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Market Wrap

Passing Time

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      11-08-2004           High     Low     Volume   Adv/Dcl
DJIA    10391.31 +  3.77 10405.69 10361.44 1.70 bln 1174/1645
NASDAQ   2039.25 +  0.31  2044.53  2033.79 1.61 bln 1373/1645
S&P 100   557.30 -  0.60   558.02   555.96   Totals 2547/3290
S&P 500  1164.89 -  1.28  1166.86  1162.32
SOX       418.61 +  0.78   421.35   416.18
RUS 2000  602.08 -  2.21   605.51   601.21
DJ TRANS 3581.97 +  9.47  3585.75  3561.77
VIX        13.80 -  0.04    14.48    13.67
VXO (VIX-O)13.92 -  0.44    14.92    13.77
VXN        19.22 -  0.25    20.23    19.13
Total Volume 3,311M
Total UpVol  1,584M
Total DnVol  1,608M
Total Adv  2547
Total Dcl  3290
52wk Highs  420 
52wk Lows    40
TRIN       0.72
PUT/CALL   0.64

Equity bulls ran the clock on hapless bears today, as intraday downphases succeeded only in moving the price sideways. The Dow and Nasdaq finished fractionally higher while the SPX finished fractionally lower.

It was a quiet day, particularly in the wake of Friday's busy session. Volume was significantly lighter today for QQQ, while near average for the indices. The CBOT reported that on Friday, more than 4.3M contracts were traded, more than half of which electronically. The 4.3M figure was the second heaviest day for the exchange, while the 50%+ figure set a new record.

Daily Dow Chart

The Dow eked out a 3.77 point gain to close at 10391.31. I have squeezed one years' worth of daily prints onto the chart to provide some longer term perspective- anyone wishing to see more daily candle detail is urged to look at the daily YM chart in tonight's Futures Wrap.

The 1-year daily chart shows a strong rally off the October lows that is most likely still in progress and will so remain until the price is at least back into the declining channel below 10220. In the meantime, the daily cycle continues to press higher, with immediate upside resistance at 10425, then at 10500 and 10560.

Daily S&P 500 Chart

The SPX fell 0.11% to close at 1164.89. The move failed at a high of 1166.86 and bounced from a higher low of 1162.32. While it's possible that Friday's high volume upside doji was the terminal move in this strong but overbought daily cycle upphase, bears will need to see a move below the 1150 level on a closing basis to suggest a reversal in the upphase. The first sign of trouble will be a break of 1160, while confirmation will come on a break of 1146.

Daily Nasdaq Chart

The Nasdaq managed a .31% gain, which was impressive given that such occurred during an intraday cycle downphase. The high printed at 2044, while the low was 2033. Above 2045, next resistance is at 2070 and 2105. The daily cycle oscillators are oversold here, and bears can hope for a terminal upside surge to finish off this cycle and pave the way for the next downphase. If bears can close the Nasdaq below 2020-25, we should see the upphase stall, but it should take a close below 1996 to reverse it.

Weekly TNX Chart

Ten year notes followed through on last week's weakness, with the ten year note yield (TNX) rising 2.9 bps to close at 4.215%. On the weekly chart, note that the latest weekly candle is based solely on today's move, as with the weekly crude oil chart below. The weekly cycle upphase about which I've been writing has been strengthening off the rising lower trendline, and continues to coincide with the daily cycle upphase (see tonight's Futures Wrap). Above current levels, next resistance is in the 4.3% area, followed by 4.4%.

A large 11.25B overnight repo was announced this morning by the Fed's open market desk, refunding the 7B maturing today and leaving an additional 4.25B on the table. This money may have found its way into the treasury bill auctions that took place today, with 19B in 6 month bills generating a bid-to-cover ratio of 1.84, 21B of 3 month bills generating a bid-to-cover ratio of 1.89, and 22B of 3 year notes generating a 2.24 bid-to-cover.

Weekly chart of Crude oil

Crude oil declined again today, kicking off the third week since its 52-week and record high (in nominal terms- the 1980 high would have been $90 in today's dollars). News sources attributed the continued weakness to expectations that existing supplies will be sufficient to meet demand for the winter, and recovering production in the Gulf of Mexico. Tensions remained high, however, on news of increased violence in Fallujah carrying over from the weekend, with Reuters reporting the killing of more than 40 insurgents. This was compounded by a lack of resolution in the Nigerian labor troubles and Russian YUKOS' likely bankruptcy, but it was the grounding of a tanker in the Suez Canal that occupied headlines this afternoon.

Bloomberg reported that approximately 135 ships were waiting today after The Tropic Brilliance ran aground 2 days ago carrying 142,547 tons of crude oil. This mishap closed the Canal for the first time since 1975. As of 2003, the Energy Department reported that 1.3M bpd move through the Canal, and while there was a chance that The Tropic Brilliance would be unloaded and floated out as soon as today, crude oil held above a low of 48.625 on the Nymex all day, closing lower by 1.05% at 49.10.

