Tuesday
Nov252014

Confidence Gap Narrows

Today's release of Consumer Confidence missed estimates by a pretty big margin.  While economists were looking for a level of 96.0, which would have represented a modest increase from October's reading of 94.1, the actual reading came in at 88.7.  This was the lowest reading since June and the biggest miss relative to expectations since March 2013.  As shown in the first chart below, this month's increase also brings the headline reading back below its historical average of 93.3 going back to 1967.  Since the recession ended in June 2009, there have only been two months where we have seen above average readings in confidence.

With each month's release of Consumer Confidence, we also like to look to see where confidence stands based on different income levels.  As many readers are aware, one of the unique aspects of this recovery has been the fact that the rebound in confidence, which has already been tepid, has also been extremely uneven.  The chart below shows Consumer Confidence for US Consumers with incomes of between $35K and $50K and compares it to confidence among consumers with incomes of more than $50K.  While higher income consumers normally have a higher level of confidence than lower income ones, the gap between the two has grown uncharacteristically wide during this recovery, and has even hit record highs in recent months.

In this month's report, however, we saw a partial reversal of that trend.  Like the overall Consumer Confidence index, confidence among higher income consumers dropped from 118.3 down to 112.3.  For lower income consumers, however, we actually saw a modest increase in confidence as that index rose from 84.7 up to 85.9.  To be sure, the current gap of 26.4 is still elevated by historical standards, but considering the fact that the gap was wider than 42 percentage points just two months ago is an encouraging sign.  However, it needs to be followed by continued improvement if we are going to be able to see a meaningful decline in the six month average (chart below).  At a level of 30.30, that reading is still extremely elevated and down less than one percentage point from last month's record high reading.

Tuesday
Nov252014

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.

Even as the overall market has seen a monster rebound off the lows in October, there are still more stocks on our list that have falling 50-day moving averages versus stocks that have rising 50-day moving averages.  In fact, stocks with declining moving averages (38) outnumber stocks with rising moving averages (12) by a margin of more than 3-1.  Shares of Approach Resources (AREX) are the most volatile stock on the list with an average intraday range of over 9% during the last 50-trading days.  The highest priced stock on this month's list is Salix Pharmaceuticals (SLXP), which is currently trading just over $100 per share, and has an average intraday range of 4.5%.

In terms of sector breakdown, this month it is practically all Energy all the time.  Of the 50 stocks on the list, 29 of the 50 are from the Energy sector (2 have rising moving averages and 27 have falling moving averages).  Then, of the remaining 21 names, six are from the Industrial sector, five are in the Materials sector, five are in Health Care with the remaining five names spread out between Materials (3), Consumer Discretionary (1), and Financials (1).


Tuesday
Nov252014

Q3 GDP Revised Up

The second reading of Q3 GDP was released by the Bureau of Economic Analysis this morning and it was a notably stronger than expected reading.  Wall Street economists were looking for a revision downward from 3.5% quarter-over-quarter seasonally-adjusted annual rate (SAAR) growth in the initial reading from one month ago to 3.3% QoQ SAAR.  The report ended up much stronger than that, with a 3.9% QoQ SAAR reading.  The total figures suggest that economic momentum remained strong in Q3, with the economy growing at its fastest two-quarter pace since Q3 and Q4 of 2004, coming in at 2.1% (4.2% annualized) for the six months ending in September.  Year-over-year growth remained tepid at 2.4%, in the middle of the range that it's occupied since Q1 2010, but annualized growth has been 3.5% or more for four of the last five quarters.  GDP is always measured on an extremely lagged basis, so we can't be too optimistic about these numbers as other more forward-looking indicators deteriorate slightly, but the consistency of the growth does increase the probability that the US economy has finally "shifted gears" up to 3% baseline growth.

