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Wednesday, October 19, 2005

USRant: Uh-Oh, CHUNGO... Is Danger Island Next?

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Over the last ocuple of sessions, I've made it clear that things were not 'hanging together' - that cross-market action was making me very skittish (see yesterday's OzRant and USRant and the sundry posts from the prior night). I also mentioned - as a low-probability 'alternative reality' - that 1183.50 was a crucial level and that a breach of that level brought downside S&P futures targets as low as 1150 into focus. Well, 1183.50 didn't hold.

When the PPI (released an hour before the market opened) showed the highest rate of producer-level inflation in 15 years (at the headline level), the initial market reaction was 'feh'. The reaction - or absence thereof - had my RantRadar making screeching noises. It stank to high heaven (the reaction, not my RantRadar).

The futures had already been pushed up to 1196.75 during the mandatory ego-handjob presented to Greenspan every time he opens his fat idiot yapper: this time the ego-masturbation was performed during Japanese market hours - Greenspan has been touring, trying to shore up his legacy. The Maestro-bation push to the high 1190s made the Globex high a likely upper bound for the day, and satisfied the 1190-1200 range for the bounce that started last Friday (exactly as forecast), although I genuinely expected 1200 to be breached this session. 

In a delicious vindication of my 'quarters are important' idea about the Dow, have a guess what the high was for the Dow futures...

Go on... guess.

If you guessed '10400-ish' you would be spot on. The actual Globex high for the Dow futures was 10399...

The PPI resulted in a very modest intial reaction from equity futures, a downdraft to 112-10/32 in 30-year bond futures (which was recovered once all the idiots were short), and a spike down in the Euro... the sort of reactions one might expect when inflationary expectations rise. But there was no 'venom' in the reaction. It was as if the market thought that if it held its breath and pretended the PPI wasn't really really awful, it could sneak past the data without getting punished.

For the first three hours (almost the first 4 hours, actually) of the session, it looked like the market was going to get away with it. Sure, the equities were down, but they were not ugly. In fact "mixed" is a better adjective - while the S&P was down between 2 and 4 points during the time, the Dow was hovering around unchanged and actually spent the bulk of the time above unchanged... thanks to a big pop in MMM. But everything - bonds, equities, the Euro - was trading in an unnaturally compressed range: the S&P500 futures traded within a 4-point band for the whole of the first 3½ hours.

Then, and interesting thing happened.

The mid-session 'quiet period' is often used to conduct market manipulations - the trading is nice and thin, making it a relatively low-cost time to simply slam a load of dough into the futures market and generate a bit of a squeeze, if that's what you wanted to do.  But during this mid-session, the attempted moonshot (at 2:06 a.m. our time) stalled - despite oil getting slammed down during the same time. And where it stalled was of crucial importance: it stalled with the S&P futures at 1192.50 - exactly one tick below the first-hour's high.

A red rag to a bull - from then on the entire tenor of the market changed, and not for the better. 

And to make matters worse - Intel missed the mark on its earnings expectations after the bell: it fell a penny short of the consensus guess: at the close it was up $0.26 at $23.74... now it's down at $22.93: that's a 3.4% reversal.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.25billion, overnight repurchase with $4.125billion in T-backed collateral undertaken at a 6.2 basis point discount to the Fed Funds Rate (FFR). the Fed has been very unhelpful lately, providing little in the way of highly-discounted large-volume cash for da Boyz to splash around.

Major US Indices

The Dow Jones Industrial Average shed 62.84 points (0.61%), closing out the day at 10285.26 points. The index hit an intraday high of 10361.47 during the mid-session failed jamjob (it was the only index that set a new session high at that time), but reversed hard in the aftermath to close at its low. 

Oddly, this intraday reversal - and Intel's post-market negative surprise - makes my worries about a sub-10k Dow by the end of this week (expressed in yesterday's OzRant) less likely. Next week is still a 'maybe', but I would have liked for the S&P futures to have nudged 1200 in order to generate a larger crop of nuffnuff breakout buyers to slaughter - because that is what drives a market down: not new shorts (those occur mostly at bottoms), but stale longs.

Within the blue-chip index, 7 stocks rose, the biggest gainers being 3M (MMM, +3.09% to $74.71) on a higher than expected profit outcome and Hewlett Packard (HPQ, +1.28% to $27.73), which accounted for 21 Dow points between them. I figure that MMM's profit performance was strong because the entire US economy is being held together with sticky-tape. Since MMM has a high stock price, and the Dow is stock-price-weighted (rather than market-cap weighted like the S&P, NasdaqComp and Nasdaq100), the boost to MMM shares helped the Dow to avoid a triple-digit embarrassment.

