Tuesday
Apr012014

S&P 500 Back At All Time Highs

The S&P 500 closed at 1885.52 this afternoon, eclipsing its prior all time highs.  A wobbly March kept investors on their toes, but the worst sell offs of the month came from outside the S&P 500, hitting extended biotech, internet and growth-oriented names.  The closing high once again confirms that the bull market dating to March 2009 is not over, and it also puts large cap stocks back on an upward path for the year after a difficult first quarter.  The S&P is up 37 points, or two percent, since the close on New Years Eve, and the most recent gains will serve as ammunition from equity bulls as the second quarter unfolds.  Below is a chart of the S&P 500 over the last six months.  With the index now above the top end of the sideways range it had been in for the last month, is a breakout coming?

Tuesday
Apr012014

Roller Coaster Quarter

While the major averages were little changed in Q1, for some stocks there were swings of monumental proportions.  In the Russell 1000 alone, there were 22 stocks in the index that fell more than 10% in the month of March but managed to post gains for the first quarter!  This is the Russell 1000 we're talking about, which is made up of large cap stocks.  If you look into smaller and mid cap stock universes, there would be loads more examples. 

The table below lists the 22 names in the Russell 1000 that fit the criteria mentioned above.  Looking at the list there are numerous high profile names worth highlighting.  Holders of FireEye (FEYE) had a rough month as the stock traded down 28% in March.  Before you shed much in the way of tears, though, keep in mind that the stock was still up over 40% for the quarter!

Perhaps no one has had quite the first quarter that Elon Musk has had.  Shares of Tesla (TSLA), where he is the founder, chairman, and CEO, traded down 15% in March, while shares of SolarCity, where he is chairman, also traded down 26%.  Both of those declines are painful, but even after the declines, TSLA rallied 39% in the quarter while SCTY gained 10%.  Not a bad quarter after all!

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Tuesday
Apr012014

ISM Manufacturing Rises For Second Straight Month

Today's ISM Manufacturing report for the month of March rose for the second straight month, although it was slightly lower than expected.  While economists were expecting a reading of 54.0, the actual level was 53.7.  The chart below shows the historical readings of the ISM Manufacturing report going back to 2000.  As shown, the index has now regained nearly half of the decline it saw from November 2013 to January when it dropped from 57.0 down to 51.3.

The table below shows the breakdown of each of the ISM Manufacturing Index's 10 main components.  As shown, Customer Inventories is the only component that is currently below 50, and is one of only four components that declined relative to February.  On the positive side, five components saw increases this month led by Production which increased from 48.2 up to 55.9.  That was the largest monthly increase for that component since June 2009!  Compared to a year ago, this month's report was a little more encouraging with seven out of ten components showing improvement.

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Tuesday
Apr012014

Sales of Ford Trucks Continue to Thaw

Sales of pickup trucks are often a sign of strength or weakness in the small business and construction sectors as these types of businesses are the most common users of these vehicles.  Given the slowdown in overall economic data this winter, it was expected to see truck sales also show signs of slowing.  For example, in January sales of Ford F-Series trucks declined almost 1% compared to levels in 2013.  In February, though, we saw a slight improvement in the weather and with that a thaw in sales.  The first two months of 2013 saw total sales of F-Series trucks rise 1% compared to the first two months of 2013.

This morning's release of March sales continued to show the positive correlation between the mercury and sales of Ford F-Series trucks.  During the month, sales totaled 70.9K, which was the highest March sales total since 2007.  That brings the total sales for 2014 up to 173.4K, which represents an increase of 2.7% compared to the first quarter of 2013, and is the best Q1 sales total since 2006.  

With sales of F-Series trucks now at an eight-year high, it may seem like things are as good as it gets.  However, a closer look at the chart shows that even though YTD sales are at an eight year high, they are still lower than the first quarter sales total for every year from 1996 through 2006.

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Tuesday
Apr012014

2014 vs. Other Years During the Bull Market

Coming off a year that saw the S&P 500 gain nearly 30%, the market took a breather in the first quarter of 2014.  Actually, it was the weakest first quarter we've seen during the current bull market.  

Below is a chart showing the S&P 500's performance in Q1 of each year going back to 2010.  The bull market began on March 9th, 2009, so 2009 is not included.