Looking at the internals of the report, there were broad upward revisions to key areas that were slightly weak last quarter, including consumption, fixed investment, and inventories.  We previously said that inventories were due for an upward revision after a very weak initial reading, while we expected net trade - especially imports - to be revised upwards, negatively impacting total growth.  The rest of the revisions, which we did not expect, were positive: higher consumption and higher investment.  As a consequence, domestic final private demand, which strips out trade, government, and inventory changes, jumped half a percent, coming in at a healthy 2.48%, while final demand registered a 4.02% increase.  The table below shows seasonally adjusted, annualized contributions to total growth by category.  We show Q2, the first reading of Q3, and the second estimate for Q3, as well as changes since the first estimate. For example, consumpton contributed 1.51 percentage points of the total 3.9% growth in Q3, versus 1.22 percentage points of the 3.5% from the first estimate.  In other words, consumption added an incremental 0.29 percentage points to total growth in this reading versus the first estimate.

Monday
Nov242014

Nasdaq New Highs

Much has been made recently about the Nasdaq Composite's run towards a new all-time high.  As shown in the first chart below, the Naz is currently just 6% below its closing high of 5,048.62 reached on March 10th, 2000.  To reach a new all-time closing high, the index needs to gain another 293 points from here.

If you look at the chart on a monthly basis, however, you'll see that the index is set to make a new all-time high at the end of this month for the first time since February 2000.  At the moment, the index is 58 points above that February 2000 monthly high.  March 2000 was a wild month for the Nasdaq.  By March 10th, the index was up 7.5% on the month, but it fell 9.4% from the 11th through the 31st to close the month down 2.63% -- thus the February 2000 all-time monthly closing high.  

Monday
Nov242014

Homebuilders Set for a Nice Year-End Run?

The S&P 1500 Homebuilder group has struggled since early 2013.  After a huge 240% gain from October 2011 to May 2013, the group has been stuck in a downtrend.  But that downtrend has been broken over the last couple of trading days, as shown in the chart below.  Let's see if the group can put together a nice finish to the year and maybe test its 2013 highs. 

Can they do it?  Over at Bespoke Market Intelligence, we have a boatload of stats on the housing sector.  Using our monthly Pulse consumer survey, we provide subscribers with detailed reads on expected home purchases, refis, mortgage delinquincies, and even home improvement plans.  After reading our Housing section in our monthly Consumer Pulse report, you'll have all the information you need to make a smart bet on the homebuilders heading into 2015.  Sign up for a 5-day free trial to Pulse today to check out our November Pulse report due out Friday.  Use "pulsecharter" in the coupon code section of the Subscribe page to receive a 30% Think B.I.G. reader discount for the life of your membership!

Monday
Nov242014

Top Performing Russell 3,000 Stocks Year-to-Date

2014 is quickly coming to an end, so below is a look at the 50 best performing Russell 3,000 stocks year-to-date.  As shown, the top seven stocks in the index are from the Health Care sector.  RadNet (RDNT) ranks first with a YTD gain of 388.62%.  Receptos (RCPT) ranks second at +345.74%, followed by Avanir Pharma (AVNR) in third at +331.55%.  The top performing non-Health Care stock this year has been VASCO Data Security (VDSI) with a gain of 256.09%.  Other non-Health Care stocks in the top 20 include TriQuint Semi (TQNT), RF Micro (RFMD), Pacific Ethanol (PEIX) and Century Aluminum (CENX).

If you're a believer in the theory that money managers like to get winners on the books towards year end, these are the names they'll be looking at.

It's worth noting that there haven't been nearly as many big winners in 2014 as there were in 2013.  Obviously the market's overall gain of nearly 30% last year makes a big difference, but to put it into perspective, last year on this date, there were 217 stocks in the Russell 3,000 up more than 100%.  This year there are only 37 up more than 100%.  Last year there were 45 stocks up more than 200% at this point, and this year there are only 9.

Since so many Health Care/Biotech names rank in the top 50, below is a list of the top performing non-Health Care stocks in the Russell 3,000 year-to-date:

Monday
Nov242014

Bullish Sentiment Ticks Higher

After pulling back over the last two weeks, bullish sentiment in our weekly Bespoke Market Poll ticked up 6 percentage points to 61%:

Friday
Nov212014

S&P 500 Higher or Lower from Here?

The S&P 500 finished the week higher on Friday, but which way will it 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!

Be sure to sign up for a 5-day free trial to Bespoke Premium to view our just-published Bespoke Report newsletter.  This week's report provides key stats and analysis on the market heading into next week's Thanksgiving holiday shortened trading week.  

