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One thing about this business - I've alluded to this before - is that sweaty palms=Death. You do your analysis, you take a position (if it's warranted by the analysis) and you see how it develops. The outcome will be what the outcome will be (as a Buddhist might say); it's my strongly held belief (based on experience) that the times when you care about an outcome (what I call 'riding every tick') is when things go all to hell.
With sweaty palms, you do dumb things: you reverse a losing trade at the exact low (or high, for shorts); you change GT's "SELL" call on QAN to a 'BUY', two days before its top. Far better to download a good movie (e.g., Sin City); that way you can divert your attention for a time, and do a good anarcho-capitalistic duty by violating monopoly-driven 'intellectual property' law (which does nothing for artists/musicians/writers... it just helps Sony and the film studios to accrue monopoly profits).
But let's get back to sweaty palms (as opposed to 'stink palms', which are a great idea as anyone who's watched 'Mall Rats' knows).
Take the "Euro to 1.2000 this week" from yesterday, for example. It was based on what I consider to be an impartial analysis; it had several things supporting it (deep oversold, poor USD economic fundamentals, excessive small-account short positions)... so when the BoJ slammed the Yen down (making USDJPY go UP is done by buying USD/selling Yen) and that bled over into the EURUSD/EC market, there was no need to get sweaty palms about it.
Note that this is not because 'I always have to be right'; if something happened that changed the analysis, then it would have been time to kill the trade without blinking. But if something introduces a 'blip' (the failure of Ansett to get back in the air) in an environment that still retains the overwhelming majority of the initial case (rising fuel prices, falling passenger loads, government-induced terrorism hype as a 'global tax' on international travel... the things I wrote about at the time for QAN) then you take it on notice - but you still don't blink.
The Euro is still well below its level as at yesterday morning - 1.1806 versus 1.1835 yesterday morning) - but the entire Yen intervention spike has been given back (with a little bit of interest in USDJPY). That's what I meant when I said yesterday that BoJ interventions never work; in the last five years the BoJ has dropped 140 trillion Yen in currency support operations each year, and it has never done a damn thing except when the Yen was primed to bounce anyway (and it wasn't, yesterday... it was oversold rather than overbought).
(Note - I know that's confusing... that when USDJPY is overbought, it means Yen is oversold... remember, the BoJ is trying to weaken the Yen).
I've said this before - if the BoJ are trying to use monetary policy as an ersatz industry policy (to help exporters) they should simply have written cheques to exporting firms rather than buggerising around with the currency - because buggerising around with your currency never works. Ask Normal Lamont.
Anyway.... the gradual climb upwards in the Euro (from all the way down at 1.1732... Yowza) was not even particularly impressive; that shows that there are still a lot of people who think it's right to short all the way up - paradoxically, that is what will provide upside fuel. Short-covering will provide an eventual spike upwards... when a load of short-term newcomer-shorts decide to throw in the towel.
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation a $6.5billion, 2-day repurchase entirely in T-backed collateral undertaken at a 3 basis point discount to the Fed Funds Rate (FFR). The discount wasn't really big enough to be worth much, so there was no sense in trying to buy for a 10 a.m. (NY time) jamjob,
Major US Indices
There was really only one 'signal' during the session; recall that with a buying bias, the only requirement for a long trade is that the smoothed %R is deeply oversold (that is, a moving average of the %R goes below 10). that happened at the low bar of the day (which is a nice touch), which coincided with the usual 'tease' break of the first-hour range (also a nice touch) and also coincided with the Dow coming down to test one of my favourite moving averages (also a nice touch), and the Dow also testing 10525 (how many nice touches do you need?).
Check out the chart - the green bubble shows how nicely things lined up...
Apart from that, nuthin' really lit up the sky; it appears that everyone thinks that this 'year end rally' is a dead-set surety... if that's the case, who will be doing thebuying if everyone tries to front-run it?
John Hussman (a man whose work is exceptional) wrote a piece yesterday about the difference between a 'self fulfilling prohecy' and an 'discounted expectation'. Basically, a self-fulfilling prohecy is something that effectively causes itself to happen, while a 'discounted expectaiton' is something that is already priced in. (He also wrote a splendid summary of why the US is very likely to have a recession... I strongly recommend you read his latest piece and anything else he writes: he and Steve Roach and Gretchen Morgenson. (And of course Marc Faber and Kurt Richebacher).
Anyhow - this talk of 'self fulfilling prophecies' reminds me of one of the best lines from the 'Hitch-hikers Guide to the Galaxy' (the books, not the God-awful movie that made the whole thing a useless, unfunny melange). It's from 'Mostly Harmless', and goes:
Anything that, in happening, causes itself to happen again, happens again
It doesn't always do it in that order though...
But back to the market...
The Dow Jones Industrial Average slid 46.51 points (0.44%), closing out the day at 10539.72 points. After dipping to 10524.28 (10525-ish) just after the endof the first hur, the index rose to hit an intraday high of 10574.22 (10575-sh) just before 4 a.m. AYSBAT (that's Australian You-Should-Be-Alseep Time).
