Energy Inventories Lower Than Expected

Earlier this morning the Department of Energy (DoE) released energy inventories for the latest week.  In the crude oil space, traders were expecting stockpiles to rise by 2 million barrels, but the actual increase came in at just 230K barrels.  Even though the build was lower than expected, crude oil inventories are still at all-time record highs.

While crude oil inventories actually increased this week, stockpiles of gasoline declined.  While traders were looking for a decline of 400K barrels, the actual decline was more than twice that at 910K barrels.  As a result of that decline, gasoline stockpiles are increasingly falling to levels that are in-line with the historical average.  

Overall, this week's moves in energy inventories reinforced the notion that the US is awash in crude, while gasoline stockpiles are running in-line with their historical average.

Bespoke Market Survey -- Participation Requested!

We believe we have the most knowledgeable readers on the street, and we want to know your views on the market.  Back in March we launched our first Bespoke Market Survey and we got some great insights from your responses.  

Now that May is upon us, it's time to run our monthly survey again to see how your views have changed over the last 30 days.  Please click on the link below to complete this month's survey.  After completing the survey, you'll be entered into a drawing for a free $50 Amazon.com gift card as long as you provide your email address.  Rest assured that your survey responses will remain anonymous, and your email address will not be used for anything other than the gift card drawing.

As always, thank you for your participation!

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Some Modest Relief at the Pump

While gasoline prices are nowhere near low, they have come in considerably from their highs earlier in the year and currently stand at about $3.53 per gallon.  In the wake of this decline, prices at the pump for this time of year are currently at their lowest levels since 2010.  That being said, there have only been three years in the last ten where prices were higher at this time of year.

Looking at a longer term chart of gas prices shows some positive trends for consumers.  Since the all-time peak of $4.11 in the Summer of 2008, gas prices have now made four lower highs.  With a pattern like that, any technician would tell you that until that string of lower highs is broken, the trend is lower.

Land of the Rising Stock Market

Forget about the Sun, Japan is now the land of the rising stock market.  This year alone, the Nikkei 225 is up 36.4%.  While the actual returns in dollar adjusted terms are quite a bit less (19%), Japan is still one of the top performing equity markets in the world this year.

The strong start to 2013 for equities in Japan is also far and away the greatest YTD performance through 5/7 for the Nikkei since at least 1970.  The chart below shows the ten strongest YTD gains through 5/7 for the Nikkei.  After this year's gain of 36.41%, the next strongest start to a year was 1987.  Back then, the Nikkei was up 26.6% through 5/7 and then proceeded to fall 10.9% over the rest of the year.  Based on the returns following the nine prior strongest starts to the year for the Nikkei, the index averaged a gain of 8.0% through year end with positive returns five out of nine times.

Positive Reaction to Earnings This Season

Through today, the average stock that has reported this season (roughly 1,700 companies) has averaged a one-day gain of 0.77% on its report day.  (For companies that report after the close, we use the next day's change.)  Below is a chart showing this average report-day performance for stocks during each earnings season over the last ten years.  The average one-day performance for all quarters going back ten years has been +0.12%, so this season's 0.77% gain has been very strong compared to the average.  Unless we see significant earnings weakness over the next two weeks, this season will make it four quarters in a row in which stocks averaged gains on their report days during earnings season.  The last time we went four earnings seasons in a row with positive returns was back in late 2005, but the gains have been much better during this four-quarter period than they were back then.  Stocks have had a remarkable run on earnings over the last twelve months.  At some point there's going to be a reversal.  The next earnings season starts in July.

Every day over at Bespoke Premium, we track all of the stocks that have reported that morning and the prior evening.  From our database, below is a list of the stocks that have had the most positive one-day reactions on their report days this season.  As shown, Global Geophysical (GGS) ranks first with a huge one-day gain of 74.77% on April 25th.  Neutral Tandem (IQNT) ranks second best with a gain of 52.01%, followed by YRC Worldwide (YRCW), Noranda Aluminum (NOR) and Build-A-Bear Workshop (BBW).  Only two S&P 500 companies have gained more than 15% on their report days this season: Netflix (NFLX) and Akamai (AKAM).

While most stocks have gained on their report days this season, there have definitely been some losers as well.  Two stocks have seen declines of more than 37% on their report days, and not only do they both start with a "V," they both start with a "Voc."  These two big losers are Vocera (VCRA) and Vocus (VOCS).  ZAGG has been the third worst with a one-day decline of 27.33%, followed closely by Acacia Research (ACTG).  Edwards Lifesciences (EW), Pitney Bowes (PBI), Safeway (SWY), Textron (TXT) and Allergan (AGN) are the S&P 500 names on the list of earnings season losers.

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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). We then grouped the stocks 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.

In our last look at the most volatile stocks, we noted that there were just five stocks in the S&P 1500 trading above $10 that had an average daily move of 5% or more, and only one of those stocks had an average range of more than 6%.  In our latest update below, the number of stocks with an average daily range of 5% or more has increased to eleven, but there are no stocks with an average daily range of more than 6%.  Netflix (NFLX) is by far the highest priced stock in the table.  Not only is it trading above $100, but its also above $200!

Looking at the list of stocks in uptrends, it is interesting to note that 4 of the 27 are homebuilders.  Stocks like M/I Homes (MHO), Ryland (RYL), KB Homes (KBH), and Meritage (MTH) have been strong stocks lately, but they have also been volatile too.

Other notable stocks in this month's list include First Solar (FSLR) and Best Buy (BBY), which are up 50% and 100%, respectively, so far this year.  FSLR reports after the close tonight, so it is likely to only get more volatile in the short term.  On the right side of the table, shares of 3D Systems (DDD) are up 30% since late April, but the stock still has a declining 50-day moving average.  If it has another week or two like the last two, though, expect to see the stock on the list of volatile stocks in uptrends next month.

