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Sometimes you just have to stare in awe and get out of the way. Today was one of those days - thank Odin we were still stuck with a buying bias (as I mentioned yesterday). I also mentioned yesterday that the aggressive selling all-but wrote off the prior gut-feel that the Dow could tank for the rest of the week... it fell too far, too fast, on Tuesday.
That said, the early going was awfully weak - the S&P futures dipped to 1173.75, which is fully 10 points below the 'critical breakout' level of 1183.50 mentioned here a couple of days ago. So, had we been willing to attempt shorts, no doubt we could have snaffled something during the first half-hour - and in fact there were several shorting signals where I was left thinking "Bastard... I wish I was allowed to take those".
The pullback I promised in the Bonds happened right on cue. After closing the 30-year bond futures long at 113-7/32, the Bond stayed subdued thereafter. In fact, the trade was cashed in just 2 ticks from the day's high in the bonds - whch is pretty shit-hot exiting. The bonds closed at their session lows, some 14/32 below our exit... so we can reload at some later time. $625 in profits with little risk... nice.
But back to equities...
There were a couple of very odd things about the behaviour of the markets just after the Oil Inventories data (which was, in fact, neutral: crude inventories up, but heating oil and gasoline inventories down). The inventories report was released at the end of the first hour.
During the second half of the first hour, the market had made a couple of attempts to close its opening gap down - but had failed. Within ten minutes of the oil inventories report, the gap was closed.
That may not seem odd to you, but it's pretty odd. Usually, if a gap (up or down) is not closed in the first hour, it's not going to close.
That was Hint one.
Hint two was the depth of the retracement after the gap was filled; after reaching 1183.50 the market sagged badly... but held a key pivot at 1176. (Actually, the pivot broke by two ticks... nuffies).
Hint three was that this same 'sag' low after the Crude report was higher than the two short-term swings that were set prior to the Crude report.
Still, the market really had no traction to speak of until the Beige Book was released: at the time the Beige Book came out, the S&P futures were just in the black, and were testing the post-Crude-report high. The Beige Book did what Fed publications always do... it smeared bullshit from asshole to breakfast time, telling anyone who likes Pravda-style reportage that everything is jsut tickety-boo (although prices are a problem - pencil in another rate hike).
Frankly, the actual content of the Beige Book was almost neutral (as far as Fed propaganda goes). Bonds didn't move, the dollar didn't move... but equities went frigging bananas. Someone let rip with a tsunami of program buying, and the rise from 4 a.m. (Australian time) till the session high (at 1201 - can you believe it!!) was a whopping 17.5 points. The rise from the low - 1173.75 - to the session high was 27.25 points.Do not take this as a portent of good things, dear Reader; markets that are in 'good shape' do not behave like this. As I said above - I'm glad we were stuck with a buying bias, because standing in the road of that train would have gotten us seriously scorched... but price action like we saw today is actually a symptom of a market that is a hair-s breadth from falling completely to pieces.
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation - a measly $2.25billion, overnight repurchase entirely in T-backed collateral undertaken at a 6.3 basis point discount to the Fed Funds Rate (FFR).
Major US Indices
The Dow Jones Industrial Average added 128.87 points (1.25%), closing out the day at 10414.13 points. From low to high, the Dow moved over 190 points. After plunging quite vigorously to an early low at 10232.98, the post-Beige-Book short-squeeze saw the Dow propelled to an intraday high of 10414.13 (which was also the clsoe).
Within the blue-chip index, 24 stocks rose, the biggest gainers being United Technology (UTX, +3.86% to $51.88) and Mcdonalds (MCD, +3.76% to $33.69), which accounted for 25 Dow points between them. Losers in the Dow numbered 6 and were led by Honeywell (HON, -5.23% to $34.05) and General Motors (GM, -2.54% to $28.38), with these two stocks contributing -21 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 330.9m shares to 161.4m.
The broader S&P500 advanced 17.62 points (1.5%), to 1195.76. Within the index, gainers numbered 399, while 83 S&P500 stocks fell for the day. Volume was tilted 3.1:1 in favour of the winners with 1720.38 million units traded in the winners as compared with 555.15 million traded in the losers .