Losers in the Dow numbered 23 and were led by Exxon Mobil (XOM, -4.35% to $56.30) and Altria Group (MO, -3.31% to $72.48), with these two stocks contributing -40 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 268m shares to 201.7m.

The broader S&P500 lost 11.96 points (1%), closing at 1178.14. Within the index, gainers numbered 97, while 380 S&P500 stocks fell for the day. Volume was tilted 3.1:1 in favour of the losers with 1458.70 million units traded in the losers as compared with 469.17 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 14.3 points (0.69%), to close at 2056, while larger-cap technology issues fared worse with the Nasdaq100 losing 11.45 points (0.74%), to end at 1538.43 points. Within the tech benchmark, gainers numbered 20, while 74 Nasdaq100 stocks fell for the day. Volume was tilted 2.1:1 in favour of the losers with 435.76 million traded in the losers compared to 206.72 million in the winners .

NYSE Volume was super-chunky, with 2.24 billion shares changing hands, while Nasdaq Volume was about average, with 1.52 billion shares traded.


Major Market Statistics
IndexCloseGain(Loss)%
Dow Jones Industrial Average10285.26-62.84-0.61%
S&P5001178.14-11.96-1%
Nasdaq Composite2056-14.3-0.69%
Nasdaq1001538.43-11.45-0.74%
NYSE Volume2.24bn--
Nasdaq Volume1.52bn--

Bellwethers

My 9-stock "bellwethers" group fell by an average of 0.17% - recall that yesterday I mentioned that Citigroup was not participating in the advance...

Look at Citigroup (down in the Bellwethers' section: it's telling a different story to the broader market... and as I've so often said, it's the most highly-manipulated large-cap stock in the world. The folks who run it (the floor guys who run the stock price, not management of the company) are the ultimate Street insiders.

I've said this before - Citigroup is the 'bellwether of bellwehters' - because it's the most manipulated big-cap stock in the shole wide world, and the manipulation is performed by the most 'hooked in' set of vipers the financial world has ever known. Many of them will eventually be the subject of SEC investigations - particularly for 'front running' client orders - but for now C is their bitch and they like it that way.

  • General Electric (GE) -$0.01 (0.03%) to $34.00;
  • Citigroup (C) -$0.35 (0.78%) to $44.46;
  • Wal Mart (WMT) -$0.11 (0.24%) to $45.13;
  • I.B.M. (IBM) +$0.89 (1.08%) to $83.48;
  • Intel (INTC) +$0.26 (1.11%) to $23.72;
  • Cisco Systems (CSCO) -$0.19 (1.11%) to $16.98;
  • eBay (EBAY) -$0.42 (1.03%) to $40.42;
  • Fannie Mae (FNM) unchanged at $44.68; and
  • Freddie Mac (FRE) -$0.31 (0.52%) to $59.17.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2338 to 918, for a single-day A/D reading of -1420; and Nasdaq losers exceeded gainers by 2028 to 952. The 10-day moving average of the A/D line fell to -566.2 on the NYSE, while the 10dma of the Nasdaq A/D fell to -439.4.

On the NYSE declining volume was greater than volume in advancing issues by 1778.3 to 427.7 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1030.5 to 448.5 million shares.

26 NYSE-listed stocks rose to new 52-week highs, and 161 posted fresh 52-week lows, while on the Nasdaq there were 47 stocks that hit new 52-week highs, and 97 which fell to fresh 52-week lows.

Market Breadth Statistics

NYSENasdaq
Advancers918952
Decliners23382028
Advancing Volume (m)427.71448.45
Declining Volume (m)1778.331030.53
New Highs2647
New Lows16197

Market Sentiment Statistics
IndexCloseGain(Loss)%
CBOE Volatility Index15.330.664.5%
CBOE Nasdaq Volatility Index16.480.261.6%
Equity Put-Call Ratio0.840.113.51%
10-day PCR0.720.011.41%
SPX-VIX Ratio76.9-4.27-5.27%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 0.7 bps to 4.7%. the 30-year bond future rose 5 ticks to 112-24/32 - not exactly the bounce I was looking for, but I'll take it.

The middle of the yield curve was broadly higher: five year yields fell to 4.336%, and ten-year yields fell to 4.481%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 9.0 bps wider at 19.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 54.0 bps for 10-year AAA, and 76.0 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 0.0 bps looser at 36.0 basis points and the 10-year AAA-A spread 8.0 bps tighter at 3.0 bps.