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Huge Jump in Bullish Sentiment

Heading into last week, we saw the second lowest bullish reading in our weekly market poll since we began conducting it in early 2012 (38% bullish to 62% bearish).  This week we've seen a complete reversal, with bullish sentiment now outnumbering bearish sentiment by 10 points (55% to 45%).  This upside reversal in the bull/bear spread of 34 percentage points is the highest bullish reversal that we've seen to date.  Looks like investors are finally starting to buy into this market.  The only question now is whether or not it's too late.

S&P 500 Higher or Lower From Here?

The S&P 500 closed out the week on an extremely positive note by making a new all-time high and crossing above the 1,600 level for the first time ever.  So where do we go from here?  Please take part in our weekly market poll below by answering 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!  If you have yet to visit our newly improved research website, definitely do so over the weekend.  On Wednesday, we marked our 6-year anniversary, and we re-launched our Bespoke Premium website to coincide with the date.  Check it out here: Bespoke Premium

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DJIA 1,000-Point Thresholds

The DJIA crossed above 15,000 for the first time ever today, but it has since fallen back below that level in afternoon trading.  Whether or not the index will finish the day above that key threshold is unknown, but as of today it has been 2,115 days since the DJIA last crossed and closed above a thousand-point threshold for the first time.

In the table below, we list the first day that the DJIA closed above each thousand-point threshold from 1,000 to 14,000.  Given the law of large numbers, with each thousand point threshold crossed, the percentage gain needed to cross the next threshold declines.  For this reason, the amount of time that has elapsed between 14K and 15K is even more noteworthy.  To get from 2K to 3K, the DJIA rallied 50% in the span of 1,560 days.  To get from 14K to 15K, though, the DJIA only needed to rally a little over 7%, but it still hasn't been able to do so after more than 2,000 days!

In the above chart it is also interesting to note how minor the 1987 crash now looks more than 25 years later.  While the drops from 2000-2002 and 2007-2009 still look daunting in the chart, we can only hope that 25 years from now the DJIA has risen enough that those declines look like nothing more than a small blip! 

Another Week in the Books

Another week of earnings season is in the books, and even though the number of companies that have reported this season nearly doubled from 855 up to 1,655, the percentage of companies that have beaten earnings estimates this season remained the same at 59%.  As shown below, a 59% beat rate is a respectable reading compared to other earnings seasons over the past few years, but it's nothing to get exicted about.

Top-line revenue numbers did get better this week, however.  As shown in the second chart below, 52% of companies have beaten revenue estimates this season.  While this is a low reading compared to the average of 60% since the bull market began in 2009, it's a lot better than the 43% reading that was in place early on this season.  We'll see if the revenue beat rate can continue to inch higher as earnings season enters its final phase over the next couple of weeks.

ISM Services Weaker Than Expected

While today's better than expected employment report helped to boost positive sentiment in the market, the weaker than expected ISM Services report released 90 minutes later did little to dampen sentiment.  While economists were looking for the ISM Services report to come in at a level of 54.0, the actual reading came in weaker at 53.1.  This was the lowest reading since last July.  Combining both the ISM Manufacturing and Services indices based on their weighting in the overall economy, the ISM for April came in at 52.8 versus last month's reading of 54.0.

The table below breaks out the current readings of the ISM Services' ten subcomponents and compares their readings to last month and one year ago.  As shown in the table, while all the components are currently above 50, only three increased compared to last month and last year.

S&P 500 Sector Trading Range Charts

The S&P 500's big breakout higher today has pushed the index up to more than two standard deviations above its 50-day moving average.  So while we may be establishing a new leg higher here, we're not likely to get too much more extended in the very near term.  (The red zone in the chart below represents between one and two standard deviations above the S&P 500's 50-DMA.)

Heading into today, seven of the ten major S&P 500 sectors were in overbought territory, but after this morning's move, all ten are overbought.  Technology is seeing a nice breakout above its 2013 range, but it still has a ways to go to get above its September 2012 high.  Industrials and Financials are breaking out, though, while Energy and Materials are getting close.  The fact that the cyclicals have bounced back siginficantly this week is a good sign for the bulls.

Introducing Bespoke's New Research Site

Six years ago today, Bespoke Investment Group was launched by co-founders Paul Hickey and Justin Walters.  To coincide with our six-year anniversary, we present to you our new and improved research website: Bespoke Premium.  We urge you to take a look at the new website when you have a chance.  The new site provides a detailed description of our three new membership levels (Bespoke Newsletter, Bespoke Premium and Bespoke Institutional) as well as our Wealth Management services.  Be sure to check out our new Client Testimonials page and read about the company and its co-founders as well.

You can subscribe to any of our research services directly on the website at our Subscribe page.  Also, for the month of May, we're offering a 10% discount on all membership levels!  Simply enter in "bespoke6" in the coupon code section of the Subscribe page to receive the discount.  We can't thank you enough for your support over the last six years, and we hope to continue offering you quality service over the next six years and beyond!

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AAII Bullish Sentiment Rises Back Above 30%

Individual investors turned a little more bullish this week as bullish sentiment rose back above 30% for the first time in a month.  According to the American Association of Individual Investors (AAII), bullish sentiment for the latest week rose from 28.29% up to 30.99%.  Even after this rise, however, it is still hard to believe that with the S&P 500 at or near all-time highs, that less than one-third of individual investors are bullish.

Jobless Claims Drop to a Five Year Low

While most of the economic data we have been seeing lately has been weaker than expected, one bright spot over the last few months has been initial jobless claims.  This week proved to be no exception as jobless claims came in considerably lower than expected (324K vs 342K).  It was also the lowest weekly reading in claims going all the way back to January 2008! Click here to continue reading.