Interdum stultus opportuna loquitur...

Friday, December 16, 2005

USRant: What A Fun Week...

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Well. the Energy sector did the business for us this week, ameliorating the soul-rending heartache at having missed the short entry in Gold that I discussed last Friday. A short scalp in bonds gave us 57% return on margin in less than two hours, and the potshots at the SPI trousered their targets 90% of the time (there were no losing trades - and there haven't been since November 21st - but I called off yesterday afternoon's second and third targets at the close. That's a bit of a bummer because both of those targets were hit during the overnight session). But the Energy sector was the sweet spot, and particularly Natural Gas, which gave a 381% return in three sessions.

It's getting to the stage where I want a trade to go backwards; there's nothing more worrisome than a string of winners - the contrarian in me says that the Fates await the onset of Hubris before they give vent to their perennial desire to dick us mortals around.

Bill Shakespeare (or his ghostwriter, Frank 'Porky' Bacon) said something to that effect - "Oftentimes to win us to our harm, the instruments of darkness tell us truths; win us with honest trifles, to betray us in deepest consequence".

Seriously though - in this game if you start second- (and third-) guessing your analyses on the basis that you are doing things too well, you can tie yourself in semantic knots. Remember 'Catch-22'?

Let's get on with it...

Economic data on the Current Account was released - and it was a good deal better than expected, which means that the Bush Administration has started fudging that data series now as well. Consensus called for a deficit of $206 billion, but the result was only a deficit of $195.8 billion. How anybody could be enthusiastic in the face of an external imbalance of that magnitude is beyond me - it's sort of like expecting to lose both lungs, a kidney, and 90% of the content of your perineum... but then discovering when you wake up that the doctors managed to save a 3-inch piece of your ascending colon. You're still going to be oozing shit into a bag for the rest of your life. 

Anyhow - the nuffnuffs loved it, falling over themselves to buy the open and the first-hour breakout (don't worry - the story still has the same happy ending - they got creamed).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation: a $6billion, 6-day repurchase entirely in T-backed collateral undertaken at a 7.8 basis point discount to the Fed Funds Rate (FFR).

Major US Indices

The Dow Jones Industrial Average dipped 6.08 points (0.06%), closing out the day at 10875.59 points (10875-ish). The index hit an intraday high of 10940.34 after about 2 hours of trade, at which time it set a simply lovely example of our favourite mechanism - the %R overbought/CCI divergence. From there it reversed course (as it's supposed to when it posts a divergence) kept falling until the last half hour of trade, at which point it hit a low of 10869.27. 

Within the blue-chip index, 12 stocks rose, the biggest gainers being Caterpillar (CAT, +1.58% to $59.64) and Johnson & Johnson (JNJ, +1.16% to $60.86), which accounted for 13 Dow points between them. Losers in the Dow numbered 17 and were led by Exxon Mobil (XOM, -2.40% to $58.06) and Procter & Gamble (PG, -1.49% to $58.11), with these two stocks contributing -18 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 345.6m shares to 164.6m.

The broader S&P500 dipped 3.62 points (0.28%), to 1267.32. Within the index, gainers numbered 216, while 261 S&P500 stocks fell for the day. Volume was tilted 1.7:1 in favour of the losers with 1514.26 million units traded in the losers as compared with 870.92 million traded in the winners .

Over at Times Square, the Nasdaq Composite slid 8.15 points (0.36%), to close at 2252.48, while larger-cap technology issues fared worse with the Nasdaq100 losing 13.02 points (0.77%), to end at 1688.68 points. Within the tech benchmark, gainers numbered 22, while 74 Nasdaq100 stocks fell for the day. Volume was tilted 6.8:1 in favour of the losers with 989.74 million traded in the losers compared to 146.55 million in the winners .

NYSE Volume was super-chunky, with 2.58 billion shares changing hands, while Nasdaq Volume finally showed some strength, registering 2.3 billion shares.

