Tuesday
Sep232014

Best Quarter For the Dollar in Four Years

Most people are probably well aware that the dollar has been strong lately, but many may be surprised by the extent of the rally.  With a gain of over 6%, the US Dollar Index is on pace for its best quarter in more than four years.  To find even a time when the US Dollar Index was up 5% in a calendar quarter you have to go back to Q3 of 2011.

Based on the fact that you have to go back three years just to find a quarterly move that was even close to this quarter's gain, you can imagine that this quarter's move in the dollar is likely to have implications across all different asset classes, including equities.  Since different sectors and stocks within those sectors have different levels of exposure to international markets, not all parts of the equity market will be equally impacted.

Earlier today, we sent out an extensive report to Bespoke Premium and Institutional clients detailing the performance of different sectors following other quarters where the US Dollar Index rallied more than 5%.  If you are a client and want to see this important report, please click on the link below.  If you are not already a client, but want access to the report, sign up today for our no obligation free trial today!

Strong Quarter For the US Dollar

Tuesday
Sep232014

New iPhone 6/6+ Three Month Sales Estimates from Pulse

From our monthly Consumer Pulse Report survey due out this Thursday, we were able to collect key Apple iPhone sales expectations data over the next three months.  We have just sent out a two-page report on our iPhone findings over to current Pulse members.  You can view the report now by signing up for a 5-day free trial to our new Pulse subscription service.  With the service, you get our monthly Bespoke Consumer Pulse Report along with ad hoc Pulse Points throughout the month similar to the Apple report we have just sent out.  

Act now and get 30% off the subscription cost for the life of your membership!  The service is in its early stages, and we're offering this discount to an initial batch of "charter members."  All you have to do is enter "pulsecharter" in the coupon code section of the Pulse Subscribe page to receive the discount.  

Monday
Sep222014

Russell 2000 Bearish Crossovers

For the second week in row, small cap stocks started off the week on a poor note and fell by more than 1%.  In the process of today’s decline, the Russell 2000’s 50-day moving average (DMA) crossed down below its 200-DMA.  This ‘death cross’ as it has been called, has been getting a lot of talk for its supposed future bearish implications.

So what can we expect from small cap stocks going forward?  We just sent out a report to Bespoke Premium and Bespoke Institutional clients summarizing how the index has historically performed during each of the prior negative crosses for the Russell 2000 during the current bull market as well as after each occurrence since the Russell 2000's inception in 1971. Clients wishing to view the report can click on the link below, but if you are not currently a client and wish to subscribe, sign up today for our no obligation free-trial and get instant access.

Russell 2000 Bearish Moving Average Crossovers

Monday
Sep222014

Looking For Action? S&P 1500 Most Volatile Stocks

For traders with a short-term time horizon who are looking for big moves over a short period, we have updated our list of the S&P 1500 stocks trading above $10 that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last 50 days).  The stocks are grouped based on whether they have a rising or falling 50-day moving average (DMA).  Stocks highlighted in gray are new to the list this month.  As shown, this month's list is evenly divided between stocks with rising and falling 50-DMAs.

Similar to the recent uptick in the VIX that we have seen over the last few days, we are also noticing a modest uptick in volatility among individual stocks.  That being said, both the VIX and our list of most volatile stocks are still indicating subdued levels of price swings relative to the last several years.  For example, there are just three stocks in the entire S&P 1500 (priced above $10 per share) that have an average daily range of more than 5%.

The most volatile stock on the list is Scientific Games (SGMS), which has an average intraday range of 6.3% and also tops the list of stocks with rising 50-DMAs.  After SGMS, GT Advanced (GTAT) tops the list of stocks with declining 50-DMAs with an average daily range of 5.3%.  Unfortunately for holders of the stock, GTAT has tended to open near its highs of the day and close near the lows as the stock has dropped from $20 down to just under $11 in a matter of two months.  Rounding out the list of stocks with average daily ranges of 5% or more, shares of Taser (TASR) barely made the cut with an average intraday range of 5.0%.  That stock has seen a benefit since the Summer following the riots in Ferguson, MO and calls for more police officers to be equipped with cameras similar to the solutions provided by TASR.

Monday
Sep222014

Dropping Like Flies

While the S&P 500 is trading at or right near all-time highs, other areas of the market are not even treading water when it comes to year to date returns.  The chart below compares the year to date changes of four different equity market indices based on market cap.  The indices range from the Russell Micro Cap Index which measures the performance of stocks with the smallest market caps, all the way up to the S&P 500 which tracks the largest stocks in United States.

Up until early March, all four indices were trading in lockstep with each other and comfortably in the green for the year.  Since then, though, we have seen indices fall out of favor one by one from the smallest market cap up the line.  It started with the micro caps in the Spring.  While they led all other indices at their peak in early March, they were down more than any other index in early May.  In July, it was the Russell 2000's turn to fall out of favor.  While the S&P 500 and S&P 400 comfortably took out their Spring highs, the Russell 2000 failed to make a new closing high.  Now, in the most recent rally, it has been the mid caps' turn.  While the S&P 500 once again handily took out its highs from July, like the Russell 2000 did in July, the S&P 400 failed to take out its highs from the prior rally.  The question now is with its smaller peers dropping like flies, will the S&P 500 manage to hang in there or succumb to the pressure of its peers?

