Interdum stultus opportuna loquitur...

Thursday, October 06, 2005

USRant: Oil Tanks, Stocks Too... How Come That?

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

Those of you who remember my blatherings going all the way back to HotCopper in '98/'99, will recall that I've always thought Greenspan was a jerk - a no-talent bum who couldn't make a living in the private sector and therefore was forced to get a job as a bureaucrat in order to get a decent pension. Now the asshole is trying to rewrite history before he retires, to try and preserve some of the mindless "Maestro" wankery that he loves so much.

His track record is deplorable - as a private consultant he picked the top and the bottom of the market's moves in the 1970s... almost to the day.... but on exactly the wrong side. I have a chart showing that somewhere,  and I will dig it out and post it.

His private-sector brilliance continued... as David Fleckenstein (a terrific writer and a good manager) wrote recently about Greenspan's role in the Savings and Loan debacle: 1985, as a paid consultant to Charles Keating's Lincoln Savings & Loan, Greenspan proclaimed that its management was "seasoned and expert" -- with a "record of outstanding success in making sound and profitable direct investments." He later wrote a letter to Edwin Gray, then-chairman of the Federal Home Loan Bank Board, telling Gray to "stop worrying so much," and "that deregulation was working as planned." Greenspan noted 17 S&Ls that had just reported record profits. Within four years, 15 of those 17 institutions were out of business, costing the Federal Savings & Loan Insurance Corp. $3 billion.

And of course Greenspan was the prime mover of the "Chicken Little" view of the world that was prevalent among the world's idiots as a result of the consulting-company leechfest known as Y2K - a non-issue that was blown into the End Times by morons like Greenspan.

So let's not let the jerk get away with rewriting the history of his feeding of the equity and mortgage bubbles; rather than do anything to prevent a bubble, this cretin actually did everything he could to augment them. He deserves calumny, and people should push him into the gutter if they see him in the street.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.75billion, overnight repurchase entirely in T-backed collateral undertaken at a 0.9 basis point discount to the Fed Funds Rate (FFR). Not big enough, and not at enough of a discount.

Major US Indices

The absence of selling divergences has been a pain in the tuches the last couple of sessions. As I outlined the other day, the reversal occurred where it should have been expected; on a failed test of a first-hour high. But it didn't give us a valid selling divergence signal.

That's a genuine pain, because the thing about having a methodological structure is that you're obliged to use it. Following two late-day buying divergences yesterday, we were obliged to have a long-side bias, even though it was clear that the market was 'slippery' downwards. We dove in long at 1213.25 as the 85-tick %R hit oversold, and had to endure a retracement to 1211.25 as it became even more oversold - but we got out about 25 minutes later with the day's 1-point objective. 

Yes, it was like pulling teeth. Yes, it would have been much easier selling rallies than buying declines. Both of those statements are true - but not relevant, since there wasn't a selling divergence to be seen anywhere. Longer-term (daily and weekly) charts diverged to a selling bias ages ago (remember that I said weeks ago that 10700 would be the top for any rally?), but the intraday bias gets set at a lower timeframe, and we just have to put up with it.

For anyone who missed the opening trade there was another divergence (again, a buying divergence, dammit) later in the session - that provided another soul-sucking one-hour wait for the eventual payoff.

I said much earlier in the year (just before the first London bombings), that so long as the market held its closing level above 10250 we would be on target for 1300 in the S&P by year-end. I was never really comfortable with that analysis, but when it popped out of the methodology I was obliged to write it up. As a result we have had a 'soft bias' towards the upside for a while, albeit retaining upside reversal targets (like the recent target at 10700). But 10250 isn't far below ,and if it is broken on a closing basis then it's going to develop into something much nastier - like a 4-digit Dow by year-end, and the S&P finishing the year sub-1100... with negative traction into the New Year as higher credit card minimums payments, tighter personal bankruptcy laws, and higher winter fuel bills all combine to bite into consumption spending power, with a lack of 'house as ATM' refi to help replace the reduction in purchasing power.

That's the thing about relying on massive leverage to run your financial life - if you're not a contrarian you're going to get ripped to pieces... and the entire US is a huge leveraged bet on Brand America (and we know how that bet is working out). I stick by my prediction of late 2000 - that China and India are the two Next Big Things, and that the US will be three countries by 2025.

Dow 15-minute intraday

The Dow Jones Industrial Average dipped 123.75 points (1.19%), closing out the day at 10317.36 points. The index hit an intraday high of 10438.47 (at the open), and never got out of reverse for the entire session - dropping to 10316.16 in the last minutes of the session. 

Within the blue-chip index, only 1 stock managed to close with a gain - American Express (AXP, +0.52% to $50.07). The other 29 Dow components fell, and were led by General Motors (GM, -4.82% to $28.63) and Hewlett Packard (HPQ, -3.78% to $27.47), with these two stocks contributing -20 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 394.9m shares to 5.4m.

That's a massive volume tilt. Mindless selling.