The weekly chart of crude oil futures shows a steep drop from the October high, with first support asserting itself in the 48-49 area, below which there's stronger support between 45 and 46, then at 42. Note the bearish stochastic divergence that was in play for most of the runup above 48.

It was a quiet news day overall. There were no major economic reports released, and tomorrow's lone report will be Wholesale Inventories for September to be announced at 10AM, with economists expecting a rise of 0.7% after August's 0.9% increase.

In corporate news, TASR took a jump on news that the Transportation Security Administration of the US Homeland Security Department has approved the onboard use of TASR's weapons by air marshals on flights to and from the US. TASR closed higher by 16.4% at 54.12.

Insurance group CNO announced Q3 earnings of 36 cents per share of 57.9M, well ahead of last year's Q3 figures of 17 cents or 18.9M. The company cited its ongoing effort to improve operations and risk management, and reaffirmed its 2005 outlook of $1.71 per share . The 36 cent EPS figure beat estimates by 2 cents. CNO added 7.29% to close at 17.95.

Drugmaker PFE disclosed in an SEC filing on Friday that NY A-G Elliot Spitzer has requested documentation regarding trials and possible promotion of certain of its products for uses other than as approved by the FDA. A similar request was received by the company from Connecticut's Attorney-General in connection with Zoloft, and there was mention of its Bextra product as well. PFE lost 1.32% to close at 28.41.

Oil & gas company HEC broke even for Q3 on net income of 795K and revenues of 8.3M, reversing a loss in Q3 2003 of 1 penny per share or 806K on revenue of 7.4M. HEC added 1.85% to close at .55.

Airliner BAB reported Q2 earnings before tax of 220M pounds on revenue that rose 2.2% to 2.02B pounds. The company announced that it would not be paying a dividend as fuel costs rose 12.4% to 271M pounds. Despite hedging, the company expects to pay 245M pounds more for fuel than last year. Passenger and cargo surcharges are expected to offset 160M pounds' worth of this increase. BAB finished lower by 2.83% at 40.85.

Silver and gold miner CDE reported a Q3 loss of 18M or 8 cents per share, down from a 10 cent loss in Q3 2003, but noted that 2.1M of current operating profits will be reported in Q4 due to a temporary plant closure. Revenues were higher by 30% to 31.3M. CDE lost 3.84% to close at 5.01.

MSFT was weaker on news that the company estimates its exposure to antitrust claims at 950M, 200M more than the figure disclosed in its latest 10K filing. These figures don't include a payment of 536M to be made to networker NOVL and to the US Computer and Communications Industry Association in settlement of antitrust claims arising from NOVL's Netware product in its landmark antitrust case in the European Union. NOVL also plans to file a claim arising from alleged anticompetitive practices that have caused prejudice to its WordPerfect suite (WordPerfect and Quattro Pro) during the 1990s. The Netware payment resulted in a 3 cent charge for MSFT's previously reported Q1 results of 26 cents. MSFT's updated results in light of the NOVL settlement were 23 cents on earnings of 2.53B. MSFT lost 3 cents to close at 29.28, while NOVL finished higher by 9.48% at 7.51.

GE announced that it will be selling 60% of its stake in GE Capital International Services (GECIS), its global outsourcing business, to General Atlantic Partners and Oak Hill Capital Partners. The company said that GECIS will "no longer limit its cost-saving, business support services to GE and GE customers ... We will now have unrestricted access to the world market." The company intends to expand into Eastern Europe and China. GE lost 7 cents to close at 35.12.

Later in the session, the NASD announced that it has charged financial advisors HRB with fraud in connection with its sales of Enron bonds between Oct. 29, 2001 and Nov. 27, 2001, prior to the Enron bankruptcy. The NASD alleged that HRB's sales force failed to disclose the extent of the risks associated with the bonds. HRB responded that its sales and disclosures were sufficient in light of the information available at the time, and that it expects to prevail at the eventual hearing. HRB finished higher by .45% at 49.59.

Resort developer and operator IDR announced a Q1 loss of 6.7M or 14 cents per share, down from a profit of 2 cents per share or 938M. The company said that it expected the loss, which it said resulted from the timing of various construction projects. The stock declined on the news, finishing lower by .76% at 19.55.

It's unsurprising that today was a throwaway session as the market awaits CSCO's results tomorrow and the Fed's rate decision on Wednesday. Many were expecting a strong rally today, and the charts suggest that it was merely deferred by the long, tiring range that printed. Bears can hope that Friday marked the daily cycle exhaustion top, but better than hope will be confirmation in the form of lower daily highs and lows. Until that occurs, the trend is your friend. With any luck, there will be more movement tomorrow, as suggested by today's inside range. A violation of either today's high or lows will be the first sign of a possible directional move in the direction of the break, but watch for volume to confirm it- as we saw today, the price can drift this way and that, and on low volume reversals are much more likely.


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