Wrap – Week Ended 11/20/09

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Got busy this weekend on the Monday post, wrap comments will be incorporated therein.


5 Responses to “Wrap – Week Ended 11/20/09”

  1. 1
    BirdsofpreyRcool Says:

    bill et al. — EXXI… Compliance Department says we must wait until Monday morning. Bad form on my part. We can post rumors, just not actual, material, non-public stuff (of course). So, apologies!

  2. 2
    RMD Says:

    Back in town catching up. Astonished about no, none,zippo comments after Z’s Thurs. post on AEZ. I’ll suppose no one cares…yet.

  3. 3
    BirdsofpreyRcool Says:

    Bedtime Market Strategist

    Fat Fingered
    The past week’s trading activity started with overnight gap-ups helping to push the S&P 500 to new 2009 highs and finished with overnight gap-downs essentially leaving the market flat for the week. The majority of the overnight moves occurred in reaction to movements of the Dollar. We have previously pointed out that when the dollar was very strong because of the flight to quality bid early in the year, it risked placing a severe constriction on the economy if it remained at those levels. Therefore, it was understandable that the Dollar had a heightened role in influencing equity prices. Now that the currency has returned to pre-Lehman levels, the Dollar’s role should be less influential as other factors such as earnings and economic recovery take hold. The inverse correlation between the Dollar and asset prices strengthened throughout the year. In recent months, the markets have been simply trading off the inverse relationship because it has been such a strong trend, with less emphasis on the why it has been strong and whether it will continue to be strong. Friday morning’s “fat finger” trade in the Dollar Index futures market at 7 am driving them up 10% and the S&P 500 futures’ reaction of dropping 50 basis points highlighted the extreme to which the trend following reached. There is not much value being added if people are just reacting to every basis point that the Dollar moves. Video games are more challenging. Nonetheless, it appears as though the dollar relationship with Oil and Gold is diffusing and that with equities is weakening. Oil settled each of the last two weeks in the same direction of the Dollar index. Although Gold continues to move in the opposite direction, but the metals upside momentum has picked up as the Dollar’s downside momentum has slowed. Over the past month, the Dollar index is flat and the S&P 500 is up just over 1%.

    Season’s Greetings
    Despite it being an expiration, the past week posted the slowest volumes of the year. Although investors usually want to see new highs registered on strong volume, light volume is not necessarily a bearish omen. The test of a move’s strength is not the volume at new highs and new lows. We can point out many tops and bottoms registered on very heavy volume. The true test is based upon how well the market handles corrective moves. Lately, most investors appear intent on locking in 2009 performance rather than taking a risk in the final 6 weeks of the year. Monitoring how the market handles these pullbacks is imperative.

    Those who have had a good year are in protective mode, those who are in catch up mode have been tentative about chasing and those who are doubtful about the rally’s sustainability want to save bullets and regroup in order to be aggressive in 2010. As we all know, 2008 and 2009 have been anything but typical years. Just as the seasonal September or October correction never materialized, there is no reason to assume that seasonality will play out through year end.

    Despite the atypical environment of the past two years, it is still good to be mindful of typical seasonal trends, primarily because so many players have moved to the sidelines for the year. During the 20 years prior to 2008, the S&P 500 rallied an average of 2.4% between now and the end of the year. For the 20 years, including 2008 and its 20% rally from November 20th to year end, the average gain is 3.2%. The median gain during that same time period is 2%. There were only 4 years, 2005 (-0.52%), 2002 (-3.76%), 2000 (-1.66%) and 1996 (-0.43%), where the S&P 500 lost ground between November 20th and year end. If you look at a 10 year average excluding 2008, the average performance is a less impressive 1.75% and the median is 1.63%. Finally, consistently over the separate 20 year and 10 year time frames, approximately 62% of the weeks were positive performances. Not surprisingly, most of the positive performance was back end loaded in the final couple of weeks for the year.

    With it being a holiday week so close to month end, a great deal of economic data is going to get packed into Tuesday and Wednesday.

  4. 4
    zman Says:

    2 – hear ya, it was slow

    3 – Thanks for that, felt slow, was slow, not a lot of damage done to the commodities or the indexes, awful on the names in our space but that should be fleeting.

  5. 5
    BirdsofpreyRcool Says:

    7:56AM Energy XXI to increase interests in core operated Gulf of Mexico Oil properties for cash considerations of $283 mln (EXXI) : Co announces it has executed a conditional purchase/sale agreement to acquire certain Gulf of Mexico shelf oil and natural gas interests from MitEnergy Upstream, a subsidiary of Mitsui & Co. (MITSY) for a headline cash consideration of $283 mln. The transaction involves mirror-image non-operated interests in the same group of properties Energy XXI purchased from Pogo Producing Company in June 2007. The properties include 30 fields currently producing 8,000 net barrels of oil equivalent per day, about 77% of which is oil and 80% of which is already operated by Energy XXI. Upon restoration of volumes pending repair of third party pipelines damaged by hurricanes in 2008, net production is expected to reach 10,000 BOE per day. Offshore leases included in the purchase total nearly 33,000 net acres. “The original Pogo property acquisition turned out to be an excellent transaction for Energy XXI, and the purchase announced today will double our interests in the same properties,” Energy XXI Chairman and CEO John Schiller said. “The synergies are obvious, as no incremental personnel, systems or other overhead will be required. Administrative and operating cash costs are expected to be reduced by about $1 per BOE overall. This transaction will boost our recent production run rate by 43% to about 27,000 BOE per day, with near-term upside anticipated.”

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