If you missed our post earlier today on natural gas by swctweather.com, you'll definitely want to check it out over the weekend as well.  

Finally, over at Bespoke Market Intelligence, today we put together a list of the key trends that our new Pulse service has identified ahead of the market this Fall.  You can sign up for a free trial to Pulse as well to get the November Pulse report in your inbox next Thursday.

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
Nov212014

Is The Short Term Top in on Natural Gas?

swctweather.com covers weather forecasts and patterns for Connecticut and New York and is run by Jacob Meisel, a sophomore at Harvard College.  Jacob has close to 8 years of experience already forecasting weather both for the CT/NY region and for the nation.  As far as forecasting sites for the region are concerned, swctweather.com gives the best detail and explanation behind its forecasts, allowing the reader to see not only the what of the forecast, but the why as well.  So, if the forecast is calling for snow, Jacob will discuss all the variables involved in the forecast, and detail what factors need to break in order for the given forecast to pan out.  His new premium service provides daily, detailed forecasts for residents of the CT/NY area relying on in-depth weather analysis, and his school closing percentages during winter storms have put him on the map for anyone in the region that has kids!

Jacob also discusses patterns impacting the entire country.  A case in point was a discussion he was having today regarding the weather patterns driving the current snap of cold weather for much of the country.  Signs are pointing to a shift that could cause temperatures in the early part of December to be closer to, or even above, average.  If this occurs it would be nearly the exact opposite of what most forecasters are calling for.

If swctweather's forecast proves to be accurate (something we would bet on), it will have bearish implications for the natural gas market, which has been rallying this week on an expected continuation of the cold weather returning next week.  In our conversations with him, we mentioned that our readers would likely be very interested in seeing the why behind his thoughts and asked if he would be willing to write a guest post for our site.  Jacob agreed, but since the post is so detailed, we turned it into a pdf instead.  So if you want to see why Jacob is calling for this shift to higher temperatures, click on the link below.  Also, definitely check out his site and follow him on twitter (@swctweather)!  

Evidence of an Early December Weather Pattern Digression Lessening Heat and Natural Gas Demand

Thursday
Nov202014

Philly Fed Hits a 21 Year High

To say that today's release of the Philly Fed Manufacturing report for the month of November was stronger than expected would be a gross understatement.  The report absolutely crushed expectations.  While economists were forecasting a level of 18.50, the actual level of the current conditions index spiked to 40.8.  To put this level in perspective, it was the highest monthly reading since December 1993, and was just the eighth highest monthly reading since 1980.  In terms of this month's 20.1 point increase, that was the largest monthly increase since June 2009.  And finally, relative to expectations, it was the biggest beat since at least 1998.  Although this indicator tends to be volatile, it was quite simply one of the strongest economic data points we have seen in quite some time.

The table to the right breaks down this month's Philly Fed report by each of its different components.  As shown, while the headline reading blew the doors off, the internals were not quite as strong.  While Shipments, New Orders, and Number of Employees saw big increases, we also saw declines in a number of components.  Based on Prices Paid and Prices Received, inflation doesn't seem to be much of a problem as these two saw larger declines than any other components.  The price data makes sense given weak PPI internals in yesterday's report.  To sum up, the internals of this month's Philly Fed are a microcosm of the quandry currently facing the Fed.  The labor market is tightening (big increases in Number of Employees and Average Workweek), but inflation is low, meaning the justification for rate hikes is still pretty weak based on macroeconomic data.

Thursday
Nov202014

Wave of Misses for Flash PMIs

Overnight Flash PMIs were released for major economies with Manufacturing Flash PMIs released in Japan, China, France, Germany, the Eurozone as a whole and the United States.  Services Flash PMIs were also released for France, Germany and the Eurozone.  As shown in the bar chart below, there was only one sequential improvement (French Services) and only one beat (French Services again).  Every other major global Flash PMI reading missed and deteriorated versus October.  While most Manufacturing readings are still expanding, things are getting dicey in the Eurozone, and there's no improvement visible; the same is true of Services.  The United States, meanwhile, is the anchor of global growth.