2014 was tracking very similarly to 2010 until the end of February when the two years began to diverge.  In 2010, the S&P continued sharply higher in March, while this year the index traded sideways.

For more perspective, below is a chart showing the S&P 500's performance during each full year of the current bull market, with the first quarter of 2014 included as well.

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Tuesday
Apr012014

March Recap Linkwrap

And with that, the first quarter of 2014 is over.  This past month was a forgettable one for large cap equity market investors, despite the 5th anniversary of the bull market falling in the first week of trading.  The S&P 500 finished just better than flat and with strong breadth, but needed a good finish on the last day of the month to do it.  

Early in the month, Consumer Discretionary had a good run.  Meanwhile, the Dow Jones Industrial Index finished up in similar territory, although it did it during a period of outperformance versus the Dow Transports.  Small caps didn't have such a fun ride.  The Russell 2,000 drastically underperformed its larger cap peers.  Biotechs got shellacked, internet stocks and some tech stocks were thrown to the wolves despite a strong start to the month, and 3-D printing stocks firmly established that they were no longer deserving of the monicker "bubbly".  All in all the growth trade became a widowmaker as the best performers from last year kneecapped the market.  IPOs, on the other hand, didn't lose all of their luster (other than Candy Crush maker KING); we're curious about the prospects of IPOs given the full pipeline of flotations coming up.  

Within large cap stocks, we noticed both a rotation within the US and away from it.  Oh and by the way, during all of this bonds were actually the place to be, despite nervousness in parts of the fixed income markets after some language from Fed Chair Janet Yellen made the markets jumpy about a hawkish Fed (even though economic projections from the committee weren't necessarily supportive of that conclusion).  Despite all the worry earlier in the year about the impact of tapering on emerging markets, EM has been killing it lately, pretty much regardless of which day of the week you got long (even though the BRICs have underperformed for years now and Russia had a rough start to the month).  Bulls are hoping the rest of the spring lives up to its historical trend.  If you're looking for ways to play a rotation within or out of US equities, Bespoke's ETF cheat sheets could be a helpful resource for trade ideas.  Checking out our numerous reports on economic indicators will keep you up to date on macro conditions, while one of our takes on sentiment and market positioning will help you time your entry.  If you like our Think B.I.G. blog, you'll love our actionable advice, tips and analysis in your inbox.  Check out Bespoke Premium today with a five day free trial!

Monday
Mar312014

It's the First of the Month

April Fool's Day is tomorrow -- just a reminder to think twice before getting suckered into something!  Maybe the bulls shouldn't get suckered into buying in the morning.  The first trading day of the month has been rough on investors lately.  As shown in the table below, the last four months have started out with a down day for the S&P 500.  And all three that have occurred this year have been especially painful, with declines of -0.89% (January 2nd), -2.28% (February 3rd) and -0.74% (March 3rd).

Prior to the last four months, the S&P had a six-month winning streak of gains on the first trading day.  That was in 2013, though, which is well into the rearview mirror at this point.

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Monday
Mar312014

Q1 Snapshot of the Dow 30

The Dow Jones Industrial Average finished the first quarter down about 120 points from where it ended 2013, which represents a minimal decline of 0.7%.  As of the close today, 18 of the 30 Dow stocks are in the red for the year, while 12 are in the black.

Below is a look at the year-to-date performance numbers for the Dow 30, and we also provide where each member is currently trading within its normal range (overbought, oversold or neutral).  A detailed description of how to read the screen is provided at the bottom of this post, but basically, the dot is where the stock is currently trading, while the tail is where it was trading one week ago.  Moves into the red zone mean the stock is "overbought," or extended above its normal range, while moves into the green zone mean the stock is "oversold," or extended below its normal range. 

Merck (MRK) was the top Dow stock in Q1 with a gain of 13.43%.  Microsoft (MSFT) ranked second at +9.57%, followed closely by Caterpillar (CAT) at +9.43%.  On the downside, Boeing (BA) fell the most at -8.06%, with General Electric (GE) and Goldman Sachs (GS) not far behind at -7.6%.  Nike (NKE) was the fourth worst Dow performer in Q1 at -6.41%.

