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Index Wrap

A "Crazy Ivan" type of session

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In the movie "Hunt for Red October," U.S. submarine Petty Officer Jones described that the Soviet sub he was tracking had pulled a "Crazy Ivan."

At times, Soviet submarines using a "Crazy Ivan" would inexplicably turn 180 degrees in an attempt to outmaneuver their foes, or launch a surprise attack.

While we've been hearing about Hurricane Ivan for weeks as it takes aim at the U.S. Gulf Coast, investors used the rapidly approaching hurricane and earnings warnings from beverage giant Coca-Cola (NYSE:KO) $41.16 -3.98%, chipmaker Xilinx (NASDAQ:XLNX) $27.50 -5.3% and electronics outsource-manufacturer Celestica (NYSE:CLS) $12.60 -13.52% as ample reasons to lock in recent profits.

According to current weather forecasts, Hurricane Ivan is expected to hit land late this afternoon, or early Thursday, somewhere between Florida's Panhandle and Louisiana, with winds reaching up to 160-mph.

A perfect storm seemed to be brewing for energy bulls early in the session as Gulf of Mexico producers and refiners have been shutting in production ahead of Ivan's visit. At 10:30 AM EDT the EIA said its statistics showed a 7.1 million barrel draw in the latest week, which was well above a 1.5 million barrel draw forecast. Supplies in storage are estimated at roughly 278.6 million barrels, or 1% below last year's level.

October Crude Oil futures (cl04v) jumped as high as $45.30, but "Crazy Ivan'd" by the close to settle down 29 cents at $43.58 as Hurricane Ivan's path appeared to be drifting north-northeast toward Alabama and the Florida panhandle and not directly at many of the Louisiana-coastal refiners.

U.S. Market Watch - 09/15/04 Close

I can't say today was a totally "defensive-looking" session. Treasuries found selling, not safe-haven buying, and selling was rather evenly distributed among the major maturities.

The dollar gained ground after this morning's release of the September New York Empire State Index, which showed a notable rebound in manufacturing activity in the northeast. Some defensive action here? I don't think so. Remember next week's FOMC meeting (Tuesday) and we might be seeing one of those anticipatory bouts of dollar buying on thought the Fed may hike another 25 basis points. Fed hike thoughts may also have brought selling into Treasuries.

A quick check of October Fed Funds futures (ff04v) 98.26, which fully encompasses next week's FOMC meeting is predicting roughly 100% chance the Fed will raise it target for Fed funds to 1.75%. We get this by taking a base 100 (or zero rate), subtracting the Fed Funds futures of 98.26 to get 100 - 98.26 = 1.74.

That report (NY Empire) took some of the sting our of the later- released August Industrial Production data where production fell 0.1%, which was below economists' forecast for a 0.5% gain. July's upwardly revised figures showed a gain of 0.6% from the previously reported 0.4% gain.

August capacity utilization was steady at 77.3% in August, even with July's upwardly revised 77.3% utilization rate from the previously reported 77.1% rate. These continued low levels of capacity utilization suggest few bottlenecks.

The Utility Sector Index (UTY.X) 330.60 +0.02% finished today's session with a fractional gain after trading 52-week highs just last week at 334.33. A bit of an intra-day "Crazy Ivan" here too considering August's industrial production figures were pulled lower by a third-straight month of decline in utilities output, with August output falling 2.4%.

October Crude Oil futures (cl04v) - 30-minute intervals

At mid-session, I thought for certain crude would find a bid above $44.75. However, oil futures "Crazy Ivan'd" too. The 30- minute chart does show bidders came up to the $44.75 level once it was broken, but two horizontal highs of $45.40 and $45.30 look very suspicious as though determined sellers are forming at that level.

Despite the rather sudden late-session reversal in oil, stocks which did show some bid from their morning lows, faded toward today's close, as if traders would rather wait out Ivan and be more protective of recent gains.

Market Snapshot / Internals - 09/15/04 Close

Volumes were brisk, but nothing unusual and steady with what the daily rates have been since the Labor Day weekend. New lows at both the NYSE and NASDAQ are almost identical to yesterday, while new highs abate for a second-straight session.

Pivot Matrix -

The S&P 100 Index (OEX.X) has traded its slowly rising 200-day SMA (547.05) 5 times in the last seven sessions, but buyers have been unable to hold a close above this longer-term SMA, which at this point would suggest there's not a lot of conviction from buyers. The OEX hasn't been able to hold a close above its correlative WEEKLY R1 and MONTHLY R1 either.

While the OEX struggles with its 200-day SMA, the NDX/QQQ have both come up shy of their 200-day SMA's (1,441, $35.81) during the recent rebound, while the Dow Industrials (INDU) closed back below its slowly trending higher 200-day SMA (10,231) after breaking above on September 2.

In last night's Index Trader Wrap we quickly reviewed the very broad and stronger NYSE Composite ($NYA.X), and in the opening ticks, the 6,574 level was cut like a hot knife through warm butter, offering little sign of support from buyers.

Jeff Bailey

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