US Now the Most Overbought

Below is a look at our trading range screen for the 30 largest country ETFs traded on US exchanges.  For each ETF, the black vertical "N" line represents its 50-day moving average (50-DMA).  The dot represents where it is currently trading, while the tail end represents where it was trading one week ago.  Moves into the red shading are considered "overbought" (read more at the bottom of the screen), while moves into the green zone are considered "oversold".  We also provide how each country has performed on a year-to-date basis, as well as where it currently stands relative to its 50-DMA.

The majority of countries have seen their stock markets trade in neutral territory over the last couple of weeks with relatively low volatility (short tails).  Last week at this time, five countries were oversold, while three were overbought.  As of today, six countries are oversold (all just barely), while there's only one that is overbought.

The one country that is overbought right now is the US (SPY).  As you can see in the screen, it's currently more extended versus its 50-day moving average than any other country ETF highlighted.  Japan (EWJ) was more overbought last week, but it has pulled back significantly over the last five trading days and is now just a hair above its 50-day.  

In terms of year-to-date performance, India (PIN) is up the most at +27.19%, followed by the Phillipines (EPHE) at +20.89% and Thailand (THD) at +19.34%.  The US has been one of the better performing countries on the list at +10% YTD.  On the downside, Russia (RSX) is off the most at -26.6%, while France (EWQ) and Germany (EWG) are both down 10%+ as well.


S&P 500 Ex-Dividend Dates Through Year End

We've just published our November Dividend Screen over at Bespoke Premium, which provides a list of every stock in the Russell 3,000 going ex-dividend through year end.  Our Dividend Screen also highlights which companies are expected to decrease or increase their dividend payouts over the next three years, and by how much.  Sign up for a 5-day free trial to Bespoke Premium to see the report.

As a taste of our full Dividend Screen, below is a basic list of the highest yielding S&P 500 companies going ex-dividend through year end.  Stocks like General Motors (GM), Chevron (CVX), McDonald's (MCD) and Coca-Cola (KO) all go ex between now and the end of December.  (Remember, to receive the dividend, you have to own the stock at the close on the day before the ex-dividend date.)


46 Days and Counting

The national average price of a gallon of gas continued its decline over the weekend, dropping to a level of $2.927.  What makes the recent decline even more stunning is the fact that there has not been a single day since September where the national average price of gasoline increased.  At 46 days and counting, the current streak without a gain is the second longest in the last ten years.  The longest streak without an up day was from 9/16/08 through 12/12/08, so there is a ways to go before the current streak gets anywhere near that level.

The chart below shows the national average price of a gallon of gas according to AAA since 2004.  The red lines in the chart show each time there was a streak of 30 days or more without a gain.  As can clearly be seen in the chart, even though the current streak without an up day is the second longest of the last ten years, gas prices tend to be very 'streaky'.  Since 2004, there have now been eleven streaks of 30 or more days where the average price of gasoline didn't rise, and the current streak is the second this year.


Bulls Pull Back a Bit

Bullish sentiment in our weekend Bespoke Market Poll fell 10 percentage points, dropping from a 2014 high of 68% last week down to 58%.  As shown in the charts below, the prior week's bull/bear readings were at relative extremes based on our poll data going back to the start of 2012.  It's not surprising to see sentiment levels pull in a bit after a so-so week for the market.  


S&P 500 Higher or Lower from Here?

The S&P 500 finished only modestly higher this week, and there was relatively little volatility even with the mid-terms election on Tuesday.  With the market breaking out to new all-time highs, which way will things head from here?  Please take part in our Bespoke Market Poll below 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!

Looking for more in-depth market analysis from Bespoke?  Sign up for a 5-day free trial and access our just published Bespoke Report newsletter.  You won't be disappointed.

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Utilities, Consumer Staples Both Overbought

Below is our trading range chart of the S&P 500 over the last year.  The white line represents its 50-day moving average, and the light blue shading represents the index's "normal" trading range (one standard deviation above and below the 50-day).  Moves into the red zone are considered overbought, while moves into the green zone are considered oversold.

As shown, the S&P broke out to a new all-time high this week, and bulls are hoping the prior highs will now act as support going forward.

Two sectors that have gone parabolic this week are Utilities and Consumer Staples -- both defensives.  It's rare to see these two sectors spike like they have over the last couple of weeks.  They're now extremely extended to the upside, and we would expect them to see some mean reversion in the near term.

Looking for more chart analysis from Bespoke?  Sign up for a 5-day free trial to our Bespoke Premium service.  There's enough chart analysis to fill your weekend...and the next one.