Within the blue-chip index, 11 stocks rose, the biggest gainers being Exxon Mobil (XOM, +0.99% to $57.37) and Mcdonalds (MCD, +0.89% to $34.00), which accounted for 7 Dow points between them. Losers in the Dow numbered 17 and were led by General Motors (GM, -3.33% to $25.86) and Home Depot (HD, -2.24% to $40.57), with these two stocks contributing -15 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 182.1m shares to 122.2m.
The broader S&P500 slid 4.22 points (0.35%), to end the session at 1218.59. Within the index, gainers numbered 152, while 326 S&P500 stocks fell for the day. Volume was tilted 1.5:1 in favour of the losers with 1026.94 million units traded in the losers as compared with 690.99 million traded in the winners .
Over at Times Square, the Nasdaq Composite slid 6.17 points (0.28%), to close at 2172.07, while larger-cap technology issues fared better with the Nasdaq100 losing 0.87 points (0.05%), to end at 1628.4 points. Within the tech benchmark, gainers numbered 39, while 55 Nasdaq100 stocks fell for the day. Volume was tilted 1.1:1 in favour of the winners with 370.66 million traded in the losers compared to 325.27 million in the winners .
NYSE Volume was super-chunky, with 1.97 billion shares changing hands, while Nasdaq Volume was chunky, with 1.64 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 | 10539.72 | -46.51 | -0.44% |
| S&P500 | 1218.59 | -4.22 | -0.35% |
| Nasdaq Composite | 2172.07 | -6.17 | -0.28% |
| Nasdaq100 | 1628.4 | -0.87 | -0.05% |
| NYSE Volume | 1.97bn | - | - |
| Nasdaq Volume | 1.64bn | - | - |
Bellwethers
My 9-stock "bellwethers" group fell by an average of 0.26%
- General Electric (GE) -$0.26 (0.76%) to $33.76;
- Citigroup (C) +$0.17 (0.37%) to $46.60;
- Wal Mart (WMT) -$0.44 (0.92%) to $47.61;
- I.B.M. (IBM) -$0.26 (0.31%) to $83.15;
- Intel (INTC) +$0.05 (0.2%) to $24.55;
- Cisco Systems (CSCO) +$0.01 (0.06%) to $17.86;
- eBay (EBAY) +$0.43 (1.03%) to $42.30;
- Fannie Mae (FNM) -$0.50 (1.05%) to $46.98; and
- Freddie Mac (FRE) -$0.56 (0.91%) to $60.68.
Market Breadth & Internals
NYSE declining Issues beat out advancers by 1988 to 1247, for a single-day A/D reading of -741; and Nasdaq losers exceeded gainers by 1808 to 1234. The 10-day moving average of the A/D line fell to 90.8 on the NYSE, while the 10dma of the Nasdaq A/D fell to 98.4.
On the NYSE declining volume was greater than volume in advancing issues by 1212.7 to 657.3 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 834.9 to 787.1 million shares.
67 NYSE-listed stocks rose to new 52-week highs, and 104 posted fresh 52-week lows, while on the Nasdaq there were 81 stocks that hit new 52-week highs, and 58 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 1247 | 1234 |
| Decliners | 1988 | 1808 |
| Advancing Volume (m) | 657.26 | 787.12 |
| Declining Volume (m) | 1212.72 | 834.88 |
| New Highs | 67 | 81 |
| New Lows | 104 | 58 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 13.08 | 0.11 | 0.85% |
| CBOE Nasdaq Volatility Index | 15.56 | -0.09 | -0.58% |
| Equity Put-Call Ratio | 0.69 | 0.01 | 1.47% |
| 10-day PCR | 0.65 | 0 | 0% |
| SPX-VIX Ratio | 93.2 | -1.12 | -1.18% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 6.9 bps to 4.759%.
The middle of the yield curve was broadly higher (in price): five year yields fell to 4.481%, and ten-year yields fell to 4.565%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 7.0 bps wider at 15.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 54.0 bps for 10-year AAA, and 72.0 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 4.0 bps tighter at 42.0 basis points and the 10-year AAA-A spread 1.0 bps tighter at 8.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.862 | 0.035 | 0.91% |
| UST 2Y (yld) | 4.4 | -0.04 | -0.9% |
| UST 5Y (yld) | 4.481 | -0.067 | -1.47% |
| UST 10Y (yld) | 4.565 | -0.074 | -1.6% |
| UST 30Y (yld) | 4.759 | -0.069 | -1.43% |
The Banks Index declined 0.41 points (0.41%), to 100.33; within the index,
- Washington Mutual (WM) -$0.65 (1.63%) to $39.24;
- Fifth Third Bancorp (FITB) -$0.64 (1.57%) to $40.12;
- Golden West Financial (GDW) -$0.71 (1.17%) to $59.80;
- North Fork Bancorp (NFB) -$0.26 (0.99%) to $26.10; and
- JPMorganChase (JPM) -$0.34 (0.9%) to $37.34.
