $31.56;
  • National Oilwells/Varco (NOV) +$1.32 (2.25%) to $59.90; and
  • Transocean (RIG) +$1.02 (1.83%) to $56.77.
Energy Complex
Reuters CRB336.162.390.72%
Crude Oil Light Sweet63.531.732.8%
Heating Oil2.01790.052.34%
Natural Gas13.5190.544.19%
Unleaded Gas1.83320.031.81%
AMEX Oil Index1004.8519.311.96%
Oil Service Index162.512.221.38%

Currency Markets

USD Exchange Rates
US Dollar Index89.970.510.57%
Australian Dollar0.7525-0.0066-0.87%
Swiss Franc1.28980.00660.51%
Canadian Dollar0.8502-0.0001-0.01%