Taken in conjunction with everything else that screams 'oversold', and also thinking hard about the fact that Citigroup is nowhere near as weak as the broad market, it looks like nuffnuff capitulation. Therefore, it's almost certain to presage a rally attempt, at the very least. 

The fact that the S&P cash index has broken 1200 is not particularly helpful to the rally idea, but the S&P futures held above 1200 (just) and the Dow still has that concrete support at 10250 below.

The broader S&P500 declined 18.08 points (1.49%), ending the day at 1196.39. Within the index, gainers numbered 44, while 439 S&P500 stocks fell for the day. Volume was tilted 7.2:1 in favour of the losers with 1794.57 million units traded in the losers as compared with 249.82 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 36.34 points (1.7%), to close at 2103.02, while larger-cap technology issues fared better with the Nasdaq100 losing 24.02 points (1.51%), to end at 1571.52 points. Within the tech benchmark, gainers numbered 8, while 87 Nasdaq100 stocks fell for the day. Volume was tilted 6.8:1 in favour of the losers with 586.69 million traded in the losers compared to 86.24 million in the winners .

NYSE Volume was super-chunky, with 2.5 billion shares changing hands, while Nasdaq Volume was chunky, with 1.96 billion shares bought and sold (mostly sold) on keyboards across cyberspace.

Major Market Statistics
Dow Jones Industrial Average10317.36-123.75-1.19%
Nasdaq Composite2103.02-36.34-1.7%
NYSE Volume2.5bn--
Nasdaq Volume1.96bn--


My 9-stock "bellwethers" group fell by an average of 0.42%; notice that Citigroup is still not participating in the decline. Citi's handlers are the nimblest and most agile manipulators in the world - there is no way they would get caught long if there was a genuine decline coming.

  • General Electric (GE) -$0.17 (0.52%) to $32.68;
  • Citigroup (C) -$0.07 (0.15%) to $45.27;
  • Wal Mart (WMT) -$0.35 (0.8%) to $43.50;
  • I.B.M. (IBM) -$0.29 (0.36%) to $79.82;
  • Intel (INTC) -$0.43 (1.76%) to $24.07;
  • Cisco Systems (CSCO) -$0.17 (0.96%) to $17.50;
  • eBay (EBAY) -$0.01 (0.03%) to $40.19;
  • Fannie Mae (FNM) -$0.79 (1.86%) to $41.62; and
  • Freddie Mac (FRE) +$1.46 (2.63%) to $57.02.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2677 to 604, for a single-day A/D reading of -2073 (like the volume stats for the major indices, that's an eye-popper... indicating a selling frenzy). Nasdaq losers exceeded gainers by 2414 to 599. The 10-day moving average of the A/D line fell to -599.2 on the NYSE, while the 10dma of the Nasdaq A/D fell to -501.9. These are both starting to get seriously overstretched to the downside.

On the NYSE declining volume was greater than volume in advancing issues by 2254.1 to 234.1 million shares - almost a 10:1 ratio; On the Nasdaq declining volume exceeded volume in advancing issues by 1477.6 to 290.2 million shares.

74 NYSE-listed stocks rose to new 52-week highs, and 158 posted fresh 52-week lows, while on the Nasdaq there were 83 stocks that hit new 52-week highs, and 84 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)234.12290.24
Declining Volume (m)2254.131477.63
New Highs7483
New Lows15884

Market Sentiment Statistics
CBOE Volatility Index14.551.3510.23%
CBOE Nasdaq Volatility Index15.860.956.37%
Equity Put-Call Ratio0.870.1622.54%
10-day PCR0.610.011.67%
SPX-VIX Ratio82.2-9.78-10.63%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.3 bps to 4.58%.

The middle of the yield curve was broadly higher: five year yields fell to 4.232%, and ten-year yields fell to 4.361%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 7.0 bps wider at 11.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 38.0 bps for 10-year AAA, and 66.0 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 opening up by 11.0 bps to 46.0 basis points and the 10-year AAA-A spread 10.0 bps wider at 20.0 bps.

Treasury Yields
UST 13wk (yld)3.49-0.045-1.27%
UST 2Y (yld)4.17-0.03-0.71%
UST 5Y (yld)4.232-0.007-0.17%
UST 10Y (yld)4.361-0.015-0.34%
UST 30Y (yld)4.58-0.023-0.5%

The Banks Index slid 0.52 points (0.55%), ending the day at 94.54; within the index,

  • Golden West Financial (GDW) -$1.53 (2.62%) to $56.86;
  • M&T Bank Corp (MTB) -$1.37 (1.32%) to $102.79;
  • Fifth Third Bancorp (FITB) -$0.47 (1.3%) to $35.70;
  • State Street (STT) -$0.57 (1.14%) to $49.28; and
  • North Fork Bancorp (NFB) -$0.28 (1.13%) to $24.43.

