Market Soapbox 12/15/05
Resistance: DJIA 11000; SP500 1300; Nasdaq 2300; NDX 1750
Support: DJIA 10700 ; SP500 1240; Nasdaq 2200; NDX 1650
In our top story tonight, Generalissimo Francisco Franco is STILL dead. In other news, Initial jobless claims +1K from prior to 329K vs est. 320K.
The NY Empire State Index checked in at 28.7 vs est.18 vs prior 22.8; Philly Fed checked in at 12.6 vs est. 15 vs prior 11.5; showing robust growth in the NY & Philly regions.
The prices paid index dropped to 49.0 from 56.8, while the prices received index slipped to 30.5 from 32.5. Reflecting a drop in energy inputs but NOT to be misinterpreted.
Because this means that 49% of the those surveyed indicated INCREASED input prices and production costs, this translates into a firming of increased PPI and core PPI.
Net Foreign Purchases at a record 106.8B up from 101.9B. Foreign purchases of U.S. securities rose in every category, . Foreign official institutions accounted for $13 billion of these purchases, while private investors bought $97.3 billion.
Central banks bought $6.2 billion in agency bonds, compared to $2.2 billion in September. They also bought $4.9 billion of bonds and notes after purchases fell by $1.1 billion in September.
Chinese holdings of Treasury securities took an unusual drop in October, down to $247.6 billion from $252.2 billion in September. Japanese holdings of Treasurys also fell in October, to $681.6 billion from $687.3 billion in September.
Nov. industrial production, +0.7% vs est +0.5% vs prior revised +1.3%; showing continued yet declerating growth in industrial production as Gulf Coast reconstruction continues and more refineries come back on line.
Trying to catch the bond markets attention, capacity utilization at 80.2 vs est. 79.8 vs prior 79.8%; showing very little slack by breaking the psychological 80 barrier and harkening (as we have been) to the FOMC phrase, "possible increases in resource utilization... have the potential to add to inflation pressures.''
Total CPI for Nov. -0.6% vs est. -0.5% vs prior +0.2%; falling at the fastest rate in 56 years, as a record 8% decline in energy prices and 16% drop in gasoline prices helped counter September's huge 12% gain, however, electricity prices rose 3.8%
Further fanning of interest rate fears for the markets, core CPI +0.2% vs est. +0.2% vs prior +0.2%; making two straight +0.2% readings following five straight +0.1% readings, showing that core inflation has firmed and is picking up.
This has been one of our mantras, interest rates will go up farther than anyone expects. The firming in core CPI combined with dwindling economic slack validates the potential for this.
If core CPI continues to rise at a 2 1/2% annual rate into 2006, the Fed will probably not pause and may keep raising rates through mid-year. And the bond market really better watch out if the anticipated recession does not materialize and oil pulls back. More later...
Todays SOOHEY, PIG, PIG!! award goes to me for letting the pig have a quiet day in its poke.
12 weeks ago, DJIA -270 breaking key support. 11 weeks ago, DJIA +148, lacking conviction. 10 weeks ago, DJIA -281 crashing down. 9 weeks ago, large swings DJIA -6. 8 weeks ago larger swings, DJIA -77. Five weeks of downturn totaling -486.
7 weeks ago, recovery begins with larger swings, DJIA +186. 6 weeks ago, broadbased gains DJIA +128. 5 weeks ago, DJIA +154. 4 weeks ago, a slowing, DJIA +79. 3 weeks ago, DJIA +165. Five weeks of gains totaling DJIA +712.
2 weeks ago, DJIA -53, breaking the up trend. Last week, DJIA -99, two straight down weeks. Mon, a split tape day DJIA -11. Tues, DJIA +56 with improved internals and higher volume. Wen, a split tape and internals day, DJIA +60. Today, DJIA -2 with horrible internals on higher volume. This week DJIA +103, over the last 12 weeks DJIA +177.
DJUA, DJTA, NDX & XAU up, RUT, SOX, MID & XOI pounded down. CAC down, DAX up, FTSE down, Hang Seng up, Nikkei 225 down BIG.
Dollar up vs. Euro & down BIG vs Yen , XAU up & gold down BIG @ 504, XOI & crude down BIG @ 59.99, CRB commodities down. Contra trend: none.
Bonds down with the 10 year yield risling @ 4.46% & the 30 year @ 4.67. The 2 & 5 year @ 2 basis points; the 5 & 10 year gap @ 9 basis points; the 10 & 30 gap @ 19 basis points.
Sectors: Airlines, Gold Bugs, Biotech, Tobacco & Transports up nicely. Natural Gas, Oil, Oil Services, Energy, Commodity, Financial, Real Estate, REIT's, Banking & Semis down.