Over at Times Square, the Nasdaq Composite gained 35.24 points (1.71%), to close at 2091.24, while larger-cap technology issues fared better with the Nasdaq100 adding 31.18 points (2.03%), to end at 1569.61 points. Within the tech benchmark, gainers numbered 82, while 13 Nasdaq100 stocks fell for the day. Volume was tilted 2.5:1 in favour of the winners with 617.98 million traded in the winners compared to 249.06 million in the losers .
NYSE Volume was super-chunky, with 2.67 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 | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10414.13 | 128.87 | 1.25% |
| S&P500 | 1195.76 | 17.62 | 1.5% |
| Nasdaq Composite | 2091.24 | 35.24 | 1.71% |
| Nasdaq100 | 1569.61 | 31.18 | 2.03% |
| NYSE Volume | 2.67bn | - | - |
| Nasdaq Volume | 1.89bn | - | - |
Bellwethers
My 9-stock "bellwethers" group rose by an average of 1.49%
- General Electric (GE) +$0.41 (1.21%) to $34.41;
- Citigroup (C) +$0.43 (0.97%) to $44.89;
- Wal Mart (WMT) +$0.86 (1.91%) to $45.99;
- I.B.M. (IBM) +$0.69 (0.83%) to $84.17;
- Intel (INTC) -$0.03 (0.13%) to $23.69;
- Cisco Systems (CSCO) +$0.22 (1.3%) to $17.20;
- eBay (EBAY) +$1.59 (3.93%) to $42.01;
- Fannie Mae (FNM) +$0.90 (2.01%) to $45.58; and
- Freddie Mac (FRE) +$0.83 (1.4%) to $60.00.
Market Breadth & Internals
NYSE advancing Issues exceeded decliners by 2115 to 1157 for a single-day A/D reading of 958; Nasdaq gainers trumped losers by 1969 to 1060. The 10-day moving average of the A/D line rose to -291.9 on the NYSE, while the 10dma of the Nasdaq A/D rose to -196.7.
NYSE advancing volume exceeded volume in decliners by 1922.5 to 680.6 million shares; Nasdaq advancing volume was greater than volume in decliners by 1342.2 to 495.9 million shares.
36 NYSE-listed stocks rose to new 52-week highs, and 235 posted fresh 52-week lows, while on the Nasdaq there were 46 stocks that hit new 52-week highs, and 144 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 2115 | 1969 |
| Decliners | 1157 | 1060 |
| Advancing Volume (m) | 1922.53 | 1342.17 |
| Declining Volume (m) | 680.61 | 495.92 |
| New Highs | 36 | 46 |
| New Lows | 235 | 144 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 13.58 | -1.75 | -11.42% |
| CBOE Nasdaq Volatility Index | 15.61 | -0.87 | -5.28% |
| Equity Put-Call Ratio | 0.95 | 0.11 | 13.1% |
| 10-day PCR | 0.73 | 0.01 | 1.39% |
| SPX-VIX Ratio | 88.1 | 11.2 | 14.57% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 1.1 bps to 4.689%.
The middle of the yield curve was broadly higher: five year yields fell to 4.318%, and ten-year yields fell to 4.463%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 5.0 bps wider at 16.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 45.0 bps for 10-year AAA, and 70.0 bps for 20-years.
Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly wider with the AAA-A spread on 20-years rising 10.0 bps to 46.0 basis points and the 10-year AAA-A spread 10.0 bps looser at 13.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.757 | -0.013 | -0.34% |
| UST 2Y (yld) | 4.22 | -0.01 | -0.24% |
| UST 5Y (yld) | 4.318 | -0.018 | -0.42% |
| UST 10Y (yld) | 4.463 | -0.018 | -0.4% |
| UST 30Y (yld) | 4.689 | -0.011 | -0.23% |
The Banks Index rose 1.9 points (2.01%), at 96.46; within the index,
- State Street (STT) +$2.42 (4.7%) to $53.95;
- US Bancorp (USB) +$1.10 (3.98%) to $28.72;
- BB&T Corp (BBT) +$1.54 (3.93%) to $40.76;
- Suntrust Banks (STI) +$2.59 (3.86%) to $69.61; and
- Wachovia (WB) +$1.52 (3.19%) to $49.14.