While the majority of Dow stocks are in the red for the year, they have actually been doing well lately.  You can see the upside momentum in the screen because most of the dots are green and to the right of their tails, meaning they are up versus where they were a week ago.  17 of the 30 Dow stocks are currently "overbought," or more than one standard deviation above their 50-days, while just 1 of 30 is oversold (Visa).  Stocks like Cisco (CSCO), Intel (INTC), Chevron (CVX), McDonald's (MCD), 3M (MMM), Procter & Gamble (PG), Microsoft (MSFT), United Tech (UTX) and Exxon Mobil (XOM) all had strong finishes to Q1.

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Monday
Mar312014

Gasoline Rising But Less Than Normal

Prices at the pump have been on a steady incline so far in 2014.  Since the recent low in November, the average national price for a gallon of gas has risen 12% to $3.56.  In just the first quarter alone, gasoline prices have risen on 60 out of 90 days.  If you are a consumer, it never feels good to pay more and more each time you pull up to the station.  All else being equal, the more money that goes to filling the tank, the less money you have for other items.

While rising gas prices are never welcome, it is important to put the increase that we have seen so far this year into perspective.  Yes, prices are up, but they always rise at this time of year.  Going back to 2005, the average price of a gallon of gas has risen in the first quarter every year for an average gain of 15.4%.  That is more than twice the gain that we have seen so far this year.  In fact, since 2005 there has not been a single other year where gas prices rose less in Q1 than they did this year.

The chart below compares the daily change in the average price of a gallon of gas so far this year to the 'typical' annual pattern going back to 2005.  Here you can clearly see how this year's gain in gas prices have trailed the normal pattern, even as we approach the time of year where gas prices level off for the year.  If the current trend continues, prices for the summer driving season may be relatively tame.

March has been a month of rotation out of what had been working into what had not been working.  As we head into April, the big question is whether this shift is a short-term mean reversion trade or the start of a longer-term trend.  To find out which way Bespoke thinks this market is headed, be sure to check out our 30-page Bespoke Report newsletter published Friday after the close.  Read by the largest institutions on down to beginner investors, our newsletter stands as one of the most widely read pieces on "the street" each week.  Get it now with a 5-day free trial to either our Bespoke NewsletterBespoke Premium or Bespoke Institutional services.

Monday
Mar312014

Bulls Step Up

Bullish sentiment in our weekly Bespoke Market Poll increased 5 percentage points over the weekend up to 54% from a level of 49% last week.  It looks as if investors have so far been unfazed by the recent downturn in areas like the Internet and Biotech stocks and instead are choosing to focus on the way the broad market has held up.

March has been a month of rotation out of what had been working into what had not been working.  As we head into April, the big question is whether this shift is a short-term mean reversion trade or the start of a longer-term trend.  To find out which way Bespoke thinks this market is headed, be sure to check out our 30-page Bespoke Report newsletter published Friday after the close.  Read by the largest institutions on down to beginner investors, our newsletter stands as one of the most widely read pieces on "the street" each week.  Get it now with a 5-day free trial to either our Bespoke NewsletterBespoke Premium or Bespoke Institutional services.

Sunday
Mar302014

Sector Rotation in March

Below is a good look at sector rotation in the month of March.  As shown, the S&P 500 as a whole had 68% of its stocks above their 50-day moving averages at the end of February, and 67% are above their 50-days with one day left in March -- basically unchanged.  On a sector basis, however, there has been a real shift over the last month.  

As shown, Health Care, Consumer Discretionary and Technology were big leaders coming into March, and they all had more than 70% of their stocks abover their 50-days.  These three sectors have been weak lately, though, and now they have the worst breadth readings in the market.  Health Care is a real standout due to Biotech's recent fall.  At the end of February, 83% of Health Care stocks were above their 50-days, ranking it second behind Utilities for the strongest breadth reading.  Now just 46% of Health Care stocks are above their 50-days, which is the worst reading of any sector.  

Aside from Utilities, whose reading is unchanged at 90% month-over-month, the other five sectors with breadth levels currently stronger than the overall market all had below-market readings at the end of February.  Consumer Staples, Energy and Financials have all seen big bounces is the percentage of stocks above their 50-days this month.

March has been a month of rotation out of what had been working into what had not been working.  As we head into April, the big question is whether this shift is a short-term mean reversion trade or the start of a longer-term trend.  To find out which way Bespoke thinks this market is headed, be sure to check out our 30-page Bespoke Report newsletter published Friday after the close.  Read by the largest institutions on down to beginner investors, our newsletter stands as one of the most widely read pieces on "the street" each week.  Get it now with a 5-day free trial to either our Bespoke NewsletterBespoke Premium or Bespoke Institutional services.