Looking ahead at potential market influences: Dec 16 Current Account. FYI, we don't know what is wrong with our sidebar graphs, but we are investigating it.
With regard to oil futures, after four straight days of good behaviour, the market went back to its old habits, oil futures down 1.4%, energy sector down, market down.
From Wend: "Clueless investors swallowed the hook (FOMC spin), with the exception of mid and small caps, someone is paying attention."
Greenspun's attempt to throw the market a bone with an ambiguous FOMC statement has sunk in as investors have taken a closer look at the verbage, "measured" is still in the statement, and "accomodative" has been removed.
From yesterday: "Tomorrows CPI will probably be tame, net foreign purchases perhaps a decrease, capacity utilization will show little slack and will be ignored by the media and the market." The data was anything but ignored as the interest rate sensitive RUT & MID took a hit.
And now for some seemingly random thoughts: We are witnessing a perplexing oscillation where the XAU (precious metals), XOI (energy), DJIA (industrials), NDX (tech), SOX (semis), RUT (small cap) & MID (mid cap) are all taking turns churning up then churning down out of sequence with the prevailing market direction of the day.
We sense that quadruple options expiration and short covering has something to do with this. However, the choppy topping pattern that has formed as a result, with inconsistent leadership is much more disturbing. Beware of another shoulder forming off the top.
Where there's smoke, there is usually fire and the scent of elephant's attempting to tread lightly as they unwind their positions prior to year end is in the air. The elephants footprint creates an impression, should those who have bought into the dip catch a whiff of the smoke, a rush for the exits could occur.
This year we have witnessed a decoupling in the following relationships; the dollar & gold, stocks & bonds, the dollar & commodities and finally an oddfellows coupling of oil futures, energy sector & equities markets.
There is a distinct possibility that stocks pullback after the Santa Claus rally, couple this with interest rates rising far beyond anticipation and the foretold recession not materializing, which could lead to a bond market implosion in early Spring and a declining housing market this Spring and Summer.
Throw in the Gulf States ramp up, refineries coming back on line, and additional capacity being added, and you get a pullback in energy futures, and a potential commodities market implosion as well. The icing on the cake would be further retracing of the dollar against the Euro and Yen.
Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!!!
Support: DJIA 10700 ; SP500 1240; Nasdaq 2200; NDX 1650
In our top story tonight, Generalissimo Francisco Franco is STILL dead. In other news, Initial jobless claims +1K from prior to 329K vs est. 320K.
The NY Empire State Index checked in at 28.7 vs est.18 vs prior 22.8; Philly Fed checked in at 12.6 vs est. 15 vs prior 11.5; showing robust growth in the NY & Philly regions.
The prices paid index dropped to 49.0 from 56.8, while the prices received index slipped to 30.5 from 32.5. Reflecting a drop in energy inputs but NOT to be misinterpreted.
Because this means that 49% of the those surveyed indicated INCREASED input prices and production costs, this translates into a firming of increased PPI and core PPI.
Net Foreign Purchases at a record 106.8B up from 101.9B. Foreign purchases of U.S. securities rose in every category, . Foreign official institutions accounted for $13 billion of these purchases, while private investors bought $97.3 billion.
Central banks bought $6.2 billion in agency bonds, compared to $2.2 billion in September. They also bought $4.9 billion of bonds and notes after purchases fell by $1.1 billion in September.
Chinese holdings of Treasury securities took an unusual drop in October, down to $247.6 billion from $252.2 billion in September. Japanese holdings of Treasurys also fell in October, to $681.6 billion from $687.3 billion in September.
Nov. industrial production, +0.7% vs est +0.5% vs prior revised +1.3%; showing continued yet declerating growth in industrial production as Gulf Coast reconstruction continues and more refineries come back on line.
Trying to catch the bond markets attention, capacity utilization at 80.2 vs est. 79.8 vs prior 79.8%; showing very little slack by breaking the psychological 80 barrier and harkening (as we have been) to the FOMC phrase, "possible increases in resource utilization... have the potential to add to inflation pressures.''
Total CPI for Nov. -0.6% vs est. -0.5% vs prior +0.2%; falling at the fastest rate in 56 years, as a record 8% decline in energy prices and 16% drop in gasoline prices helped counter September's huge 12% gain, however, electricity prices rose 3.8%
Further fanning of interest rate fears for the markets, core CPI +0.2% vs est. +0.2% vs prior +0.2%; making two straight +0.2% readings following five straight +0.1% readings, showing that core inflation has firmed and is picking up.