Monday
Sep222014

Still Bearish

Bullish sentiment was strong for four weeks in a row entering September, but it has been depressed over the last three weeks.  As shown below, the majority of participants in our weekly Bespoke Market Poll are bearish (53%), while bullish sentiment is at 47%.  This is the lowest reading for bullish sentiment since the August 4th reading.

Friday
Sep192014

Bespoke Wealth Management

Interested in learning more about Bespoke's Wealth Management services?  Many Bespoke readers know about our research services but are unaware that we also offer individually managed account services.  

Click here for a brief summary of our services, and if you'd like to receive a more detailed packet with information on historical performance, investment strategies, account minimums, fees, etc., please fill out a contact form and be sure to include your mailing address.  We can also be reached at 914-315-1248 if you would like to discuss these things over the phone.

Friday
Sep192014

S&P 500 Higher or Lower from Here?

The S&P 500 ended the day down slightly, but we hit another new all-time high once again this week.  So which way will the market head from here?  Please take part in our weekly Bespoke Market Poll by letting us know whether you think the S&P 500 will be higher or lower one month from now.  We'll report back with the results on Monday before the open.  Thanks for participating and have a great weekend!

Will the S&P 500 be higher or lower than its current level one month from now?
Higher
Lower
  
Free polls from Pollhost.com

Friday
Sep192014

Smallcaps Continue to Struggle

It's no secret that smallcaps have had a rough year.  As we get closer to the autumnal equinox next Monday, the Russell 2,000 is still down close to 2% on the year, while the S&P 500 is up nearly 9%.  That's not what most bull market growth investors are accustomed to.

The trouble for smallcaps this year has allowed the S&P 500 to play catch-up big time in terms of bull market performance.  Below is a chart showing the performance of both the Russell 2,000 and the S&P 500 since the bull market began on March 9th, 2009.  As shown, the Russell 2,000 is up 233%, while the S&P 500 is up 198%.  The second chart below shows the performance spread between the two indexes.  Earlier this year, the bull market performance spread between the two was nearly 75 percentage points (with the Russell 2,000 on top).  As of today, though, the performance spread has been cut in half from its high down to just 35 percentage points.  Pretty much all of the outperformance that the Russell 2,000 experienced during the great run higher in 2013 has now been wiped out.  

Below is a look at the annual performance of the Russell 2,000 versus the S&P 500 since 1979 when the Russell was created.  In yellow we have highlighted years similar to 2014 (so far) in which the Russell 2,000 was down and the S&P 500 was up.  The four years highlighted are 1984, 1987, 1998 and 2007.  In the year following three of these four years, both the Russell 2,000 and the S&P 500 were up double digit percentage points.  The lone year where both indices didn't see double-digit gains was following 2007 -- in 2008, the Russell fell 34.8% and the S&P 500 fell 38.5%.

Friday
Sep192014

Alibaba (BABA) -- $224 Billion

Two weeks ago we did a post highlighting a list of the largest companies in the S&P 500.  While Alibaba (BABA) is not an S&P 500 company, it would currently rank as the 13th largest company in the index if it were included.  At $224 billion, BABA is $17 billion bigger than the 13th largest S&P 500 stock -- Verizon (VZ), and $5 billion smaller than the 12th largest S&P 500 stock -- Procter & Gamble (PG).  

Below is a list of the $100+ billion companies in the S&P 500.  As you can see, BABA is bigger than the likes of Facebook (FB), IBM, Coca-Cola (KO), Intel (INTC), Disney (DIS), Pepsi (PEP), and of course, Amazon.com (AMZN) -- the US version of Alibaba.

Thursday
Sep182014

Housing Starts and Building Permits Disappoint

Although homebuilder sentiment may have hit a post-recession high in Wednesday's report, Housing Starts and Building Permits were big disappointments this week.  In the case of Housing Starts, economists were expecting a seasonally adjusted annualized rate (SAAR) of 1.037 million, but the actual level came in at just 956K.  For Building Permits, the miss was not quite as large, but it was still a miss nonetheless (998K versus 1.04 million).

The table below breaks out this month's report by region and type of dwelling.  On a regional basis, Starts and Permits were down across the board.  In the case of Starts, the biggest miss came in the western region (-24.7%), while the three other regions were all down by similar amounts on a month over month basis.  For Building Permits, the South was the standout region with a decline of just 0.6% on a month over month basis, while the other three regions were down by just less than or more than 10%.  

