Interdum stultus opportuna loquitur...

Tuesday, October 11, 2005

USRant: Looked OK There For A While....

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Well, two things happened this session: firstly, those trading blindly off the Columbus Day mantra  got off to a disappointing start (the mantra is "Get in on Columbus Day; get out in May and stay away"). Second, the market closed below the critical support I've outlined previously (at Dow 10250). Another consecutive close below this level completely rules out the 1300 year-end target for the S&P500 that I have previously mentioned (with, as I always point out, some apprehension).

Now it's not always useful to make inferences based on the price action that occurs on a holiday session; usually none of the big houses send their 'A' team, and so trade is dominated by folks who - let's be frank - should only trade baseball cards. That said, the afternoon debacle appears to have had some institutional participation - on the selling side. Wave after wave of TICK < -1000 is a dead giveaway - nuffnuffs just don't have enough clout to swing the entire market to a massively declining TICK.

During the (weak) morning session, as the S&P futures dropped more than 10 points from their Globex high, I was heard to say out loud "This can't possibly be the Delphi bankruptcy - that's been known about for ages. With GM and Ford being basket cases, it was a lay-down misere that parts suppliers would be under the pump." And yet, that's literally the only thing that could have been a driver.

We got out of a scalp long with our hides intact (in fact, with a half-point gain), but tell you what - I am more than a little annoyed at that little 'almost but not quite' divergence way up at the 10565 area: you will recall that from October 4th, where the Dow missed making a new session high by 1 point, and the S&P missed making a new session high by 0.34 points - but both had their CCI way lower than the previous swing high. And today we got a selling divergence at the high of the day, which was countermanded by a buying divergence an hour or so later (see the chart below). 

After the bell, Alcoa reported better than expected earnings (it hacked its forecast by 39% a month ago, and beat that lowered expectation... nothing like a low bar to make a dud look like a champion). Its stock was up 2% in the after-market, after closing down 1.65% during the regular session. To me, Alcoa's failure to generate unit shipment growth (it's revenue growth was entirely driven by higher USD base metals prices), and its failure to control costs adequately, indicate that 'investors' as responding to the 'beat the street by a penny' hustle, rather than actually trying to understand what the key drivers are. They're behaving as if Alcoa's earnings - entirely the product of luck - are actually the result of good management.

I've heard it said of George W Bush that he's a man who was born on third base, looked around, and assumed he must've hit a triple. Alcoa management must be feeling a bit like that at the moment.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk did not enter the market. Bureaucrats have better things to do with their time than turn up for work on a public holiday.

Major US Indices

The Dow Jones Industrial Average lost 53.55 points (0.52%), closing out the day at 10238.76 points. As I've mentioned several times before, that 10250 close is significant, and the battle to see if the close held above that level was like the wrestle between Isaac and God (that's a hint for youse Zionists out there - that's what Israel is... get your heads out of your arses). 

Looks like Isaac was the bears today (after all, the original wrestle was pretty much a draw, with Isaac fighting God to a standstill... and being renamed Israel - One who struggles with God). And so was the wrassle  at 10250 - the honours went to the bears - just.

Perhaps all these 'el' names should be changed - given advances in theology over the last few months - to 'FSM'; IsraFSM would be "One who struggles with the Flying Spaghetti Monster". That said, you have to consider that if Isaac had taken on the Big Fettucine, the outcome would probably have been different. I don't know why the FSM sent his 'B' team in to the wrestle.

Anyhow -performing the required substitution we would have IsraFSM, MichaFSM, GabriFSM, PhanuFSM, ImmanuFSM... you get the picture.

OK, enough religious instruction in the ways of His Noodliness... let's get back to the chart.

Note the tease break of the first hour high (the first hour high is marked FHH on the chart), which coincided with a selling divergence on the CCI. Note also the ease with which the market slid after the divergence was posted.

One thing to note - the empty bars in the data (which I've marked '???') have cocked up the calculation of the %R at the opening bar, and possibly the CCI as well. I have tried to check, but this is how the chart evolved in real-time, so this is what gets presented...

Suffice it to say that the selling divergence worked a treat for anybody who chose to change their intraday bias to selling; the buying divergence late in the session also provided a half-dozen one-point bounces off short-term %R oversold readings on the very-short timeframe charts.

