Interdum stultus opportuna loquitur...

Thursday, November 10, 2005

USRant: But First...

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

Sometimes you get a piece of telly that makes you smile for days. On the ABC last night, "The F***ing Fulfords" was absolutely superb. I used to want to be Clive Robertson when (if) I grew up, then I wanted to be someone else (I forget who, now).. but now I want to be Francis 'Fucker' Fulford.

Proper 'pukkha' people don't need to have stage manners (like the second-rate German aristos currently occupying Buckingham Palace, and the inbred parvenus overseeing "Australian Princess", which I have only ever seen in ads); since Fulford's ancestor got his land in the 11th century, Fulford has genuine noblesse, even with no title and a hole in his jumper.

Any besides, he thinks that Goldman Sachs are wankers... and like a good gentleman, gives his dogs the run of the house.

And now, back to normal Ranting...

Well, oil did the business - getting down to my target. You will recall that way way back on September 16th (with oil being due for a bounce) I wrote the following:

The high-probability end-point for this bounce (assuming $62.75 holds for the rest of the week, and on Monday) is actually way up at $67.50 - that would make a beautiful head and shoulders on the daily chart - which, when the left shoulder is broken, will project down to $54.65. The fact that Crude will reverse back up before it gets down that far is not hugely relevant - it will get down to the high $50's.

Then on October 5th I laid out the actual RantTarget for Crude (in "CrudeRant: Crude Oil, I Mean...", giving pretty much a chapter and verse account of why (and a pretty picture, too).

The RantTarget was $57, basis the October futures - turned into $57.30 when the contango was taken into account after the rollover to the December contract. Tonight's low was $57.40, which I reckon is pretty close.

Sadly the Euro is making me wait...

All things considered, it was an absolutely fascinating session: when the news arrives that your imbalance with the world outside your borders is the largest in the history of this planet (and 8% more than was expected)... your currency rises almost 1%. New jobless claims up? Can't be all bad...

Seriously though - it must be something in the water. We all know that the Americans can always find something external to blame, in order to exculpate themselves from their profligacy. In 2001, the recession wasn't caused by a standard monetary boom-bust cycle... it was 9/11. Today, the massive trade deficit wasn't the result of excessive imports and a hollowed-out manufacturing sector... it was all becasue of high oil prices, a Boeing strike, and Hurricane Katrina. 

What will the excuse be next month, when a stronger dollar sucks in even more imports? (I expect the dollar to be weaker by then, but the data will cover the recent weeks during which the dollar has strengthened considerably).

The current strength in the USD is a real head-shaker, given the trade balance data: I am on record as saying (ages ago) that the USD was likely to defy the resistance at 90, but the fact that both the trade balance and the budget are shot to pieces, ought to be a catalyst for at least some short-term USD weakness. And yet today after spiking upwards (and forming a divergence - see the short-term Euro futures chart below) - the dollar reversed and simply got stronger as the day wore on. 

Speaking of the early reversal, recall what I mentioned yesterday about the first directional move after a piece of news? It's invariably designed to lure in nuffnuffs... and then crush them like bugs. Well, no surprises - the bad trade balance saw a massive 3000 EC contracts propelling the market upwards in the 3 minutes either side of the data... and then 12000 units slamming the market down in the following 10 minutes. In fact in the hour following the data, there were 40,000 contracts traded... and precious little to the upside. Take a gander at the hourly chart and notice the two divergences - the first a corker of a sell, the second a buy that hasn't done anything yet:

Euro (futures) 60 minute chart

With just over an hour to go in the session, the Dollar Index went from 91.90 to 92.10 in three minutes... equivalent to a 30-pip decline in the Euro. This level of USD buying in the last hour before the start of a holiday weekend? If that doesn't sound fishy to you, then you're not cynical enough. Anyhow - examine the USDX chart and notice the divergence on the CCI and the extreme overbought on the %R (unsmoothed, unfortunately):

US Dollar Index 15 minute chart

I'm still not remotely sweaty-palmed about the long Euro position - although it made a new low for the move today (at 1.1700 - a massive 129 pips below the spike high immediately after the trade balance data). The last time the Euro was this oversold (on daily, weekly and monthly charts) was back in October 2000 - and it bounced 12 cents (1200 pips) in the following two months (and that was during a solid monthly downtrend - the monthly trend at the moment is still up). 

Here's a weekly chart (of the spot Euro - it's easier to use for longer-term charts), to show you the 5-wave structure I mentioned yesterday. As I've said before, I'm only an "enthusiastic amateur" on this Elliott Wave stuff, but it's pretty clear that the Euro is very deeply oversold; in the context of its recent move, a bounce is a very high probability event (but that was true two sessions ago, and it didn't happen). An a-b-c bounce that formed a proper Wave A on an Elliott chart would take the thing all the way back to the terminal of wave 4... i.e., at 1.2600-ish - but I don't plan to be holding the thing for the 12 weeks it would take to form the entire wave A.

