Interdum stultus opportuna loquitur...

Wednesday, February 27, 2008

USRant: Can't Blame Them For Trying...

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

Finally, some plans came together in a way that didn't require breath-holding, teeth-grinding or cursing. It wasn't perfect, but it almost can't be by design.

Why is that? You muse.

Well, because under my current archaic setup I get a 'tentative' signal from my platform, and then I have to start preparing the broadcast that tells folks how to position themselves. Ideally, if the tentative signal is a short, I want to be hitting "send" when

  • the market is overbought and makes a CCI divergence; AND
  • despite that, the thing has one last drive upwards (to enable better entries for clients)

And there's the rub; there is always a risk that the last drive upwards gets legs, and the short entry finds itself at the tail end of a squeeze.

That is not a big deal, normally; because of the 'fade' style of trading, we are never selling breakouts of LOWS... which means that we are never on utterly the wrong side of the trade. In other words, there are always very good odds of getting out breakeven in the event of a bad entry.

Last night is a case in point; that spike at the close sucked met monkey sphincter, but it was not a swing low. It was a bummer that we didn't hold overnight (the target was hit beautifully during the overnight session), but the loss was taken at the close (and more than made up for today - with both the SPI and the S&P registering nice wins).

Today's US signal was at 12:26 NY time (11:26 Chicago time) with the S&P futures at 1385...:

We're waiting for the S&P to give us some long-side lovin' (all we need is an oversold on the intraday %R), but the S&P keeps giving us CCI divergences instead ... a much higher hurdle, but shorts now require a higher hurdle due to the technical setup.

Still, we have to take the thing on; short S&P front month now, looking for 5 points worth of downside on contract 1, and then put a stop 3 points above your entry if you're trading two.

And everything worked out real nice. Another $250 per contract in the portefeuille... and with intraday margins of just $500 per contract with some US futures brokers (and $1000 at the absolute max - if you're paying more than that you're getting hosed), it works out to a nice day at the office, percentage wise.

Just think - you could join the same game; subscriptions for the intraday futures triggers seem high at $150 a month, but when it's all going nicely that represents about fifteen minutes' work.

Economic News

As usual, the economic news was absolutely horrific...

  • Durable Goods Orders were significantly weaker than the consensus expectations - the 'mob guess' had punted on a decline of 4.5%, but the actual outcome was -5.3%. That's pretty awful, but we only care about one number... Non-Defence CapEx excluding Aircraft. That number was 'only' a drop of 1.4%: if you're a long time reader, you know that this measure is our forecasting proxy for business capex. (If you add back aircraft and defence, the aggregate was down a staggering 10%). Over the last half year, overall Durable Goods has declined at an annual rate of over 15%.
  • New Homes Sales were absolutely shocking, and included a 15% year on year fall in the median house price. Remember those folks who derided anybody who was negative on property? Remember all the shining-eyed folks forking over tens of thousands of dollars for 'investment' seminars that told them to leverage up to their scrota (scrotums? you be the judge) and buy apartments off the plan? They've gone all quiet... like DavNet holders after mid-2002.
  • Crude Oil Inventories rose by 3.21 million barrels. There is no consensus estimate for this figure, but the outcome suited yesterday's USRant forecast for Crude. I'll repeat it below for completeness...

Here it is...

Energy futures finally got their close above $100. The next few sessions are make or break. If I had to bet,. I would bet short; the news flow around $100 oil will lure some stale small bulls out of the paddock and into the abbatoir.

And today it fell a percent. Doesn't sound like much, but a $1 fall in the price per barrel translates into a 25% gain on initial margin in the futures market.

Fed Open Market Operations

The Fed only did one repo - an $ 11.5 billion repurchase with only $2.089 billion in Treasury-backed.

Headline Indices

The Dow Jones Industrial Average advanced +9.36 points (0.07%) to 12694.28 points. The index high for the day was 12756.56, just after midday NY time. The low was 12609.37 at the open.