Dow 15-minute chart 

The index hit an intraday high of 10323.12 (10325-ish) - on a tease break above the first hour high. I don't know how many times I've written it - when the first hour shows little or no momentum, the first break of either first-hour extreme is always a tease.

From there, the Dow reversed to the tune of just under 90 points, with afternoon selling dragging the index down as low as 10237.8 in the final minutes of trade. 

Within the blue-chip index, 10 stocks rose, the biggest gainers being Merck (MRK, +4.06% to $26.90) and Du Pont (DD, +1.24% to $38.35), which accounted for 12 Dow points between them. Losers in the Dow numbered 20 and were led by General Motors (GM, -9.93% to $25.48) and Honeywell (HON, -1.86% to $35.87), with these two stocks contributing -28 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 248.9m shares to 104.8m.

The broader S&P500 lost 8.57 points (0.72%), closing at 1187.33. Within the index, gainers numbered 82, while 397 S&P500 stocks fell for the day. Volume was tilted 4.9:1 in favour of the losers with 1579.61 million units traded in the losers as compared with 325.47 million traded in the winners .

Over at Times Square, the Nasdaq Composite declined 11.43 points (0.55%), to close at 2078.92, while larger-cap technology issues fared worse with the Nasdaq100 losing 8.93 points (0.57%), to end at 1546.99 points. Within the tech benchmark, gainers numbered 31, while 62 Nasdaq100 stocks fell for the day. Volume was tilted 2.1:1 in favour of the losers with 410.60 million traded in the losers compared to 198.91 million in the winners .

NYSE Volume was super-chunky, with 2.22 billion shares changing hands, while Nasdaq Volume was actually pretty light, with 1.44 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10238.76-53.55-0.52%
Nasdaq Composite2078.92-11.43-0.55%
NYSE Volume2.22bn--
Nasdaq Volume1.44bn--


My 9-stock "bellwethers" group rose by an average of 0.13%

  • General Electric (GE) -$0.23 (0.67%) to $33.99;
  • Citigroup (C) -$0.18 (0.4%) to $45.23;
  • Wal Mart (WMT) +$0.51 (1.16%) to $44.54;
  • I.B.M. (IBM) +$0.75 (0.93%) to $81.25;
  • Intel (INTC) -$0.40 (1.68%) to $23.42;
  • Cisco Systems (CSCO) -$0.14 (0.79%) to $17.49;
  • eBay (EBAY) +$0.56 (1.4%) to $40.46;
  • Fannie Mae (FNM) +$0.36 (0.85%) to $42.71; and
  • Freddie Mac (FRE) +$0.19 (0.33%) to $58.27.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2307 to 940, for a single-day A/D reading of -1367; and Nasdaq losers exceeded gainers by 1918 to 1063. The 10-day moving average of the A/D line fell to -608.3 on the NYSE, while the 10dma of the Nasdaq A/D fell to -479.3.

On the NYSE declining volume was greater than volume in advancing issues by 1760.3 to 418.9 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 911.9 to 449.6 million shares.

34 NYSE-listed stocks rose to new 52-week highs, and 160 posted fresh 52-week lows, while on the Nasdaq there were 44 stocks that hit new 52-week highs, and 100 which fell to fresh 52-week lows.

Notice that all the breadth indicators - new highs/new lows, advances/declines and advancing/declining volume are showing pretty extreme readings. These readings are being registered on the first day of a close below 10250, which  drastically reduces the probability of two consecutive closes below that level.

Market Breadth Statistics

Advancing Volume (m)418.88449.64
Declining Volume (m)1760.28911.87
New Highs3444
New Lows160100

Market Sentiment Statistics
CBOE Volatility Index15.550.966.58%
CBOE Nasdaq Volatility Index17.280.663.97%
Equity Put-Call Ratio0.80.1931.15%
10-day PCR0.6100%
SPX-VIX Ratio76.4-5.61-6.85%

Bond Market Analysis

The bond market was closed for the holiday
Treasury Yields
UST 13wk (yld)3.53300%
UST 2Y (yld)4.1600%
UST 5Y (yld)4.23500%
UST 10Y (yld)4.36100%
UST 30Y (yld)4.56900%

The Banks Index shed 0.87 points (0.91%), ending the day at 94.25; within the index,

  • Washington Mutual (WM) -$0.79 (2.07%) to $37.46;
  • Golden West Financial (GDW) -$1.16 (1.99%) to $57.09;
  • Keycorp (KEY) -$0.52 (1.64%) to $31.20;
  • Regions Financial (RF) -$0.48 (1.58%) to $29.82; and
  • Suntrust Banks (STI) -$0.90 (1.33%) to $66.60.