This has been one of our mantras, interest rates will go up farther than anyone expects. The firming in core CPI combined with dwindling economic slack validates the potential for this.
If core CPI continues to rise at a 2 1/2% annual rate into 2006, the Fed will probably not pause and may keep raising rates through mid-year. And the bond market really better watch out if the anticipated recession does not materialize and oil pulls back. More later...
Todays SOOHEY, PIG, PIG!! award goes to me for letting the pig have a quiet day in its poke.
12 weeks ago, DJIA -270 breaking key support. 11 weeks ago, DJIA +148, lacking conviction. 10 weeks ago, DJIA -281 crashing down. 9 weeks ago, large swings DJIA -6. 8 weeks ago larger swings, DJIA -77. Five weeks of downturn totaling -486.
7 weeks ago, recovery begins with larger swings, DJIA +186. 6 weeks ago, broadbased gains DJIA +128. 5 weeks ago, DJIA +154. 4 weeks ago, a slowing, DJIA +79. 3 weeks ago, DJIA +165. Five weeks of gains totaling DJIA +712.
2 weeks ago, DJIA -53, breaking the up trend. Last week, DJIA -99, two straight down weeks. Mon, a split tape day DJIA -11. Tues, DJIA +56 with improved internals and higher volume. Wen, a split tape and internals day, DJIA +60. Today, DJIA -2 with horrible internals on higher volume. This week DJIA +103, over the last 12 weeks DJIA +177.
DJUA, DJTA, NDX & XAU up, RUT, SOX, MID & XOI pounded down. CAC down, DAX up, FTSE down, Hang Seng up, Nikkei 225 down BIG.
Dollar up vs. Euro & down BIG vs Yen , XAU up & gold down BIG @ 504, XOI & crude down BIG @ 59.99, CRB commodities down. Contra trend: none.
Bonds down with the 10 year yield risling @ 4.46% & the 30 year @ 4.67. The 2 & 5 year @ 2 basis points; the 5 & 10 year gap @ 9 basis points; the 10 & 30 gap @ 19 basis points.
Sectors: Airlines, Gold Bugs, Biotech, Tobacco & Transports up nicely. Natural Gas, Oil, Oil Services, Energy, Commodity, Financial, Real Estate, REIT's, Banking & Semis down.
Looking ahead at potential market influences: Dec 16 Current Account. FYI, we don't know what is wrong with our sidebar graphs, but we are investigating it.
With regard to oil futures, after four straight days of good behaviour, the market went back to its old habits, oil futures down 1.4%, energy sector down, market down.
From Wend: "Clueless investors swallowed the hook (FOMC spin), with the exception of mid and small caps, someone is paying attention."
Greenspun's attempt to throw the market a bone with an ambiguous FOMC statement has sunk in as investors have taken a closer look at the verbage, "measured" is still in the statement, and "accomodative" has been removed.
From yesterday: "Tomorrows CPI will probably be tame, net foreign purchases perhaps a decrease, capacity utilization will show little slack and will be ignored by the media and the market." The data was anything but ignored as the interest rate sensitive RUT & MID took a hit.
And now for some seemingly random thoughts: We are witnessing a perplexing oscillation where the XAU (precious metals), XOI (energy), DJIA (industrials), NDX (tech), SOX (semis), RUT (small cap) & MID (mid cap) are all taking turns churning up then churning down out of sequence with the prevailing market direction of the day.
We sense that quadruple options expiration and short covering has something to do with this. However, the choppy topping pattern that has formed as a result, with inconsistent leadership is much more disturbing. Beware of another shoulder forming off the top.
Where there's smoke, there is usually fire and the scent of elephant's attempting to tread lightly as they unwind their positions prior to year end is in the air. The elephants footprint creates an impression, should those who have bought into the dip catch a whiff of the smoke, a rush for the exits could occur.
This year we have witnessed a decoupling in the following relationships; the dollar & gold, stocks & bonds, the dollar & commodities and finally an oddfellows coupling of oil futures, energy sector & equities markets.
There is a distinct possibility that stocks pullback after the Santa Claus rally, couple this with interest rates rising far beyond anticipation and the foretold recession not materializing, which could lead to a bond market implosion in early Spring and a declining housing market this Spring and Summer.
Throw in the Gulf States ramp up, refineries coming back on line, and additional capacity being added, and you get a pullback in energy futures, and a potential commodities market implosion as well. The icing on the cake would be further retracing of the dollar against the Euro and Yen.
Keep it tween da ditches, we take it day by day and keep our eyes peeled to the sky, because it could be a name brand that pancakes us. Just my opinion, I could be wrong, this is The Nattering Naybob and your NOT!!!
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