Friday's Nonfarm Payrolls Report

The S&P 500 has been up on 18 of the last 22 "jobs" Fridays.  Yesterday we published our monthly look at the NonFarm Payrolls report that is due out tomorrow morning at 8:30 AM ET.  Our B.I.G. Tips report on tomorrow's jobs number includes an in-depth analysis of where we think the number will come in at, and which stocks and sectors benefit the most under various scenarios.  To view the report, sign up for a 5-day free trial to Bespoke Premium today!


US Expands Its Market Dominance

Below is a look at the percentage of the total world stock market cap that each of the largest countries makes up around the world.  From Bloomberg's calculations, the US stock market currently makes up 37.21% of the total world stock market.  This is up 1.31 percentage points year to date, and it leaves it more than 30 percentage points larger than the next closest country -- Japan -- at 7.05%.  As shown, China now has the third largest market at 6.51% of world market cap, putting it ahead of Hong Kong, the UK, Canada, France and Germany.  China's share of world market cap is up 1.10 percentage points this year, while the UK, France and Germany have all lost significant share.  

Like China, India is another country that has gained quite a bit of share this year, increasing from 1.84% of world market cap at the start of the year to 2.48% as of today.  Russia, on the other hand, has lost a third of its share, dropping from 1.23% of world market cap down to 0.81%.

Below is a chart showing the percentage of world market cap that the US stock market makes up.  The S&P 500 is also included so you can see how it has changed during recent bull and bear markets.  As shown, the US' share has recently broken out to a new bull market high, but it's still well below the levels seen during the early and mid-2000s.  


Lots of Bull

With the S&P 500 hitting new all-time highs again this week, the bulls are back out in force.  According to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment rose to 52.69% this week, up from last week's reading of 49.4%.  This is the highest reading of bullish sentiment we have seen all year. It is also the 6th highest reading of bullish sentiment in the current bull market and only the 17th time it has exceeded 50% since March 2009.

While bullish sentiment is at a lofty level, the decline in bearish sentiment was even more extreme.  In the latest week, bearish sentiment dropped from 21.07% down to 15.05%.  This is the lowest level of bearish sentiment in the entire bull market, and just the 10th time bearish sentiment dropped below 20%.


Jobless Claims Continue to Decline

After two straight weeks of slightly higher than expected readings, Initial Jobless Claims came in lower than expected for the latest week.  While economists were forecasting a level of 285K, the actual reading came in at 278K.  With another week where claims came in below 300K, October 2014 represents the first time since February 2006 that claims were below 300K for the entire month.

With this week's decline, the four-week moving average also declined by a little more than 2K, falling from 281.25K down to 279K.  This represents the fifth straight week where this indicator made a new post-recession low.  It is now also close to taking out its lows of 266.25K in April 2000.  If that level goes, you'll have to go all the way back to the early 1970s to find a lower reading.

On a non-seasonally adjusted basis (NSA), jobless claims fell by about 5K to 266.2K.  This is also a notable low for this indicator as well.  For the current week of the year it is the lowest reading since 1999, and nearly 100K below the average of 365.8K for the current week going back to 2000.


Utilities Valuation Ticks Above Market Levels

The S&P 500 Utilities sector is up another 2% today, as it continues to act more like the 90s Internet group than the no-growth defensive that it is.  The recent run higher for the Utilities sector has pushed it to new all-time highs.  With the run higher, the sector's valuation has also spiked.  As of this afternoon, the sector's trailing 12-month P/E ratio stood at 17.86.  While not startingly high, 17.86 is notable because it's 0.01 points higher than the P/E ratio for the S&P 500 as a whole.

Below is a chart showing the ratio between the S&P 500's P/E ratio and the P/E ratio for the Utilities sector going back to 1990.  When the ratio is above one (1), the P/E for Utilities is higher than the P/E for the S&P 500.  As shown, a ratio above one has been relatively rare over the last 24 years, but it's not without precedent and has been increasingly frequent.  The spread was actually above one for much of the last bull market from 2005 to early 2008, and it has been above one many times during the current bull market going back to late 2011.

While you wouldn't expect to see Utilities stocks more highly valued than the market as a whole, during this bull market, investors have routinely been willing to "pay up" for the sector to capture dividends in a low-rate environment.  Since 1990, the sector's average P/E ratio has been 14.57, so at some point we expect the sector to revert back to its mean.  To get back to its mean, the sector needs to start growing earnings faster than its price is increasing, or its price needs to fall back down to earth.  The latter is the more likely scenario in our opinion.


ISM Services Weaker Than Expected

While Monday's read on the Manufacturing sector in October was better than expected, activity in the Non Manufacturing sector came in a little bit softer.  With economists expecting a reading of 58.0 in the ISM Non Manufacturing PMI report, the actual reading came in at 57.1.  As shown in the top chart below, though, even after the miss, the actual level of the PMI report is still right near expansion highs.  On a total basis, accounting for each sector's weight in the overall economy, the combined ISM reading (lower chart) came in at 57.3 compared to last month's reading of 58.4. 