Saturday
Mar292014

ETF Performance Matrix: Post Fed, Rotation Out Of US

Following the Federal Open Markets Committee (FOMC) meeting last week, US rates sold off in the front end and the Treasury curve flattened, while US equity markets have been mired in a sideways trend.  The below matrix perfectly illustrates the nature of the change in fortunes for global equity markets since the Fed meeting: US equities slightly down, foreign markets up, and US rates markets rallying in the long end.

The worst performing US equity family this past week has been the Russell 2000.  Small caps have been roughed up consistently over the last week and a half, while Nasdaq 100 stocks have also had a rough go.  US large caps have been surprisingly resilient led by Energy and Utilities stocks, while the worst performers have been the Consumer Discretionary and Financials sectors.

In global markets, every major country ETF we track outperformed the US this past week, led higher by Brazil, China and India as EM markets have come roaring back.  Commodities have also outperformed, with the exception of precious metals.

This picture gives a pretty strong endorsement to the view that the FOMC meeting last week has put an end to trends we have seen in place since the start of the year.  The question is, are we seeing a repricing or the beginning of a new downward trend in US equities?

To find out which way Bespoke thinks this market is headed, be sure to check out our 30-page Bespoke Report newsletter published Friday after the close.  Read by the largest institutions on down to beginner investors, our newsletter stands as one of the most widely read pieces on "the street" each week.  Get it now with a 5-day free trial to either our Bespoke Newsletter, Bespoke Premium or Bespoke Institutional services.

Friday
Mar282014

S&P 500 Higher or Lower from Here?

The broad market traded down a bit this week, but areas like Biotech and the Internet group got crushed.  Which way will we 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 research from Bespoke?  Check out this week's Bespoke Report newsletter, due out later this evening.  To get access to this week's newsletter, sign up couldn't be easier.  We offer a free 5-day trial to let you see what Bespoke is all about.  And as a special offer this weekend, you can sign up for the Bespoke Newsletter or Premium services for 10% off.  Just use the coupon code 'bespokereport' at our Subscribe page to receive the discount.

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
Mar282014

Bonds Trounce Stocks in Q1

While there is still one more trading day left to go, perhaps the biggest surprise of the first quarter is the performance of stocks relative to bonds.  Heading into 2014, the stock market was often referred to as the TINA market, as in There Is No Alternative.  A look at the numbers, though, suggests otherwise.  

The charts below compare the performance (on a total return basis) of both the S&P 500 and the BofA/Merrill Lynch 10+ Year Treasury Index over the last year and so far this quarter.  Over the last year, stocks are still trouncing treasuries by a wide margin (+20.33% vs. -3.31%).  This quarter has been a different story, though.  Following a strong start out of the gate, Treasuries haven't looked back.  Heading into the weekend, long-term treasuries are up 7.81% on a total return basis compared to a total return of just 0.53% for the S&P 500.

Thursday
Mar272014

Rotation In To Emerging Markets

Emerging markets have had a rough go in 2014, with the broad emerging markets ETF (EEM) down 3.3% and the BRIC ETF (EEB) suffering an 8.3% decline thanks to a brutal year in Russian equities.  Meanwhile, Brazil has outperformed the rest of EM on the year (down a scant 27 basis points) and is within sight of an outperformance versus the S&P 500, which is down 9 bps on the year as of trading today.  

It's also worth pointing out that while biotechs and internet stocks were flying high earlier this year, EM weakness was commonly blamed for difficulties in US equity markets.  Now, the shoe appears to be on the other foot, as outperformers in the US get brought back to earth and the emerging world gets a much needed reprieve from the grinding sell offs of the fall and winter.

Below are charts for EEM, EEB and the Brazil ETF EWZ.  All three have burst through a downtrend that had served as resistance since the rally in EM ended last October.  Brazil was the canary in the coal mine, and as we noted in a tweet last week, the 5 straight up days for the Ibovespa Index were a bullish sign.  EWZ broke its downtrend in the middle of last week, and now EEM and EEB are confirming the move upwards after a tentative move above resistance yesterday.