The Broker-dealer Index rose 5.21 points (3.06%), closing at 175.21; the ticket clippers lined up as follows -
- A G Edwards (AGE) +$2.49 (6.36%) to $41.63;
- Jeffries Group (JEF) +$2.34 (5.89%) to $42.08;
- Lehman Brothers (LEH) +$4.66 (4.24%) to $114.65;
- Goldman Sachs (GS) +$4.11 (3.51%) to $121.20; and
- E*Trade (ET) +$0.55 (3.33%) to $17.05.
The Philadelphia SOX (Semiconductor) index rose 0.1 points (0.02%), at 439.4
- Teradyne (TER) +$0.36 (2.58%) to $14.29;
- Marvell Tech Group (MRVL) +$1.05 (2.39%) to $45.00;
- Freescale Semiconductors (FSL-B) +$0.33 (1.49%) to $22.49;
- Advanced Micro Devices (AMD) +$0.29 (1.38%) to $21.34; and
- Texas Instruments (TXN) +$0.27 (0.91%) to $30.07.
Gold & Silver Markets
Gold fell by $8.80 (1.85%) to close at $465.80 per ounce.
The Gold Bugs Index slid 4.69 points (2.05%), to end the session at 224.26
- Harmony Gold (HMY) -$0.48 (4.5%) to $10.19;
- Meridian Gold (MDG) -$0.93 (4.43%) to $20.04;
- Coeur d'Alene (CDE) -$0.15 (3.83%) to $3.77;
- Golden Star (GSS) -$0.10 (3.6%) to $2.68; and
- Gold Fields (GFI) -$0.50 (3.58%) to $13.46.
Silver fell by $0.20 (2.49%) to close at $7.64 per ounce.
The Gold and Silver Index (XAU) lost 1.94 points (1.81%), closing at 105 points.
- Harmony Gold (HMY) -$0.48 (4.5%) to $10.19;
- Meridian Gold (MDG) -$0.93 (4.43%) to $20.04;
- Gold Fields (GFI) -$0.50 (3.58%) to $13.46; and
- Goldcorp (GG) -$0.51 (2.75%) to $18.06.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 465.80 | -8.80 | -1.85% |
| Silver | 7.64 | -0.20 | -2.49% |
| PHLX Gold and Silver Index | 105 | -1.94 | -1.81% |
| AMEX Gold BUGS Index | 224.26 | -4.69 | -2.05% |
Oil Market
Oil lost ground, shedding $0.79 per barrel, closing at $62.41 per barrel - and at one stage it traded as low as $61.25 before a fairly impressive bounce. It will be interesting to see whether Woodside rises on broad momentum (a relief rally) or whether this additional fall in Crude prices continues to weigh on our pet Oz energy short.
The Oil and Gas Index (XOI) rose 15.95 points (1.69%), ending the day at 957.12
- Occidental Petroleum (OXY) +$2.15 (3.01%) to $73.55;
- Amerada Hess (AHC) +$2.90 (2.5%) to $119.05; and
- ConocoPhillips (COP) +$1.47 (2.45%) to $61.55.
The Oil service stocks (OSX) Index added 4.19 points (2.72%), closing at 158
- Noble Corp (NE) +$3.14 (5.38%) to $61.54;
- Smith International (SII) +$1.38 (4.66%) to $30.99; and
- Transocean (RIG) +$2.25 (4.2%) to $55.80.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 334 | -1.07 | -0.32% |
| Crude Oil Light Sweet | 62.41 | -0.79 | -1.25% |
| Heating Oil | 1.9134 | -0.02 | -1.08% |
| Natural Gas | 13.549 | 0.2 | 1.49% |
| Unleaded Gas | 1.6763 | -0.06 | -3.39% |
| AMEX Oil Index | 957.12 | 15.95 | 1.69% |
| Oil Service Index | 158 | 4.19 | 2.72% |
Currency Markets
Notice something? The USD fell (modestly) and bonds rose (modestly), after beige Book news that was supposedly so good that equities had their biggest intraday reversal since the London Bombings... can you smell something?
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 89.88 | -0.41 | -0.45% |
| Euro | 1.1995 | 0.0036 | 0.3% |
| Yen | 115.315 | -0.39 | -0.34% |
| Sterling | 1.7657 | 0.0146 | 0.83% |
| Australian Dollar | 0.7506 | 0.0027 | 0.36% |
| Swiss Franc | 1.2943 | -0.0043 | -0.33% |
| Canadian Dollar | 0.8509 | 0.0017 | 0.2% |
