Market Summary from the PrudentBear
by Lance Lewis
CSCO/FOMC Pre-Party
Asia was a little higher last night. Europe was up 2 percent this
morning, and the US futures were also quite a bit higher. We
gapped up and immediately made a Harrier jet move to the
upside. The services NAPM hit, and it was a disaster, 40.6 for
October down from 50.2 in September and significantly below
the number everybody was expecting. That number was bought
with wild abandon as if it was a misprint. The party went on for a
bit longer until we finally had a flameout and slid to back near the
open, where we once again began to rally. We proceeded to
meltup into the afternoon and back to the morning's highs. The
last hour saw a bit of a selloff back to the lows of the day, but a
bounce into the close took us out in the mid-range of the day.
Volume was OK (1.2 bil on the NYSE and 1.7 bil on the
NASDAQ.) Breadth was 2 to 1 positive on the NYSE and a little
less than that on the NASDAQ.
We came in this morning and everybody had their rally hats on
ahead of CSCO and tomorrow’s rate cut. The SOX rose 3
percent as chips were chased but not near as hard as we saw
last week. There’s always tomorrow though I suppose. MSFT
rose another 3 percent in the face of several states saying they
would not go along with last Friday’s deal and the EU saying
that its probe would continue. CSCO rose 4 percent ahead of its
call tonight. Interestingly, the open interest for CSCO Nov 17.5
calls is a mammoth 121,000 contracts in contrast to 11,000 in the
puts. That doesn’t argue for CSCO remaining above 17.5 by the
time Nov 16th rolls around no matter what sort of bedtime story
they tell this evening. This sort of lopsided put/call open interest
ratio is found in quite a few big techs. It’ll be interesting to see
what happens over the next 9 days till expiration. JNPR rose 16
percent, wiping out all of Friday’s Q-related loss. The XTC
bounced 2 percent. Just when you thought rampant
speculation might have been put to bed for a while, the biotechs
finally caught a bid as the BTK launched 5 percent and to just
shy of a new high for the move. It was basically just one long
wire-to-wire tech meltup.
Financials were mostly higher. The BKX and XBD both rose 2
percent. GE rose 2 percent. The derivative king underperformed
the banks a bit and only rose a percent. FNM and FRE rose their
usual percent. Retailers were higher as the RLX rose 2 percent.
Oil fell 16 cents. The XOI rose a hair, and the OSX fell 3 percent.
Gold fell $1.30, and the HUI fell a percent. The US dollar index
was up a touch. The euro slipped below the 90-cent level.
Treasuries were up a touch in the long end.
Tonight we’ll hear from CSCO, and then tomorrow we’ll get our
rate cut from the Fed and maybe some news out of Argentina on
how exactly they plan to structure their debt swap/default. As
for the FOMC, 25 bps seems fairly certain, but 50 bps seems to
be the big hope. At some point the Fed is going to realize that
they are running out of bullets. After all, once they hit zero, the
gun is empty. 50 bps at every meeting is going to put them all
out of ammo by early next year. 25 bps is probably going to
disappoint people, but it really doesn’t make a difference either
way other than the short-term stock market reaction. More rate
cuts haven’t been and won’t be the answer. Time and
retrenchment are the only cures for “post-bubble disorder.” |