Euro (Spot) weekly chart

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $9billion, 13-day repurchase entirely in T-backed collateral undertaken at a 4 basis point discount to the Fed Funds Rate (FFR); and
  • a $9billion, 6-day repurchase entirely in T-backed collateral, undertaken at a 2 basis point discount to FFR.
Although there wasn't a great deal of discount to FFR, there was still plenty of dough and a thin pre-holiday market. Still, the absence of a decent discount to FFR pretty much precluded any booster shot at 10 a.m. NY time - and as far as the afternoon jamjob is concerned, I think it was just pre-holiday short-covering.

Major US Indices

A dip in honour of the crap trade balance, a spike in honour of the better-than expected Consumer Confidence numbers, another dip to tease the first hour low, and then whooshka. A 135-point rampage, on no news whatsoever. And, an hour before the close of business, a selling divergence; this will probably become more obvious on Monday, what with the usual Opening Orgasm. 

The recent manic market activity may be being driven by something other than pure easonal influences - I mentioned a while back that I would not rule out a post-retirement ego-blowjob delivered to Greenspan's ego by da Boyz... maybe that's a part of the reason that the indices are all flat out trying to get into the green for the year - so that the worst central banker in history can retire with a smile. 

As an aside - 'worst central banker' is a hard choice - kind of like 'most necrotic flesh-eating bacterium"... they're all evil (central bankers, I mean).

Dow Jones 15-minute chart

Note - ignore the first bar of the day on the chart above - it represents my calculations based on pre-opening numbers for each Dow component.

After a lackluster start, the Dow Jones Industrial Average ground its way higher after the mandatory tease of the first-hour low. It really hit its straps by the midsession, and wound up with a gain of 93.89 points (0.89%), closing out the day at 10640.1 points. The index hit an intraday high of 10655.53 with an hour to go, after dipping as low as 10519.39 during the session. 

Within the blue-chip index, 28 stocks rose, the biggest gainers being Home Depot (HD, +2.28% to $41.74) and Boeing (BA, +2.15% to $66.10), which accounted for 19 Dow points between them. There were only 2 Dow losers - General Motors (GM, -4.55% to $23.51) and Exxon Mobil (XOM, -1.83% to $56.45),  and between them they took 17 Dow points off the final number. Volume traded was tilted in favour of the gainers by 401.1m shares to 61.3m.

The broader S&P500 added 10.31 points (0.84%), to 1230.96. Within the index, gainers numbered 391, while 93 S&P500 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 1381.31 million units traded in the winners as compared with 800.09 million traded in the losers .

Over at Times Square, the Nasdaq Composite gained 20.87 points (0.96%), to close at 2196.68, while larger-cap technology issues fared better with the Nasdaq100 adding 20.72 points (1.27%), to end at 1650.93 points. Within the tech benchmark, gainers numbered 79, while 17 Nasdaq100 stocks fell for the day. Volume was tilted 1.4:1 in favour of the winners with 530.98 million traded in the winners compared to 379.33 million in the losers .

NYSE Volume was super-chunky, with 2.38 billion shares changing hands, while Nasdaq Volume was chunky, with 1.97 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10640.193.890.89%
Nasdaq Composite2196.6820.870.96%
NYSE Volume2.38bn--
Nasdaq Volume1.97bn--


My 9-stock "bellwethers" group rose by an average of 1.05%

  • General Electric (GE) +$0.58 (1.71%) to $34.50;
  • Citigroup (C) +$0.91 (1.94%) to $47.73;
  • Wal Mart (WMT) +$0.84 (1.74%) to $49.04;
  • I.B.M. (IBM) +$1.15 (1.39%) to $83.99;
  • Intel (INTC) +$0.44 (1.77%) to $25.24;
  • Cisco Systems (CSCO) -$0.60 (3.38%) to $17.15;
  • eBay (EBAY) +$1.23 (2.92%) to $43.31;
  • Fannie Mae (FNM) -$0.01 (0.02%) to $46.39; and
  • Freddie Mac (FRE) +$0.81 (1.33%) to $61.81.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1946 to 1311 for a single-day A/D reading of 635; Nasdaq gainers trumped losers by 1803 to 1208. The 10-day moving average of the A/D line rose to 214.8 on the NYSE, while the 10dma of the Nasdaq A/D rose to 217.2.

NYSE advancing volume exceeded volume in decliners by 1414.8 to 918.3 million shares; Nasdaq advancing volume was greater than volume in decliners by 1163.8 to 754.5 million shares.

136 NYSE-listed stocks rose to new 52-week highs, and 157 posted fresh 52-week lows, while on the Nasdaq there were 140 stocks that hit new 52-week highs, and 74 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1414.751163.84
Declining Volume (m)918.32754.51
New Highs136140
New Lows15774

Market Sentiment Statistics
CBOE Volatility Index11.9-1.02-7.89%
CBOE Nasdaq Volatility Index14.61-1.36-8.52%
Equity Put-Call Ratio0.770.0913.24%
10-day PCR0.6500%
SPX-VIX Ratio103.48.969.49%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 8.0 bps to 4.746%.