Treasury Yields
IndexCloseGain(Loss)%
UST 13wk (yld)3.770.0731.97%
UST 2Y (yld)4.23-0.03-0.7%
UST 5Y (yld)4.336-0.012-0.28%
UST 10Y (yld)4.481-0.008-0.18%
UST 30Y (yld)4.7-0.007-0.15%

The Banks Index dipped 0.54 points (0.57%), at 94.56; within the index,

  • National City Corp (NCC) -$1.99 (6.03%) to $31.01;
  • Keycorp (KEY) -$0.54 (1.72%) to $30.81;
  • Regions Financial (RF) -$0.52 (1.66%) to $30.89;
  • North Fork Bancorp (NFB) -$0.30 (1.25%) to $23.68; and
  • Bank Of America (BAC) -$0.48 (1.14%) to $41.57.

The Broker-dealer Index slid 1.34 points (0.78%), to 170; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$1.52 (3.68%) to $39.74;
  • Raymond James (RJF) -$0.78 (2.48%) to $30.68;
  • A G Edwards (AGE) -$0.82 (2.05%) to $39.14;
  • Legg Mason (LM) -$1.48 (1.44%) to $101.60; and
  • Charles Schwab (SCH) -$0.13 (0.97%) to $13.21.

The Philadelphia SOX (Semiconductor) index declined 5.42 points (1.22%), to 439.3

  • Novellus Systems (NVLS) -$3.06 (12.29%) to $21.83;
  • Teradyne (TER) -$0.44 (3.06%) to $13.93;
  • Xilinx (XLNX) -$0.68 (2.98%) to $22.11;
  • ST Microelectronic (STM) -$0.35 (2.1%) to $16.35; and
  • Altera (ALTR) -$0.28 (1.56%) to $17.62.

Gold & Silver Markets

Gold fell by $2.00 (0.42%) to close at $474.60 per ounce.

The Gold Bugs Index dipped 5.82 points (2.48%), at 228.95

  • Hecla Mining (HL) -$0.22 (5.57%) to $3.73;
  • Eldorado Gold (EGO) -$0.13 (3.99%) to $3.13;
  • Coeur d'Alene (CDE) -$0.15 (3.69%) to $3.92;
  • Freeport McMoran (FCX) -$1.54 (3.21%) to $46.40; and
  • Goldcorp (GG) -$0.58 (3.03%) to $18.59.

Silver fell by $0.04 (0.51%) to close at $7.84 per ounce. 

The Gold and Silver Index (XAU) lost 2.6 points (2.37%), at 106.94 points.

  • Durban Rooderpoert Deep (DROOY) -$0.08 (5.67%) to $1.33;
  • Freeport McMoran (FCX) -$1.54 (3.21%) to $46.40;
  • Goldcorp (GG) -$0.58 (3.03%) to $18.59; and
  • Kinross Gold (KGC) -$0.21 (2.89%) to $7.06.
Precious Metals and Indices
IndexCloseGain(Loss)%
Gold474.60-2.00-0.42%
Silver7.84-0.04-0.51%
PHLX Gold and Silver Index106.94-2.6-2.37%
AMEX Gold BUGS Index228.95-5.82-2.48%

Oil Market

Oil lost ground, shedding $1.16 per barrel, closing at $63.20 per barrel. The media frenzy over 'Hurricane' Wilma was - as usual - an opportunity to position against the news flow. It wasn't as big a beatup as the 'Avian Flu' hoax - the massive 'bait and switch' job being done in the media to get the entire West to concentrate on a non-existent risk of bird flu (or as I call it 'The New SARS'), so that our political overlords can get on with their pet project: raping the entire system of individual liberty since Magna Carta. 

The Oil and Gas Index (XOI) dipped 40.07 points (4.08%), at 941.17

  • Sunoco (SUN) -$3.75 (5.11%) to $69.65;
  • Occidental Petroleum (OXY) -$3.83 (5.09%) to $71.40; and
  • ConocoPhillips (COP) -$2.94 (4.67%) to $60.08.

The Oil service stocks (OSX) Index slid 7.22 points (4.48%), closing at 153.81

  • Global Industries (GLBL) -$0.80 (6.19%) to $12.13;
  • Noble Corp (NE) -$3.64 (5.87%) to $58.40; and
  • Transocean (RIG) -$3.26 (5.74%) to $53.55.
Energy Complex
IndexCloseGain(Loss)%
Reuters CRB335.07-1.24-0.37%
Crude Oil Light Sweet63.2-1.16-1.8%
Heating Oil1.9342-0.05-2.49%
Natural Gas13.35-0.54-3.87%
Unleaded Gas1.7352-0.08-4.41%
AMEX Oil Index941.17-40.07-4.08%
Oil Service Index153.81-7.22-4.48%

Currency Markets

USD Exchange Rates
IndexCloseGain(Loss)%
US Dollar Index90.290.420.47%
Euro1.1959-0.0065-0.54%
Yen115.7050.7850.68%
Sterling1.7511-0.0031-0.18%
Australian Dollar0.7479-0.002-0.27%
Swiss Franc1.29860.00630.49%
Canadian Dollar0.84920.00160.19%