Major Market Statistics
Dow Jones Industrial Average10875.59-6.08-0.06%
Nasdaq Composite2252.48-8.15-0.36%
NYSE Volume2.58bn--
Nasdaq Volume2.3bn--


My 9-stock "bellwethers" group fell by an average of 0.19%

  • General Electric (GE) +$0.06 (0.17%) to $36.06;
  • Citigroup (C) +$0.27 (0.55%) to $49.37;
  • Wal Mart (WMT) +$0.01 (0.02%) to $49.27;
  • I.B.M. (IBM) -$0.16 (0.19%) to $83.37;
  • Intel (INTC) -$0.20 (0.75%) to $26.38;
  • Cisco Systems (CSCO) -$0.24 (1.35%) to $17.52;
  • eBay (EBAY) -$0.08 (0.17%) to $45.94;
  • Fannie Mae (FNM) -$0.35 (0.73%) to $47.51; and
  • Freddie Mac (FRE) +$0.51 (0.78%) to $66.02.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1693 to 1586, for a single-day A/D reading of -107; and Nasdaq losers exceeded gainers by 1661 to 1385. The 10-day moving average of the A/D line fell to 40.0 on the NYSE, while the 10dma of the Nasdaq A/D fell to -157.3.

On the NYSE declining volume was greater than volume in advancing issues by 1260.1 to 1224.3 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1593.1 to 665.1 million shares.

135 NYSE-listed stocks rose to new 52-week highs, and 94 posted fresh 52-week lows, while on the Nasdaq there were 101 stocks that hit new 52-week highs, and 56 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1224.29665.11
Declining Volume (m)1260.11593.07
New Highs135101
New Lows9456

Market Sentiment Statistics
CBOE Volatility Index10.6-0.13-1.21%
CBOE Nasdaq Volatility Index12.94-1.02-7.31%
Equity Put-Call Ratio0.610.1738.64%
10-day PCR0.5800%
SPX-VIX Ratio119.61.110.94%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.5 bps to 4.65%.

The middle of the yield curve was broadly higher: five year yields fell to 4.359%, and ten-year yields fell to 4.448%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps tighter at 12.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 69.0 bps for 10-year AAA, and 96.0 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 11.0 bps looser at 27.0 basis points and the 10-year AAA-A spread 1.0 bps looser at 0.0 bps.

Treasury Yields
UST 13wk (yld)3.832-0.008-0.21%
UST 2Y (yld)4.3400%
UST 5Y (yld)4.359-0.018-0.41%
UST 10Y (yld)4.448-0.02-0.45%
UST 30Y (yld)4.65-0.025-0.53%

The Banks Index advanced 0.47 points (0.45%), to 105.79; within the index,

  • Regions Financial (RF) +$0.64 (1.87%) to $34.94;
  • Keycorp (KEY) +$0.54 (1.61%) to $34.04;
  • National City Corp (NCC) +$0.54 (1.58%) to $34.82;
  • Zions Bancorp (ZION) +$0.87 (1.16%) to $75.85; and
  • MBNA Corp (KRB) +$0.24 (0.88%) to $27.52.

The Broker-dealer Index declined 0.02 points (0.01%), ending the day at 197.04; the ticket clippers lined up as follows -

  • Goldman Sachs (GS) -$1.80 (1.4%) to $126.50;
  • Charles Schwab (SCH) -$0.18 (1.18%) to $15.09;
  • Raymond James (RJF) -$0.23 (0.61%) to $37.42;
  • Lehman Brothers (LEH) -$0.69 (0.53%) to $128.99; and
  • A G Edwards (AGE) -$0.15 (0.33%) to $45.37.

The Philadelphia SOX (Semiconductor) index slid 3.09 points (0.62%), to 495.29

  • Teradyne (TER) -$0.90 (5.74%) to $14.78;
  • KLA-Tencor (KLAC) -$1.05 (2.03%) to $50.67;
  • National Semiconductors (NSM) -$0.48 (1.73%) to $27.22;
  • Maxim Integrated (MXIM) -$0.50 (1.31%) to $37.63; and
  • Linear Technology (LLTC) -$0.36 (0.95%) to $37.45.

Gold & Silver Markets

Gold fell by $0.70 (0.14%) to close at $505.90 per ounce. At one point during the overnight session, it actually fell below $500.

