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Market Wrap

The Numbers

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The Numbers

Today we saw a very slow and sideways day but heck where have you heard that before. Did you know that 7 out 8 trading days are non-trending making the market a rather boring place to spend your day, if you spend your day here that is.

The DOW gained 27.56 points to close at 10486.02. The S&P grabbed 2.68 points for a 1184.07 close. The Nasdaq composite had a small -0.18 loss to close at 1999.14. The Nasdaq 100 lost a little more -3.08 and closed at 1480.67. Although we have 3 days of modest gains it has been on light volume and no one is buying it - literally. The reason most sited is oil.

The NYSE traded 1.4 million shares, 1,958 stocks rose and 1,324 fell. On the Nasdaq Stock Market traded 1.7 billion shares, 1,624 stocks advanced and 1,471 declined.

A boring day in the equity markets will usually give you a boring day in the bond markets as well but the treasury market did catch a bid early and held the small gains through the session. The lack of economic data is holding the market in tight ranges. Short-covering could have been reason for support today and the decision by authorities in Japan and Australia not to raise interest rates helped as well.

The 30-year Bond gained +9/32 to close at 111 28/32. The 10-year gained 19/64 to close at 109 49/64. The 30-year yield dropped -0.11 to 4.74% and the 10-year yield fell -0.34 to 4.43%

Crude made a small gain on the electronically traded market of 0.05 to close at 55.90.


MBIA Inc. (MBI) may have had a covert agreement with another reinsurance company up and above the one that was responsible for its earnings restatement. MBIA denies any such agreement.

MBI is a "reinsurer," a company that sells insurance to insurance companies, and the investigation is into whether it is disguising reinsurance policies that are in essence loans to take advantage of the more favorable accounting given to reinsurance policies.

The investigation is into whether or not MBIA, the nation's biggest bond insurer, made a covert agreement with Channel Re to protect it from losses resulting from claims it had transferred to the offshore company. If the investigation finds that this is indeed the case then MBIA could be charged with misleading investors. Federal prosecutors are also investigating a reinsurance policy with a French reinsurer that may have been part of the secret agreement.

This morning the Iraqi democratic process got a boost when the parliament selected a three-man, multiethnic presidency. The new president is longtime Kurdish leader, Jalal Talabani. Vice presidents will be Adel Abdul-Mahdi, a Shiite Arab, and current interim President Ghazi al-Yawer, a Sunni. Although the presidency has been known for weeks, a Kurd as Iraqi head of state is in stark contrast to Saddam Hussein regime.

Shiite parties and the Kurds together represent the needed two-thirds majority of the government and it still not clear if they have resolved significant disputes over the control of Iraqi oil revenue and the role of Islam in the new constitution.

The Bush administration definitely welcomed the news out of Iraq because it comes a day after the release of a United Nations report that criticizes the administration for complicating efforts to bring democratic values to the region. The report said "progress toward democracy in the region remained fitful despite American pressure and the best efforts of many Arab reformers."

Three times and you are out! Well maybe. For the third time MCI has rejected Qwest Communications' takeover offer and gave the head nod to the lower bid from Verizon. MCI claims that Verizon will be a stronger partner in the fight for larger business customers because it has a market value of $99 billion. Qwest has hinted it may take a hostile approach, which could start a proxy war.

All is not well at the sot after MCI either. MCI's decision to pick Verizon has investors such as Bill Miller of Legg Mason, a huge Mutual Fund family, upset because he thinks the Verizon's offer is too low.

MCI has asked Qwest to raise their current bid of $27.50 a share to $30 a share and provide assurances that Qwest would stick with the deal in spite of potential customer losses. Qwest had declined to increase its current offer.

Tom DeLay is in the news again. It has just come to light that the House Majority Leader's political action and campaign committees have paid his wife and daughter more than $500,000 since 2001. Most of these payments were listed as "fund-raising fees," "campaign management" or "payroll," with no additional details about how they earned the money. According to the Americans for a Republican Majority, Mr. DeLay's national political action committee, these two women have provided "valuable counseling and organizational services to the committee in exchange for the payments."

The global economic recovery may have "peaked." The World Bank warned in its annual report that the global recovery of the last three years has puttied over cracks that need to be fixed and the harshness of the impending slowdown will largely depend on the strength of the US dollar. If we see central banks losing their appetite for U.S. dollar-denominated assets all at once, a dollar selloff that shocks markets would be inevitable. A case in point was how quickly the dollar sold off after some Asian central banks announced recently that they might "diversify" their currency portfolios away from the US dollar.

The bank sees the best-case scenario as a mild slowdown in global economic growth over the next few years and a new global recession as a possibility. "A reduction in the pace at which central banks are accumulating dollars, a weakening in investors' appetite for risk, or a greater-than-anticipated pickup in inflationary pressures could cause interest rates to rise farther than projected, providing a deeper-than-expected slowdown or even a global recession," the report stated.

