Foreword
"Last Week in the Markets..." is an examination of the week that was in the financial markets, in an effort to help assess the prospects for the week(s) that will be.
_____
Summary
There's a hulluva correction (or worse) awaiting the US stock market. The jury is out on whether last week saw its beginning; the bulls remain intoxicated with the idea of the rally's invincibility. Reflecting much, much too much complacency, perhaps?
Meanwhile, interest rates are beginning to behave more in line with what you would expect in a stagflation environment, despite the government's continuing best efforts to "mask" inflationary pressures ("mask" being a euphemism for something a little more nefarious).
The business and consumer sectors know full well these pressures are in progress, and that they go beyond oil, too, although crude's unwillingness to correct is finally catching wider attention in important circles.
_____
Stocks
* Last week, the seven-measure GRA stock-market tracking group fell an average 0.7% (median decline of 0.8%).
* All seven of the group's components declined during the period, with losses running in a range of 0.2% for the NASDAQ 100, to 1.4% for the Value Line Index (geometric). Unto itself, this performance was no big deal, although it was a weekly decline. In turn, these have been rare as of late.
* For the year to date through last Friday, the tracking group was up 0.9%, on average, registering a median gain of a larger 1.5%. Five of the seven measures were in the black, while the DJIA and NASDAQ remained negative for the year.
* The table below continues to break out and measure returns from the March highs. Although some of the tracking group's components recently have moved farther above those values, I'm not yet convinced that something approximating the March levels does not remain in play. We will find out when the market has a pullback sufficient to challenge them.
----------------------------------------------------
SELECTED STOCK-MARKET MEASURES
(GRA Seven-Measure "Tracking
Group," Listed by YTD Returns)
----------------------------------------------------
08/07 3/2005 12/31 Week From
2005 High 2004 Ended Mar.
Close Close* Close 08/07 High YTD
===== ===== ===== ===== ==== =====
NYSE Comp. 7453 7441 7250 -0.3% 0.2% 2.8%
Wilsh. 5000 12258 12074 11971 -0.8% 1.5% 2.4%
Russ. 2000 663 645 652 -0.9% 2.8% 1.7%
Value Line 411 403 405 -1.4% 2.0% 1.5%
S&P 500 1226 1225 1212 -0.6% 0.1% 1.2%
NASDAQ 100 1602 1545 1621 -0.2% 3.7% -1.2%
DJIA 10558 10941 10783 -0.8% -3.5% -2.1%
----------------------------------------------------
Average -0.7% 1.0% 0.9%
Median -0.8% 1.5% 1.5%
----------------------------------------------------
*2005 closing highs as of March, as of dates shown:
NYSE Composite (3/4), Wilshire 5000 (3/7), S&P 500
(3/7), Value Line (3/7), Russell 2000 (3/4), DJIA
(3/4), NASDAQ 100 (3/7).
----------------------------------------------------
* Despite last week's lower prices, the market enters this week in a short-term overbought condition. One of the more interesting divergence currently in play is the poor performance of the DJIA, versus other major proxies. In turn, this is clearly visible in the table below, breaking out key moving averages for the DJIA, the NASDAQ Composite, and the S&P500. The Dow has pulled to just above its 200-day moving. Rough parity as of last Friday for the NASDAQ and the S&P 500 was consistent with respective prices of 2091 and 1191, versus actual respective closes of 2178 and 1226.
----------------------------------------------------------
DJIA, NASDAQ COMPOSITE AND S&P 500 CLOSING PRICES ON
SELECTED DATES VERSUS RESPECTIVE 20-DAY, 50-DAY AND
200-DAY MOVING AVERAGES (Percent or Portion Thereof)
----------------------------------------------------------
DJIA Vs. NAZ Comp. Vs. S&P 500 Vs.