As I indicated last Friday, gold had become far too highly thought-of, and it was time to skin a few nuffnuffs. It's a pity that I wasn't more forthright in declaring a short on Gold. Mealy-mouthed language cost the RantRecord a staggering $35 move in the metal, which is $1163 per mini-Gold contract, which has a contract margin of $436; triple everything to calculate the numbers for a big (GC) futures contract. The percentage gain comes out the same either way, and it's 266%. Oh well, when you consider that 266% pales into insignificance compared to the mind-blowing result for Natural Gas, I guess I shouldn't be crying so much.

The Gold Bugs Index posted a rise of 4.79 points (1.88%), closing at 259.96

  • Hecla Mining (HL) +$0.16 (4.62%) to $3.62;
  • Iamgold (IAG) +$0.31 (4.35%) to $7.44;
  • Agnico Eagle (AEM) +$0.72 (4.03%) to $18.58;
  • Golden Star (GSS) +$0.09 (3.9%) to $2.40; and
  • Glamis Gold (GLG) +$0.83 (3.41%) to $25.15.

Silver fell by $0.04 (0.41%) to close at $8.6 per ounce. The Gold and Silver Index (XAU) gained 1.52 points (1.26%), at 122.36 points.

  • Agnico Eagle (AEM) +$0.72 (4.03%) to $18.58;
  • Harmony Gold (HMY) +$0.23 (1.81%) to $12.94;
  • Placer Dome (PDG) +$0.39 (1.77%) to $22.48; and
  • Kinross Gold (KGC) +$0.14 (1.72%) to $8.28.
Precious Metals and Indices
PHLX Gold and Silver Index122.361.521.26%
AMEX Gold BUGS Index259.964.791.88%

Oil Market

I mentioned Natural Gas in the Gold section - that's because with the exception of Live Cattle a long, long time ago, I don't think I've ever seen a commodity get smashed the way NatGas got smashed this week. Thankfully there was no attempt to finesse an entry into Energy the way I tried with LC all those months ago (see the post "Live Cattle Should Tank" back in October 2004). The next session, LC fell $3 (3.2%) in three hours, and I was lamenting the fact that I was too stingy in my bids for futures options which went up 80% in the same time period.

To put it into perspective - if you had shorted 1 Natural Gas contract (outlay: $4000) at the open on Wednesday, you would be sitting on profits of $15,270 as of the close of business today. That's the gain since the start of the Wednesday session. 381% profit in three sessions - I will take that. The underlying commodity fell 10% in the same timespan.

Oil lost ground, shedding $1.93 per barrel, closing at $58.06 per barrel. 

Since my beautifully-timed call, the entire Energy complex has taken a swan dive - but it still faces an important set of prices when Crude gets back down to the low $57's (remember, that was my original RantTarget); it really needs to drive through to a $55 handle (on a closing basis) by next Tuesday in order to generate another genuine impulse leg, which ought to take it back to $50-ish.

I shudder and drool in anticipation of what it would mean for the Natural gas position if it does pan out that way: if  Crude has another $7-$8 to fall, then Natgas will test $10, which would yield profits of $56000 on Wednesday's $4000 outlay.

The Oil and Gas Index (XOI) lost 17.57 points (1.73%), at 999.64

  • Sunoco (SUN) -$2.49 (3.05%) to $79.19;
  • Occidental Petroleum (OXY) -$2.42 (2.89%) to $81.20; and
  • ChevronTexaco (CVX) -$1.51 (2.56%) to $57.51.

The Oil service stocks (OSX) Index lost 4.08 points (2.16%), to 184.83

  • Halliburton (HAL) -$2.18 (3.31%) to $63.72;
  • Rowan Companies (RDC) -$1.20 (3.18%) to $36.58; and
  • Transocean (RIG) -$1.93 (2.78%) to $67.59.
Energy Complex
Reuters CRB342.84-0.5-0.15%
Crude Oil Light Sweet58.06-1.93-3.22%
Heating Oil1.732-0.06-3.09%
Natural Gas13.633-0.24-1.72%
Unleaded Gas1.5689-0.05-2.96%
AMEX Oil Index999.64-17.57-1.73%
Oil Service Index184.83-4.08-2.16%

Currency Markets

USD Exchange Rates
US Dollar Index89.72-0.29-0.32%
Australian Dollar0.7446-0.0033-0.44%
Swiss Franc1.290.00060.05%
Canadian Dollar0.8622-0.0006-0.07%