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Tuesday, February 26, 2008

USRant: Economy Smells Like Poo; IBM Buyin' Itself...

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

Well, when you give yourself a toot-toot for being right, I guess it's only fair to lay bare your duds. Today it was a short above 1380 in the S&P, which went out when the S&P was at 1382.5 or thereabouts. Fifteen minutes later it was a couple of points higher (a good thing - enables folks to get set at better prices) and then the thing had one last try for the sky and gave up.

Well, that all sounds like it might have unfolded according to plan, for a short... EXCEPT that there was an explicit 1376.50 target. Anyone who got in above me, was supposed to adjust their targets accordingly (a deviation from the usual USSpy practice of point targets... usually 2-3 for the first contract, and larger targets on others).


At the close of the US equity markets (4p.m. NY time), the S&P futures were  at 1378.50 - so the short (which as a 'no overnight hold' call due to the second consecutive close above 1360) still looked like a good call, at that point. Not a 'ball tearer', but not bad.

Then the S&P futures rocketed 5 points in the following 10 minutes to close above 1383 - meaning that virtually every subscriber lost at least a point (except those who refused to budge from the 'fixed target' paradigm).  

That said, have a look in the blog archive for the 30-year bond call. Man Oh Man was that a ball tearer.

Economic News

The US economy is receiving daily updates as to how deep it's in the caca; today it was 

  • a massive reading of 1.0% (for the month) on the Producer Price Index; and
  • a drop to 75 on the Consumer Confidence index (that's the lowest number in a while) 

Couple that with the diabolical news in the housing sector, and are you really going to try and tell me that this recent bot of equity strength is the bounce that I forecast about ten days ago? I am still highly skeptical, even if it is coming at the right time. Too bad - with two consecutive closes above 1360, shorts become a "Show me more than one sign" entries, while longs are given more latitude. Not a comfortable situation for me, by a long shot.

Fed Open Market Operations

One $9 billion repo with just over a billion in Treasury backed. Boring.

Headline Indices

The Dow Jones Industrial Average advanced +114.70 points (0.91%) to 12684.92 points. The index high for the day was 12734.18, while the low was 12512.41. Everything was looking grim - given the autopsy report on the US economy - until IBM announced that it will buy back $15 billion of its own stock. 

I've never been a fan of stock buybacks - they are often done with borrowed money and they have absolutely no impact on the capacity of the business to do the actual stuff that it is supposed to be doing. In other words, it is something that is done when managements are looking too closely at the stock price.

Major Advancers in the Dow were

  • IBM (IBM) +$4.30 (3.91%) to 114.38 on volume of 18.1 million units
  • Intel (INTC) +0.75 (3.76%) to 20.69 on volume of 78.2 million units
  • Hewlett Packard  (HPQ) +1.07 (2.22%) to 49.2 on volume of 19.6 million units
  • Wal Mart Stores (WMT) +1.07 (2.13%) to 51.4 on volume of 30.3 million units
  • AIG (AIG) +1.04 (2.06%) to 51.42 on volume of 20.9 million units

Major Decliners in the Dow were

  • Alcoa (AA) -0.35 (0.9%) to 38.5 on volume of 11.8 million units
  • Merck c (MRK) -0.4 (0.85%) to 46.39 on volume of 7.9 million units
  • General Electric  (GE) -0.27 (0.79%) to 33.94 on volume of 45.3 million units
  • JP Morgan Chase C (JPM) -0.31 (0.7%) to 43.72 on volume of 20.2 million units
  • Bk Of America Corp (BAC) -0.22 (0.51%) to 42.72 on volume of 27.3 million units

Most Traded Dow stocks were

  • Citigroup (C) +0.21 (0.85%) to 24.95 on volume of 100.4 million units
  • Microsoft (MSFT) +0.54 (1.94%) to 28.38 on volume of 99.6 million units
  • Intel (INTC) +0.75 (3.76%) to 20.69 on volume of 78.2 million units
  • General Electric (GE%) -0.27 (-0.79) to 33.94 on volume of 45.3 million units
  • Pfizer (PFE) +0.05 (0.22%) to 22.83 on volume of 37 million units

The S&P500 Index advanced +9.49 points (0.69%) to 1381.29 points. ; the Nasdaq Composite advanced +17.51 points (0.75%) to 2344.99 points and the Nasdaq100 advanced +5.85 points (0.33%) to 1791.31 points. 

The CBOE Volatility Index lost 1.08 points (4.69%) to 21.95 points. The CBOE Nasdaq100 Volatility Index lost 0.67 points (2.51%) to 26.00 points. 

NYSE Total Volume totalled 3.95billion units and Nasdaq Total Volume totalled 2.26billion units.

Major Market Statistics
Index Close Gain(Loss) %
Dow Jones Industrial Average 12684.92 +114.70 0.91%
S&P500 Index 1381.29 +9.49 0.69%
Nasdaq Composite 2344.99 +17.51 0.75%
Nasdaq100 1791.31 +5.85 0.33%
CBOE Volatility Index 21.95 -1.08 -4.69%
CBOE Nasdaq100 Volatility Index 26.00 -0.67 -2.51%
NYSE Total Volume 3.95bn - -
Nasdaq Total Volume 2.26bn - -

Precious Metals

Precious metals futures rebounded a bit  - but not our old mate Platinum. Platinum is the harbinger.

Precious Metal Futures
Index Close Gain(Loss) %
Gold 951.8 +11.3 1.2
Silver 1879.0 +70.5 3.9
Platinum 2151.0 -2.5 -0.12
Palladium 532.40 +7.70 1.47

Energy Complex

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.

Energy Futures
Index Close Gain(Loss) %
Crude Oil 100.95 +1.72 1.73
Heating Oil 2.7919 +0.0321 1.16
Gasoline RBOB 2.5500 +0.0081 0.32
Natural Gas 9.220 +0.002 0.02

The nine-stock group that makes up the Rant bellwethers declined on average by 0.2%. The fallout occurred as follows:

  • General Electric (GE) down $0.27 (0.79%) to $33.94 on volume of 45.27 million units.
  • Citigroup (C) up $+0.21 (0.85%) to $24.95 on volume of 100.4 million units.
  • Wal-Mart (WMT) up $+1.07 (2.13%) to $51.40 on volume of 30.33 million units.
  • IBM (IBM) up $+4.30 (3.91%) to $114.38 on volume of 18.12 million units.
  • Intel (INTC) up $+0.75 (3.76%) to $20.69 on volume of 78.24 million units.
  • Cisco Systems (CSCO) up $+0.27 (1.13%) to $24.07 on volume of 58.49 million units.
  • Google (GOOG) down $22.25 (4.57%) to $464.19 on volume of 23.19 million units.
  • Fannie Mae (FNM) down $1.3 (4.6%) to $26.97 on volume of 19.91 million units.
  • Freddie Mac (FRE) down $0.97 (3.71%) to $25.21 on volume of 22.25 million units.

Notice how far the US Dollar index slid once it got through that mid-75 range? A break of 75 is really really important... in a really bad way.

Currency Futures
Index Close Gain(Loss) %
U.S. Dollar Index 74.790 -0.795 -1.05
British Pound 1.9839 +0.0194 0.99
Canadian Dollar 1.0205 +0.0179 1.79
Japanese Yen 0.9337 +0.0070 0.76
Swiss Franc 0.9300 +0.0112 1.22
Euro FX 1.4961 +0.0146 0.99
Australian Dollar 0.9311 +0.0063 0.68
New Zealand Dollar 0.81290 +0.0051 0.63