--------------- --------------- ---------------
Date 20D 50D 200D 20D 50D 200D 20D 50D 200D
----------------------------------------------------------
2005
08/05 -0.6 0.3 0.3 0.1 2.9 5.4 -0.4 1.0 2.9
07/29 0.8 1.2 1.3 1.6 3.9 6.1 0.8 2.0 3.9
07/22 1.6 1.5 1.5 3.0 4.5 6.2 1.7 2.5 4.1
07/15 1.8 1.8 1.7 3.1 4.5 5.4 1.7 2.6 3.9
07/08 0.1 0.2 -0.1 2.0 3.9 3.6 0.7 1.7 2.8
07/01 -1.6 -1.0 -1.5 -0.7 1.4 1.0 -0.7 0.6 1.4
06/24 -2.1 -0.8 -1.4 -1.2 1.8 1.0 -1.2 1.8 1.4
06/17 1.0 2.5 1.2 0.9 4.3 3.3 1.5 3.3 3.8
06/10 0.4 1.5 0.7 0.2 3.3 2.0 0.4 1.9 2.3
06/03 0.5 1.0 0.4 2.1 4.1 2.9 1.0 2.0 2.6
05/27 1.6 1.8 1.2 3.7 4.7 3.2 1.8 2.3 2.7
05/20 1.8 1.0 0.6 4.0 3.4 2.0 1.9 1.5 2.1
05/13 -0.7 -2.7 -2.5 1.6 -0.3 -1.1 -0.5 -1.8 -0.6
05/06 1.1 -1.3 -0.3 1.2 -1.3 -1.3 0.9 -0.8 1.2
04/29 -0.8 -3.1 -1.7 -1.7 -4.0 -3.4 -0.6 -2.2 0.2
04/22 -1.9 -4.0 -2.1 -2.0 -4.2 -3.0 -1.5 -2.9 -0.3
04/15 -3.5 -5.2 -2.8 -4.1 -6.1 -4.2 -2.8 -4.2 -1.0
04/08 -0.7 -1.9 0.8 -0.2 -2.1 0.4 -0.1 -1.2 2.4
04/01 -2.3 -2.4 0.2 -1.9 -2.9 -0.4 -1.5 -1.7 1.8
03/25 -2.7 -2.1 0.6 -2.4 -3.0 -0.1 -2.4 -1.9 1.7
03/18 -1.4 -0.4 2.5 -2.0 -2.5 0.8 -1.2 -0.4 3.5
03/11 -0.3 1.0 3.9 -1.0 -1.3 2.5 -0.6 0.5 4.4
03/04 1.6 2.6 5.7 0.3 -0.4 4.1 1.5 2.3 6.6
02/25 1.2 1.7 4.9 -0.0 -1.1 3.9 1.1 1.4 5.9
02/18 1.4 1.2 4.6 -0.1 -1.8 3.8 0.8 0.7 5.3
02/11 2.1 1.6 4.9 0.9 -1.2 4.9 1.6 1.1 5.8
02/04 1.8 1.1 4.2 1.2 -1.0 5.6 1.8 1.1 5.9
01/28 -1.1 -1.6 1.5 -1.7 -3.6 3.1 -0.8 -1.5 3.2
01/21 -2.3 -2.0 1.2 -3.6 -4.0 3.0 -2.0 -1.8 3.0
01/14 -1.3 -0.3 2.8 -1.8 -1,3 5.8 -1.0 -0.3 4.6
01/07 -1.1 0.5 3.3 -2.6 -0.9 5.9 -1.3 0.1 4.9
2004
12/31 0.9 2.9 5.1 1.1 4.0 10.4 0.9 3.0 7.3
----------------------------------------------------------
* Something else supporting the notion of an overbought market are some of the key sentiment measures. Ones relating to the VIX and put-call activity are shown in the following table. Of potential prospective interest here is how the VIX has been moving up recently. Friday's close of 12.48, versus the 7/20 multi-year low of 9.88 on 7/20, was an increase of a not inconsequential 26.3%.