While the US Manufacturing figure missed and declined notably, American manufacturers are still by far the best house in a gloomy neighborhood with regards to global economic activity as measured by the PMI readings.  Below we show the trend in US Manufacturing PMI, and while the trend in accelerating (higher sequentially) PMI readings has been broken, the current reading of 54.7 is still half a point above the three year average (54.2) and well above three year lows (51, set on 10/31/12).  In other words, the PMI data confirms that for the time being, the US economy is shrugging off the weight of a worsening global growth picture for major economies.

Thursday
Nov202014

Bullish Sentiment Back Below 50%

In yet another example of how investors just can't stand to be bullish for any extended period of time, today's reading of bullish sentiment by the American Association of Individual Investors (AAII) dropped by 8.8 percentage points from 57.93% down to 49.12%.  This week's decline in bullish sentiment was the largest since June 19th and the third largest weekly drop this year.  Keep in mind, however, that last week's level was the highest in more than four years and the second highest weekly reading of the entire bull market.

Along with the drop in bullish sentiment we also saw a moderate increase in bearish sentiment, which rose from 19.31% up to 23.82%.  This week's increase was the second straight week where bearish sentiment increased by more than four percentage points.  The last time we saw back to back weekly increases of four percent in bearish sentiment was in June 2013.

Thursday
Nov202014

Jobless Claims Slightly Higher Than Expected

For the second week in a row this week, jobless claims came in higher than expected.  While economists were expecting a level of 284K, the actual reading came in at 291K, down 2K from last week.  With this week's weaker than expected report, jobless claims have now been higher than expected in four of the last five weeks.  That being said, claims are still below 300K, a level they haven't eclipsed to the upside in 10 weeks now.  The last time we saw a streak of sub 300K reading that last 10 or more weeks was in 2000.

The four-week moving average for jobless claims currently stands at 287.5K, which is an increase of 1.75K from last week's level.  After five straight weeks where the four-week moving average made new post-recession lows, the four-week moving average has now increased for two weeks in a row.

On a non-seasonally adjusted basis (NSA), initial jobless claims fell by 24K to 285.3.  For the current week of the year, this is the lowest reading since 2005, and 86K below the historical average for the current week dating back to 2000.

Wednesday
Nov192014

Mixed Housing Data

After a big jump in sentiment based on Tuesday's NAHB Home Builder Sentiment report, today's data on Housing Starts and Building Permits was mixed. For Housing Starts, economists were expecting a seasonally adjusted annualized rate of 1.025 million, but the actual level came in slightly weaker at 1.009 million, which was down from last month's reading of 1.038 million.  While Housing Starts were weaker than expected, though, Building Permits exceeded forecasts rising to a SAAR level of 1.08 million compared to forecasts of 1.04 million.  

The table below breaks down this month's Housing Starts and Building Permits reports by type of unit and by region.  Even though October's Housing Starts report was weaker than expected, all of the weakness was driven by multi-family units, which declined by 15.4% m/m.  At the same time single-family units rose by 4.2% to 696K.  As shown in the chart below, this was the second highest reading for single-family units of the recovery, behind only November 2013's level 710K.  Because single-family units are considered to be more economically significant than multi-family units, this increase was a silver lining to what was otherwise a modestly disappointing report.  On a regional basis, Housing Starts declined in October in every region except the South, where they rose by 10%.

As mentioned, October's Building Permits report was a little more positive, coming in at a SAAR total of 1.080 million, which is the highest since June 2008.  In this case, we saw increases in permits for both single and multi-family units which rose 1.4% and 10.0% respectively on a month over month basis.  On a regional basis, we saw declines in the Northeast (-21.5 m/m) and Midwest (-11.4% m/m), while Permits for October in the South (+8.8% m/m) and West (+21.6% m/m) saw increases. 

Wednesday
Nov192014

#EBE

What's been doing well in this market?  Everything but Energy.  The #EBE tagline is highlighted below.  In the chart, we show the percentage of stocks in each sector that are trading above their 50-day moving averages.  As shown, seven sectors and the S&P 500 have readings above the 80% level, with Consumer Staples and Utilities both above 90%.  Materials and Consumer Discretionary are both above 75%, and then you have Energy way down at 37.2%.  Hey, it's better than the 0% reading Energy had for a few weeks in early October!

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