The one silver lining to this month's weak Housing Starts and Building Permits reports was the fact that practically all of the decline came in multi-family units.  In the case of Housing Starts, multi-family units fell 31.7%, while multi-family Building Permits fell 12.7%.  For both reports, single family units saw much smaller declines. We have also included charts below of Housing Starts and Building Permits both on an overall basis and broken out by single family and multi-family units.  As you can clearly see in the charts, multi-family units have a tendency to be a lot more volatile than single family units, so that what is missed in one month's report may be picked up in the next month.

Thursday
Sep182014

Philly Fed Slightly Weaker Than Expected

After hitting a four-year high in August, the September reading for the Philly Fed Manufacturing survey declined from 28.00 down to 22.5, which was slightly below the consensus forecast of 23.0.  In spite of the decline, manufacturing in the region remains steadily positive, confirming the strength we saw earlier in the week from the Empire Manufacturing report.

The table to the right breaks down September's Philly Fed report by each of its sub categories.  While the headline reading of this month's report showed a decline, breadth in the report was positive as six out of the nine components saw increases.  Areas seeing the biggest improvement were Number of Employees, Unfilled Orders, and Shipments, while Average Workweek and Inventories saw the largest declines.  It's interesting to see that while employers are adding more workers, the employees are working less.  It's only one datapoint, but it might be a by-product of the Affordable Care Act's requirements that all employees working more than 30 hours per week be covered with health insurance.  One way around that requirement is for companies to hire more part-time workers, which is what appears to be happening in this month's report.

Thursday
Sep182014

AAII Bullish Sentiment Remains Above Average

Individual investors are increasingly becoming "comfortably bullish" as bullish sentiment remained above its bull market average for the sixth consecutive week.  According to the weekly survey of sentiment from the American Association of Individual Investors (AAII), bullish sentiment rose from 40.38% up to 42.24%.  While bullish sentiment is above average, we would note that there has still only been one week this year where bullish sentiment exceeded 50%, so in spite of the increased optimism, investors don't appear to have become "comfortably numb" to the risks that the market can actually go down. 

Thursday
Sep182014

Dow 30 Trading Range Screen; Apple Cometh?

Last night we provided our trading range screen for the 30 largest country ETFs traded on US exchanges.  Below we have run the 30 Dow stocks through our trading range screen so you can see how these big blue-chip names have been trading.  Heading into today, 12 Dow stocks are overbought, while 2 are oversold.  Du Pont (DD) is by far the most overbought name in the index after a big move higher yesterday on break-up talk.  Goldman Sachs (GS) and Johnson & Johnson (JNJ) are the next most overbought names.  Two stocks that remain overbought but have moved lower over the last week are Microsoft (MSFT) and Nike (NKE).  Both of these names were in extreme territory last week at this time, and they have seen some mean reversion since.  Chevron (CVX) and Exxon Mobil (XOM) are the two oversold names, but both of these Energy stocks have actually performed well this week.  Another good day and they will move back into neutral territory.

It has now been over three months since Apple (AAPL) split its shares 7 for 1, making the stock $100 per share instead of $700 per share.  Talk of Apple getting added to the Dow heated up on news of the split.  Since the Dow is a price weighted index, Apple shares could never have been included in the Dow as a $700 stock because its weighting would simply be too high.  At $100/share, though, the stock could easily get added to the Dow.

So if Apple does get added to the Dow, obviously one of the thirty current members would have to come out.  Below is a look at the market caps for each Dow member, and we also provide each stock's market cap as a percentage of Apple's market cap.  As a $600 billion company, Apple is 20x larger than the smallest Dow stock -- Travelers (TRV).  The next closest are Du Point (DD), Caterpillar (CAT) and Nike (NKE).  Both Travelers and Nike were recently added to the Dow, so it's unlikely either of these would be removed.  Caterpillar (CAT) is a Dow staple, so it's hard to see that one coming out, either.  Du Pont (DD) may be the most likely choice, especially with talks of the company being broken up yesterday.  If that happens, it could be just a matter of time before Apple (AAPL) replaces DD in the Dow 30.  

Thursday
Sep182014

Jobless Claims Back Near Lows of the Last Decade

After a relatively disappointing weekly jobless claims reading last week, claims improved dramatically this week, falling to their second lowest level in over a decade.  While economists were forecasting claims to come in at a level of 305K, the actual reading was 280K, representing a decline of 36K from last week's level of 316K.  This week's decline was the largest one week decline since November 2012, and it was the biggest downside surprise in just over a year.  Not only was this week's report positive, but its timing couldn't have been better as it also coincided with the reference week for the monthly Non-Farm Payrolls report.

Last week we noted the fact that the four-week moving average for jobless claims would be dropping two sub 300K readings this week and next, so unless we saw a big improvement, the four-week average would rise.  Well, 280K qualifies as a big improvement, and with that the four-week moving average fell by just under 5K to 299.5K.  This is only the fifth time since the recession ended in 2009 that the four-week moving average has been below 300K.

On a non-seasonally adjusted basis (NSA), jobless claims rose by 6.4K to 241.1K.  For the current week of the year, this is the lowest reading since at least 2000 and nearly 73K below the historical average of 314K for the current week of the year.