Economic reports

For the week ending April 1, The Energy Information Administration reported a build in commercial crude oil inventories and in distillate fuel oil stocks for the week ending April 1. The data is moderately bearish for the oil markets because the builds in crude and distillates exceed a draw in gasoline. The American Petroleum Institute also reported a sizable build in commercial crude oil inventories of some four million barrels for the week and a marginal build in gasoline stocks along with a marginal draw in distillates.

Higher mortgage interest rates are taking its toll on the Mortgage industry as the MBA Mortgage Applications Survey showed that demand for new mortgages and refinancing continues to retreat, although demand for new purchases is still strong so far this year. The MBA index for the week ending April 1 fell 4.4% to 644.5, with both the refi and purchase components dropping.

The purchase index has averaged at a lower level than it did for much of last year and many analysts believe the slackening in purchase demand will continue as mortgage interest rates continue to rise and house prices continue to appreciate. With the demand for housing easing, higher mortgage rates will start to impact new purchases more and more.


I have always been a proponent of looking for both good and bad in people and in my charts. If I can see enough good to outweigh the bad in a person then he/she is probably good in my books. If I can find enough bullishness to outweigh the bearishness then the chart is bullish but if the bearish outweighs the bullish then it needs to be put into the bearish column. Then of course you have one index that can weigh in bullish and another that will weigh in bearish so you then need to count how many are bullish and how many are bearish to take a pulse of the whole market.

With that in mind, I am going to do a good news, bad news on the charts and put each one in a bullish or bearish column.

Daily chart of the SPX

First the good news.
1. The double bottom has held so far
2. MACD has turned up
3. 200 EMA has not been breached.

Now the bad.
1. The double bottom has a MACD negative divergence - red trend lines.
2. The rally off the bottom has only made a retracement to the 38% fib retracement, which is a shallow retracement.
3. SPX has not had enough buyers to break the 50 EMA.

This chart is a draw.

Daily chart of DOW

The good news.
1. The double bottom has held so far
2. MACD has turned up

Now the bad.
1. The double bottom has a MACD negative divergence - red trend lines.
2. The rally off the bottom has not even made a retracement to the 38% fib retracement.
3. The DOW has not even come close to the 50 EMA.
4. 200 EMA has been breached.

This chart is bearish.

Daily chart of the Nasdaq composite

The good news.
1. MACD positive divergence
2. MACD has turned up

Now the bad.
1. 200 EMA has been breached.
2. Retracement has not yet made it to the 23.6% marker.
3. Price has not yet come close to touching the 50EMA

This chart is bearish.

Daily chart of the Russell 2000

The good news.
1. MACD positive divergence
2. MACD has turned up
3. 200 EMA has not been breached.
4. Double bottom has held so far.

Now the bad.
1. Retracement has not yet made it to the 38% marker.
2. Price has not yet come close to touching the 50EMA

This chart is bullish.

So we have the SPX a draw, the DOW bearish, the Compq bearish and the Russell 2000 bullish. I guess you would have to say overall the major indexes are bearish but certainly not overly so.

Tomorrow's Economic Reports

Tomorrow we have the weekly Jobless claims report out at 8:30EST for the week ending April 2nd. The Consensus is for 333,000 claims down from the previous week of 350,000.

At 10:00 is the Bureau of Census' February's Wholesale Trade release. This is a report on the inventories to sales ratio, an important indicator of current consumption and future manufacturing activity. Consensus is for 0.7% down from January's 1.0% reading.

At 10:30 is the Energy Information Administration's weekly Natural gas Storage report, which is taking on more significance of late because of the rising price of oil and gas.

At 3:00 is the release of February's Consumer Credit. Consensus 7.6 billion down from January's 11.5 billion, biggest since last October.

Also out tomorrow is Chain store sales for March. I don't have good data on the time or the concensus.

After hours

Dell saying it expects to earn about 37 cents a share on revenue of about $13.4 billion and reiterated its earlier forecast for its profit and sales in the first quarter. It also has doubled a share buyback plan to $2 billion. Shares rose in after-hours trade.

Alcoa kicked off the first-quarter earnings reporting season, saying its net income fell to $260 million, or 31 cents a share, down 27% from a year ago however, the results beat Wall Street forecasts, and Alcoa's shares rose sharply after hours.

In a blow to electronic trading platforms, the SEC as voted 3-2 to disallow the practice of "trading through," which is sending an order to the trading platforms that can process it most quickly, rather than taking time to hunt for the best price. Proponents of the rule argue that speed is more important in trading than finding the absolute best price.


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