The table below breaks down this month's ISM Non Manufacturing report by each of the index's ten subcomponents.  On a month over month basis, it was a sea of red in October as only two components (Employment and Import Orders) showed an increase.  The increase in the employment component was especially noteworthy as that saw its highest reading since August 2005 (see chart below), and should bode well for Friday's non farm payrolls report.  With respect to Import Orders, the strength in the US dollar is boosting demand from outside US borders.  Compared to a year ago, the internals of the ISM Non Manufacturing report looked much better with seven out of ten components showing year/year increases.


The Closer: End of Day Commentary From Bespoke

Each night Bespoke puts out The Closer, our take on the day's events and a highlight of what we're watching for the coming days.  Packed with data, digestible commentary, and market insights, The Closer is all you need to get a handle on the day that was and form opinions for the next trading session.  Below is today's edition of The Closer, including commentary on recent equity performance, thematic trends, a review of what the Cantor upset means for markets, and a highlight of tomorrow's economic data.  Please click the thumbnail to view the full report.

The Closer

Subscribe to Bespoke Premium now to receive The Closer in your inbox every evening!  The first five days of every subscription are free, so if you you don't like The Closer or any other piece of Bespoke's research, you can cancel at no charge.


Bespoke's October "Financial Condition" Reading

Last week we published our October Consumer Pulse Report for Pulse subscribers.  Bottom line -- this month's report is must-see for investors looking for a full picture of the US economy ahead of the big jobs report this Friday.  This month's report found key trend shifts in labor markets, housing, consumer sentiment and consumer spending activity.

If you're unfamiliar with our new Pulse service, each month we survey between 1,500 and 2,000 US consumers, which represents a statistically significant sampling of the US population.  The survey these consumers take consists of 75 questions related to their personal finances, spending habits, and economic and investor sentiment levels.  From our monthly survey, we're able to get a real-time look at the state of the US economy, and we break it into six key sections -- Economic Sentiment, Consumer Activity, Labor Markets, Housing, Investor Sentiment and Personal Finances.  In this month's report, a few of these sections of the economy were flashing very positive, but a few others were flashing very negative.  You'll have to sign up for the Pulse service to find out which are which.  

One of the questions we ask consumers in our monthly survey is to compare their current financial condition with the financial condition of the average person.  A famous 1983 study of American students once found that 93% of them put themselves in the top 50% (better than median) with regards to driving ability.  Mathematically, this is impossible, but it emphasizes that perception is often more important than math.  In a more positive application of the same effect, 40.3% of Americans rate their financial condition as better than average, while only 22.3% believe that they are in worse condition than the average.  Given widely-quoted statistics about income and wealth distributions skewing steeply towards higher income and more wealthy Americans, we take this as a positive sign that Americans as a whole are relatively optimistic about their financial conditions.

And this data has only gotten more positive since we began running our survey in July.  In the second chart below, we provide a tracker for this question.  As you can see, sentiment towards financial condition has picked up in each of the past two surveys, and in October it reached the highest level we have seen.  

Our "Financial Condition" question provides a unique look into the mind of the US consumer.  There are numerous questions like this throughout the Pulse survey that give subscribers a great look at the current and projected state of the economy.

Why not sign up for a 5-day free trial today to view the full October Consumer Pulse Report?  It's free for the first five days, and you can cancel at any time.  And since this is a relatively new subscription offering (launched in August), we're providing you with a 30% discount to the service for the life of your membership!  Simply enter "pulsecharter" in the coupon code section of the Pulse subscribe page to recieve the 30% discount.  

Head on over to the Pulse website to learn more about the Pulse report.  There's even a sample of a past report at the site so you can get an idea of just how impressive it is.  

Ready to give it a try and see our October Pulse Report for free?  Sign up now now!  If you're unhappy after viewing the report, simply give us a call and cancel at any time.  For the first five days, the service is on us.


October Asset Class Performance

We're a couple of days late publishing our October asset class performance matrix, but nonetheless, it's provided below for those interested.

US equity related ETFs saw steep declines to start the month of October, but across-the-board 8-10% gains from October 15th through month end pushed most of them into the green for the entire month.  As shown on the left hand side of the matrix, smallcaps did the best in October with gains of nearly 7%.  After months of underperforming, smallcaps finally made a comeback.

In terms of sectors, Utilities, Health Care and Industrials did the best in October, while Energy and Materials both saw declines. 

Internationally, most countries still finished in the red for the month, even though they saw nice bounce backs after the October 15th low.  It's notable that through October, France, Germany and the UK are all down 9-14% year-to-date.  India, on the other hand, is up nearly 30% YTD.

Commodities really struggled in October, and while they fell from 10/15 through month end, Treasury-related ETFs still posted gains for the entire month.