-----------------------------------------------------
THE BEHAVIOR OF CBOE SENTIMENT-RELATED MEASURES
AND THE S&P 500 FROM 03/04/05 THROUGH 08/05/05
-----------------------------------------------------
CBOE Options S&P 500
Date --------------- -------------------
or Put/Call Ratios Vs. 10/29/04
Week CBOE -------------------- Prior 1130.2 =
Ended VIX* All Equ. Ind. Tot.@ Close Week 100.00
-----------------------------------------------------
2005
-----------------------------------------------------
08/05 12.48 1.15 0.55 2.77 0.90 1226.4 -0.6% 108.51
-----------------------------------------------------
08/03H 11.83 0.88 0.56 2.10 0.91 1245.0 -- 110.16
-----------------------------------------------------
07/29 11.57 0.99 0.66 1.65 0.91 1234.2 0.0% 109.20
07/22 10.52 0.80 0.56 1.97 0.91 1233.7 0.5% 109.16
07/15 10.33 0.75 0.54 1.19 0.89 1227.9 1.3% 108.64
07/08 11.45 0.82 0.42 1.58 0.88 1211.9 1.5% 107.23
07/01 11.40 1.00 0.55 2.10 0.88 1194.4 -0.2% 105.68
06/24 12.18 0.89 0.57 1.59 0.89 1191.6 -2.1% 105.43
06/17 11.48 1.02 0.53 1.93 0.91 1217.0 1.6% 107.68
06/10 11.96 0.71 0.47 1.55 0.90 1198.1 0.2% 106.01
06/03 12.15 0.99 0.61 1.90 0.90 1196.0 -0.2% 105.82
05/27 12.15 0.81 0.57 1.61 0.90 1198.8 0.8% 106.07
05/20 13.14 0.93 0.46 2.23 0.89 1189.3 3.1% 105.23
05/13 16.32 1.02 0.72 1.58 0.88 1154.1 -1.5% 102.12
05/06 14.05 1.07 0.80 1.67 0.88 1171.4 1.3% 103.65
04/29 15.31 1.01 0.74 1.65 0.88 1156.9 0.4% 102.36
04/22 15.38 0.98 0.67 1.90 0.88 1152.1 0.8% 101.94
-----------------------------------------------------
04/20L 16.92 0.98 0.63 1.87 0.88 1137.5 -- 100.65
-----------------------------------------------------
04/15 17.74 1.42 1.00 2.17 0.86 1142.6 -3.3% 101.10
04/08 12.62 0.93 0.55 1.82 0.86 1181.2 +0.7% 104.51
04/01 14.09 1.06 0.81 1.61 0.86 1172.9 +0.1% 103.78
03/25 13.42 0.78 0.50 2.04 0.88 1171.4 -1.5% 103.65
03/18 13.14 1.27 0.72 2.95 0.88 1189.7 -0.9% 105.26
03/11 12.80 0.99 0.62 1.97 0.88 1200.1 -1.8% 106.18
03/04 11.94 0.81 0.61 1.31 0.86 1222.1 0.9% 108.13
=====================================================
VIX Highs and Lows (Including Intraday)
---------------------------------------
Year High Date Low Date
---------------------------------------
2005 18.59 04/18 9.88 07/20
2004* 22.67 03/22 11.14 12/23
2003 41.16 03/12 14.83 12/15
2002 56.74 07/24 18.87 03/28
-----------------------------------------------------
*New series, all of 2004 forward. @All
products. L-Lowest S&P close during 2005.
H-Highest S&P lose during entire period.
-----------------------------------------------------
Interest Rates
* Treasury yields rose across the curve again last week, with yields at the longer end of the curve finishing on Friday at multi-month highs.
* A missive published on 6/6 stated:
"In addition [to the secular bear stock market], we may now have the makings of a new cyclical bear market -- in bonds, of all things, believe it or not! [There were important] lows (in yield) on Friday morning [5/27] on the 10-year and 30-year Treasury issues: 3.80% and 4.15%, respectively, versus respective late-Friday [5/27] levels of 3.98% and 4.28%.
Last Friday, the 10- and 30-year issues finished at respective yields of 4.39% and 4.58%, each up eleven basis points for the week, and up 59 and 43 basis points, respectively, from their 5/27 lows.
* Recent weeks have seen a lessening in speculation about the Fed's future course with regard to additional increases in the Federal Funds Rate. The FOMC meets tomorrow, and it is a virtual certainty it will hike the funds rate another quarter point, to 3.50% (versus a trough rate of 1%, prior to when the current series of hikes began in June of last year). Based on Friday's close in the federal funds futures market, futures are looking for at least an additional 50 basis points in increases after tomorrow's anticipated action. On Friday, the December future finished at 4.09%.
Miscellaneous
* In my view, the dollar continues to produce indications that an important top is either in or is being made. From the "Last Week" dated 7/3:
"The Dollar Index in the 90-92 area might be it for a while (90.13 close on Friday [7/1])." So far, this has been an accurate observation. The dollar continues to look like it's in some trouble.
Also from the 7/3 edition:
"...A major, somewhat protracted correction in crude simply is not materializing. Which gets back to a point I made recently, to wit: There appears to be something fundamentally going on in oil that the technicals simply are not picking up."
The 7/1 close in crude was $58.75, versus last Friday's close of $62.31.
* A weaker dollar would almost certainly benefit physical gold, perhaps materially. In the meantime, bullion acts quite well recently, as do the major stocks in the complex. Last week, the XAU finished at 94.87, not much below it recent high close of 95.93, which occurred only last Wednesday (8/3). On 5/16, the XAU closed at 78.73. Thus between 5/16 and 8/5, the XAU rose a very substantial 20.5%.
_____
|