The Broker-dealer Index slid 1.71 points (0.95%), to 177.4; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$1.29 (2.87%) to $43.72;
  • Raymond James (RJF) -$0.73 (2.23%) to $31.98;
  • Ameritrade (AMTD) -$0.30 (1.39%) to $21.21;
  • Charles Schwab (SCH) -$0.17 (1.2%) to $13.96; and
  • Goldman Sachs (GS) -$1.17 (0.98%) to $117.75.

The Philadelphia SOX (Semiconductor) index declined 6.5 points (1.37%), to end the session at 466.42

  • Micron Technology (MU) -$0.53 (3.98%) to $12.80;
  • Marvell Tech Group (MRVL) -$1.21 (2.63%) to $44.78;
  • Teradyne (TER) -$0.42 (2.58%) to $15.87;
  • Altera (ALTR) -$0.37 (1.95%) to $18.60; and
  • Texas Instruments (TXN) -$0.62 (1.94%) to $31.39.

Gold & Silver Markets

Gold was unchanged at $469.30 per ounce. It traded in quite a wide range - dipping to below $466 in the first hour of the day session, before reversing up hard to tickle $470 (it didn't quite get there though).

The Gold Bugs Index lost 7.11 points (3%), to 229.78; that's interesting on a day when the Gold price hardly budged - that gold shares couldn't get a bid.

  • Coeur d'Alene (CDE) -$0.20 (4.9%) to $3.88;
  • Iamgold (IAG) -$0.31 (4.34%) to $6.83;
  • Freeport McMoran (FCX) -$1.91 (4.06%) to $45.08;
  • Goldcorp (GG) -$0.74 (3.71%) to $19.21; and
  • Agnico Eagle (AEM) -$0.52 (3.57%) to $14.04.

Silver rose $0.05 (0.71%) to close at $7.48 per ounce. 

The Gold and Silver Index (XAU) lost 3.23 points (2.93%), ending the day at 106.98 points.

  • Freeport McMoran (FCX) -$1.91 (4.06%) to $45.08;
  • Goldcorp (GG) -$0.74 (3.71%) to $19.21;
  • Agnico Eagle (AEM) -$0.52 (3.57%) to $14.04; and
  • Placer Dome (PDG) -$0.58 (3.47%) to $16.14.
Precious Metals and Indices
PHLX Gold and Silver Index106.98-3.23-2.93%
AMEX Gold BUGS Index229.78-7.11-3%

Oil Market

Whaddya reckon about my little piece yesterday on Oil? Note that it's still been able to hold above that sodding neckline, despite a big decline. Oil nuffies were wrong-footed again by some fairly bad inventory data which showed big drawdowns in distillate and heating oil inventories, but a more modest -270k drawdown in Crude inventories.

Being typical 'newstraders', they thought that this meant that Crude supplies were tight and therefore they ought to buy Crude Oil futures. this helped the front-month drive upwards to $64.10 in the immediate aftermath of the report, and prompted one of our American cousins to send me an e-mail calling me a fuckwit with no idea about oil.

Honestly, you would think they would learn. That e-mail arrived with oil at $64.00 even - which means that the chap who sent it got to feel real bright for about four minutes. That's how long oil was above $64 after the report.

From there - having lured in all the world's idiots to the long side - it tanked, shredding nuffnuff accounts and shedding $1.11 per barrel for the session and closing at $62.79 per barrel. The session low was $62.50, and as I pointed out in yesterday's CrudeRant, oil is now heading toward daily oversold at a very fast pace.

Now, do you notice how un-smug I am being towards the semi-anonymous e-mail sender? Nowhere have I written 'Print that out and stick it up your ass, moron', or "Hope you ate your own cooking and went long $64, buttwad". I try not to write responses like that anymore.

The Oil and Gas Index (XOI) slid 41.96 points (4.04%), at 997.08

  • Amerada Hess (AHC) -$8.59 (6.52%) to $123.20;
  • Marathon Oil (MRO) -$3.79 (5.84%) to $61.07; and
  • Sunoco (SUN) -$3.84 (5%) to $72.95.

The Oil service stocks (OSX) Index shed 6.5 points (3.84%), at 162.81

  • Global Industries (GLBL) -$0.98 (6.78%) to $13.48;
  • Halliburton (HAL) -$3.69 (5.6%) to $62.24; and
  • Transocean (RIG) -$2.88 (4.88%) to $56.12.
Energy Complex
Reuters CRB333.25-1.76-0.53%
Crude Oil Light Sweet62.79-1.11-1.74%
Heating Oil2.0148-0.03-1.7%
Natural Gas14.12-0.1-0.73%
Unleaded Gas1.9078-0.11-5.35%
AMEX Oil Index997.08-41.96-4.04%
Oil Service Index162.81-6.5-3.84%

Currency Markets

USD Exchange Rates
US Dollar Index89.91-0.09-0.1%
Australian Dollar0.7565-0.007-0.92%
Swiss Franc1.293-0.0087-0.67%
Canadian Dollar0.8456-0.007-0.82%