The Broker-dealer Index lost 1.2 points (0.68%), closing at 175.57; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) -$0.32 (2.29%) to $13.65;
  • Ameritrade (AMTD) -$0.41 (1.95%) to $20.59;
  • Jeffries Group (JEF) -$0.51 (1.16%) to $43.50;
  • Merrill Lynch (MER) -$0.57 (0.92%) to $61.06; and
  • A G Edwards (AGE) -$0.30 (0.7%) to $42.59.

The Philadelphia SOX (Semiconductor) index declined 14.96 points (3.24%), at 446.15

  • Xilinx (XLNX) -$4.35 (16.04%) to $22.77;
  • Freescale Semiconductors (FSL-B) -$1.21 (5.03%) to $22.85;
  • Teradyne (TER) -$0.76 (4.77%) to $15.17;
  • National Semiconductors (NSM) -$1.03 (4.17%) to $23.69; and
  • Broadcom (BRCM) -$1.79 (3.85%) to $44.68.

Gold & Silver Markets

Gold rose $0.30 (0.06%) to close at $478 per ounce.

The Gold Bugs Index shed 0.52 points (0.21%), closing at 242.56

  • Golden Star (GSS) -$0.11 (3.48%) to $3.05;
  • Hecla Mining (HL) -$0.06 (1.47%) to $4.02;
  • Kinross Gold (KGC) -$0.08 (1.05%) to $7.52;
  • Freeport McMoran (FCX) -$0.30 (0.64%) to $46.72; and
  • Glamis Gold (GLG) -$0.13 (0.6%) to $21.40.

Silver rose $0.08 (0.97%) to close at $7.85 per ounce. The Gold and Silver Index (XAU) lost 0.06 points (0.05%), ending the day at 112.8 points.

  • Placer Dome (PDG) -$0.19 (1.1%) to $17.02;
  • Kinross Gold (KGC) -$0.08 (1.05%) to $7.52;
  • Freeport McMoran (FCX) -$0.30 (0.64%) to $46.72; and
  • Agnico Eagle (AEM) -$0.08 (0.55%) to $14.58.
Precious Metals and Indices
PHLX Gold and Silver Index112.8-0.06-0.05%
AMEX Gold BUGS Index242.56-0.52-0.21%

Oil Market

Oil lost ground, shedding a teensy $0.04 per barrel, closing at $61.80 per barrel - although that was looking much worse early in the session as Crude got down to $60.35 a barrel before rallying almost exactly $2 in 2 hours. 

The Oil and Gas Index (XOI) declined 10.94 points (1.1%), closing at 985.54

  • Sunoco (SUN) -$1.69 (2.26%) to $73.19;
  • Exxon Mobil (XOM) -$1.10 (1.85%) to $58.50; and
  • Kerr Mcgee (KMG) -$1.40 (1.6%) to $86.25.

The Oil service stocks (OSX) Index declined 1.93 points (1.19%), to 160.29

  • Halliburton (HAL) -$1.78 (2.84%) to $60.93;
  • Rowan Companies (RDC) -$0.84 (2.6%) to $31.48; and
  • Weatherford International (WFT) -$1.11 (1.75%) to $62.19.
Energy Complex
Reuters CRB333.771.550.47%
Crude Oil Light Sweet61.8-0.04-0.06%
Heating Oil1.97180.010.6%
Natural Gas12.975-0.25-1.9%
Unleaded Gas1.8006-0.03-1.56%
AMEX Oil Index985.54-10.94-1.1%
Oil Service Index160.29-1.93-1.19%

Currency Markets

USD Exchange Rates
US Dollar Index89.460.390.44%
Australian Dollar0.75910.00190.25%
Swiss Franc1.28320.00560.44%
Canadian Dollar0.8503-0.0014-0.16%