The Broker-dealer Index declined 0.97 points (0.52%), at 185.6; the ticket clippers lined up as follows -
- A G Edwards (AGE) -$0.61 (1.43%) to $41.99;
- E*Trade (ET) -$0.26 (1.39%) to $18.45;
- Bear Stearns (BSC) -$1.45 (1.33%) to $107.32;
- Goldman Sachs (GS) -$1.63 (1.26%) to $127.52; and
- Raymond James (RJF) -$0.20 (0.56%) to $35.51.
The Philadelphia SOX (Semiconductor) index declined 0.98 points (0.22%), at 452.3
- Infineon Tech (IFX) -$0.15 (1.55%) to $9.52;
- Advanced Micro Devices (AMD) -$0.35 (1.41%) to $24.54;
- Micron Technology (MU) -$0.17 (1.22%) to $13.71;
- Maxim Integrated (MXIM) -$0.44 (1.19%) to $36.39; and
- ST Microelectronic (STM) -$0.19 (1.14%) to $16.46.
Gold & Silver Markets
Gold rose $1.90 (0.41%) to close at $462.30 per ounce.
The Gold Bugs Index dipped 0.8 points (0.36%), at 222.71
- Golden Star (GSS) -$0.13 (5.18%) to $2.38;
- Kinross Gold (KGC) -$0.11 (1.61%) to $6.72;
- Iamgold (IAG) -$0.10 (1.48%) to $6.64;
- Coeur d'Alene (CDE) -$0.04 (1.06%) to $3.73; and
- Meridian Gold (MDG) -$0.16 (0.87%) to $18.33.
Silver rose $0.02 (0.26%) to close at $7.63 per ounce.
The Gold and Silver Index (XAU) lost 0.23 points (0.22%), closing at 106.01 points.
- Durban Rooderpoert Deep (DROOY) -$0.03 (2.42%) to $1.21;
- Kinross Gold (KGC) -$0.11 (1.61%) to $6.72;
- Meridian Gold (MDG) -$0.16 (0.87%) to $18.33; and
- Newmont Mining (NEM) -$0.31 (0.72%) to $42.70.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 462.30 | 1.90 | 0.41% |
| Silver | 7.63 | 0.02 | 0.26% |
| PHLX Gold and Silver Index | 106.01 | -0.23 | -0.22% |
| AMEX Gold BUGS Index | 222.71 | -0.8 | -0.36% |
Oil Market
Oil was firmer, rising by $0.24 per barrel, closing at $59.71 per barrel. yet again it dipped below $59 briefly (the sesion low was $58.60), and yet again someone steeped in to help out the major source of improved S&P500 earnings. (If you want to see a crummy earnings picture, take the S&P's earnings and subtract all the oil-price-spike induced profits for the major oilers: if they do it for the CPI, why not do it for S&P earnings as well?).
The Oil and Gas Index (XOI) rose 8.26 points (0.84%), ending the day at 986.03
- Amerada Hess (AHC) +$3.50 (2.79%) to $129.14;
- Sunoco (SUN) +$1.56 (2.16%) to $73.71; and
- ConocoPhillips (COP) +$0.86 (1.31%) to $66.61.
The Oil service stocks (OSX) Index gained 1.3 points (0.77%), to 171.2
- Noble Corp (NE) +$1.49 (2.19%) to $69.51;
- GlobalSantaFe (GSF) +$0.91 (2.05%) to $45.39; and
- Transocean (RIG) +$1.12 (1.91%) to $59.84.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 330.95 | 0.92 | 0.28% |
| Crude Oil Light Sweet | 59.71 | 0.24 | 0.4% |
| Heating Oil | 1.7785 | -0.01 | -0.43% |
| Natural Gas | 11.793 | -0.08 | -0.67% |
| Unleaded Gas | 1.5623 | 0.01 | 0.4% |
| AMEX Oil Index | 986.03 | 8.26 | 0.84% |
| Oil Service Index | 171.2 | 1.3 | 0.77% |
Currency Markets
Yes, Euro looks weak as a lamb - which will keep small-lotters (nuffnuffs who think that covered interest parity is the major driver of exchange rates) shorting every bounce. I do notice though that the consensus for the Trade Balance has been deliberately low-balled (the consensus guess is for a deficit of $62bill, when $60 bill would be the largest trade deficit in human history... looks like they are trying to give journalists some basis on which to call the deficit 'better than expected').
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 91.37 | 0.04 | 0.04% |
| Euro | 1.1781 | -0.0028 | -0.24% |
| Yen | 117.285 | -0.33 | -0.28% |
| Sterling | 1.7445 | 0.0002 | 0.01% |
| Australian Dollar | 0.7346 | 0.0018 | 0.25% |
| Swiss Franc | 1.311 | 0.0058 | 0.44% |
| Canadian Dollar | 0.8444 | 0.0018 | 0.21% |