The middle of the yield curve was broadly higher: five year yields fell to 4.484%, and ten-year yields fell to 4.564%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 8.0 bps wider at 17.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 57.0 bps for 10-year AAA, and 82.5 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 8.0 bps tighter at 34.0 basis points and the 10-year AAA-A spread 5.0 bps tighter at 5.0 bps.

Treasury Yields
UST 13wk (yld)3.872-0.005-0.13%
UST 2Y (yld)4.42-0.04-0.9%
UST 5Y (yld)4.484-0.069-1.52%
UST 10Y (yld)4.564-0.071-1.53%
UST 30Y (yld)4.746-0.08-1.66%

The Banks Index rose 2.09 points (2.07%), closing at 103.11; within the index,

  • Golden West Financial (GDW) +$3.11 (5.23%) to $62.54;
  • Washington Mutual (WM) +$1.44 (3.64%) to $40.95;
  • Mellon Financial (MEL) +$0.87 (2.66%) to $33.52;
  • Comerica (CMA) +$1.54 (2.63%) to $60.09; and
  • Wachovia (WB) +$1.28 (2.47%) to $53.03.

The Broker-dealer Index rose 3.51 points (1.87%), ending the day at 191.25; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.57 (3.72%) to $15.89;
  • Bear Stearns (BSC) +$3.15 (2.94%) to $110.43;
  • E*Trade (ET) +$0.51 (2.7%) to $19.41;
  • Morgan Stanley (MWD) +$1.37 (2.58%) to $54.45; and
  • Jeffries Group (JEF) +$0.86 (1.93%) to $45.36.

The Philadelphia SOX (Semiconductor) index added 5.87 points (1.28%), ending the day at 464.53

  • Teradyne (TER) +$0.40 (2.93%) to $14.05;
  • Marvell Tech Group (MRVL) +$1.42 (2.87%) to $50.88;
  • Altera (ALTR) +$0.42 (2.44%) to $17.64;
  • Linear Technology (LLTC) +$0.82 (2.42%) to $34.68; and
  • Xilinx (XLNX) +$0.51 (2.09%) to $24.86.

Gold & Silver Markets

Gold rose $0.2 (0.04%) to close at $467.7 per ounce.

The Gold Bugs Index slid 2.39 points (1.04%), closing at 227.52

  • Golden Star (GSS) -$0.14 (5.76%) to $2.29;
  • Coeur d'Alene (CDE) -$0.11 (2.74%) to $3.90;
  • Goldcorp (GG) -$0.46 (2.3%) to $19.50;
  • Glamis Gold (GLG) -$0.42 (1.95%) to $21.10; and
  • Hecla Mining (HL) -$0.06 (1.79%) to $3.29.

Silver rose $0.03 (0.35%) to close at $7.71 per ounce. The Gold and Silver Index (XAU) lost 1.14 points (1.04%), to 108.15 points.

  • Goldcorp (GG) -$0.46 (2.3%) to $19.50;
  • Kinross Gold (KGC) -$0.12 (1.75%) to $6.73;
  • Durban Rooderpoert Deep (DROOY) -$0.02 (1.56%) to $1.26; and
  • Newmont Mining (NEM) -$0.61 (1.38%) to $43.52.
Precious Metals and Indices
PHLX Gold and Silver Index108.15-1.14-1.04%
AMEX Gold BUGS Index227.52-2.39-1.04%

Oil Market

Oil lost ground, shedding $1.13 per barrel, closing at $57.8 per barrel. The Oil and Gas Index (XOI) slid 32.97 points (3.37%), to end the session at 944.79

  • Marathon Oil (MRO) -$2.87 (4.85%) to $56.33;
  • Amerada Hess (AHC) -$5.94 (4.64%) to $122.06; and
  • Sunoco (SUN) -$3.15 (4.26%) to $70.80.

The Oil service stocks (OSX) Index declined 6.69 points (3.93%), to end the session at 163.72

  • Rowan Companies (RDC) -$2.32 (6.54%) to $33.13;
  • National Oilwells/Varco (NOV) -$3.34 (5.68%) to $55.43; and
  • Nabors Industries (NBR) -$3.46 (5.07%) to $64.79.
Energy Complex
Reuters CRB329.96-0.72-0.22%
Crude Oil Light Sweet57.8-1.13-1.92%
Heating Oil1.7435-0.05-2.58%
Natural Gas11.38-0.29-2.48%
Unleaded Gas1.5068-0.04-2.87%
AMEX Oil Index944.79-32.97-3.37%
Oil Service Index163.72-6.69-3.93%

Currency Markets

USD Exchange Rates
US Dollar Index92.060.560.61%
Australian Dollar0.7301-0.0066-0.9%
Swiss Franc1.31540.00420.32%
Canadian Dollar0.8397-0.0033-0.39%