Major Advancers in the Dow were

  • Citigroup (C) +0.77 (3.09%) to 25.72 on volume of 74.8 million units
  • IBM (IBM) +2.08 (1.82%) to 116.46 on volume of 11.7 million units
  • AIG (AIG) +0.83 (1.61%) to 52.25 on volume of 20.7 million units
  • JP Morgan Chase C (JPM) +0.69 (1.58%) to 44.41 on volume of 36 million units
  • Alcoa (AA) +0.52 (1.35%) to 39.02 on volume of 12 million units

Major Decliners in the Dow were

  • Merck(MRK) -0.95 (2.05%) to 45.44 on volume of 13.2 million units
  • McDonald's (MCD) -1.12 (1.98%) to 55.33 on volume of 13 million units
  • Verizon Communications (VZ) -0.42 (1.14%) to 36.39 on volume of 11.2 million units
  • Johnson & Johnson (JNJ) -0.68 (1.07%) to 63.04 on volume of 8.9 million units
  • AT&T. (T) -0.37 (1.04%) to 35.2 on volume of 25.2 million units

Most Traded Dow stocks were

  • Intel (INTC) +0.08 (0.39%) to 20.77 on volume of 80.7 million units
  • Microsoft (MSFT) -0.12 (0.42%) to 28.26 on volume of 75.1 million units
  • Citigroup (C) +0.77 (3.09%) to 25.72 on volume of 74.8 million units
  • JP Morgan Chase (JPM) +0.69 (1.58%) to 44.41 on volume of 36 million units
  • General Electric (GE) +0.08 (0.24%) to 34.02 on volume of 29.9 million units

The S&P500 Index lost 1.27 points (0.09%) to 1380.02 points; the Nasdaq Composite advanced +8.79 points (0.37%) to 2353.78 points and the Nasdaq100 advanced +8.63 points (0.48%) to 1799.94 points.

The CBOE Volatility Index advanced +0.81 points (3.7%) to 22.71 points and the CBOE Nasdaq100 Volatility Index lost 0.81 points (3.12%) to 25.14 points.

NYSE Total Volume totalled 3.86billion units; Nasdaq Total Volume totalled 2.22billion units.

Major Market Statistics
Index Close Gain(Loss) %
Dow Jones Industrial Average 12694.28 +9.36 0.07%
S&P500 Index 1380.02 -1.27 -0.09%
Nasdaq Composite 2353.78 +8.79 0.37%
Nasdaq100 1799.94 +8.63 0.48%
CBOE Volatility Index 22.71 +0.81 3.7%
CBOE Nasdaq100 Volatility Index 25.14 -0.81 -3.12%
NYSE Total Volume 3.86bn - -
Nasdaq Total Volume 2.22bn - -

Precious Metals

Precious metals futures advanced as follows -

Precious Metal Futures
Index Close Gain(Loss) %
Gold 962.7 +13.8 1.45
Silver 1931.0 +59.0 3.15
Platinum 2130.0 -25.9 -1.2
Palladium 549.85 +13.50 2.52

Energy Complex

Energy futures performed as follows -

Energy Futures
Index Close Gain(Loss) %
Crude Oil 99.78 -1.10 -1.09
Heating Oil 2.7522 -0.0377 -1.35
Gasoline RBOB 2.4790 -0.0715 -2.8
Natural Gas 9.040 -0.212 -2.29

The nine-stock group that makes up the Rant bellwethers advanced on average by 1.3%. The fallout occurred as follows:

  • General Electric (GE) up $+0.08 (0.24%) to $34.02 on volume of 29.86 million units.
  • Citigroup (C) up $+0.77 (3.09%) to $25.72 on volume of 74.77 million units.
  • Wal-Mart (WMT) up $+0.03 (0.06%) to $51.43 on volume of 28.17 million units.
  • IBM (IBM) up $+2.08 (1.82%) to $116.46 on volume of 11.71 million units.
  • Intel (INTC) up $+0.08 (0.39%) to $20.77 on volume of 80.67 million units.
  • Cisco Systems (CSCO) up $+0.88 (3.66%) to $24.95 on volume of 87.22 million units.
  • Google (GOOG) up $+8.67 (1.87%) to $472.86 on volume of 10.11 million units.
  • Fannie Mae (FNM) up $+0.30 (1.11%) to $27.27 on volume of 99.61 million units.
  • Freddie Mac (FRE) down $0.12 (0.48%) to $25.09 on volume of 61.53 million units.
Currency Futures
Index Close Gain(Loss) %
U.S. Dollar Index 74.265 -0.525 -0.7
British Pound 1.9819 -0.0020 -0.1
Canadian Dollar 1.0193 -0.0012 -0.12
Japanese Yen 0.9408 +0.0071 0.76
Swiss Franc 0.9415 +0.0115 1.24
Euro FX 1.5111 +0.0150 1
Australian Dollar 0.9379 +0.0068 0.73
New Zealand Dollar 0.81260 -0.0003 -0.04