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

Will the S&P 500 be higher or lower than its current level one month from now?
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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!

Click on the image below to visit the new Bespoke Premium website:

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.

Russell 2000 Back Below 50-DMA

The Russell 2000 is having an especially bad day today with a decline of just under 2%.  This puts the index on pace for its worst day since April 15th's 3.78% decline.  Today's decline has put the Russell 2000 back below its 50-day moving average as well.  More importantly, though, while the S&P 500 closed at an all-time high yesterday, the Russell 2000 made its second lower high since March 15th.  Not a good sign for smallcaps and the broad economy.

Oil and Gasoline Inventories Go Their Separate Ways

What are we going to do with all of this oil?  In the latest inventory report from the Department of Energy (DoE), crude oil stockpiles rose much more than expected.  While traders were expecting an increase of 1.1 million barrels, actual inventories surged by 6.7 million barrels.  This was the largest weekly increase since last September, and now puts crude oil inventories not only at record highs for this time of year, but all-time highs for any time of year!

While crude oil inventories keep rising, gasoline stockpiles have been on the decline.  In this weeks DoE report, traders were expecting a decline of 900K barrels, but the actual decline was more than twice that at 1.82 million barrels.  Unlike oil inventories which are at record highs, gasoline inventories are just barely above their historical average for this time of year.

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Gold Rally Stopped Dead In its Tracks

The chart below shows the intraday trading of the front month future in gold over the last three weeks.  On Friday April 12th, the price of gold declined 4% and closed in official bear market territory.  The following Monday, the bottom fell out of gold's price as it declined another 9.4%, taking the commodity to its most oversold levels ever.  

Since that meltdown on 4/15, gold has been quietly rebounding and through yesterday's close was up nearly 12%.  However, over the last couple of days gold has been running into resistance at levels that corresponded to the opening price on 4/15.  Today, the resistance seems to have prevailed as gold is trading down 2% for its largest one-day decline since 4/15.

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ISM Manufacturing Comes in Marginally Better Than Expected

After yesterday's Chicago PMI came in below 50 for the first time since September 2009, some investors breathed a sigh of relief today as the ISM Manufacturing report for April came in above 50 and slightly better than expected (50.7 vs. 50.5).  Interestingly, after yesterday's weaker than expected Chicago PMI report, the market rallied to new all-time highs, while today's better than expected ISM has been met with initial selling.

The table below shows each of the ISM Manufacturing report's ten subcomponents.  Even though today's headline number declined from last month, the ten subcomponents were evenly split between monthly growth and declines.  Backlog orders saw this month's largest increase, while Prices Paid and Employment saw the largest declines.

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Key ETF Performance in April and Year to Date

The first four months of the trading year are now behind us, and the "big three" of US market indices (Dow, S&P 500, Nasdaq) are all now up more than 10% year to date.  Below is an updated look at our key ETF matrix, which shows the recent performance of all asset classes.  

As shown, the Dow, S&P 500 and Nasdaq 100 all finished up more than 1.85% in April, with the Nasdaq 100 (QQQ) up the most at 2.54%.  Largecaps outperformed midcaps and smallcaps in April, and smallcaps actually finished in the red for the month.  Since the start of the year, midcaps have been the best, however. 

We've seen a shift in sector performance over the last week.  As shown, Consumer Staples and Health Care, which had been outperforming significantly, both declined this week, while recent underperformers like Technology, Energy and Materials have bounced the most.  For the year, Utilities -- yes, Utilities -- has posted the biggest gain at +18.64%.

International markets have seen a huge bounce over the last week, with countries like China, Canada, Germany and Russia all gaining more than 4%.  With the exception of Japan, however, the US is still outperforming the rest of the world when looking at year-to-date performance.  

Commodities also saw big gains in the last week of April, but aside from natural gas, they were all down for the full month.

Finally, while fixed income ETFs struggled earlier in the year, they have turned it around of late and are all now in the green for 2013.

For those interested, below is a list of the 50 best performing Russell 3,000 stocks year to date.  As shown, Keryx Biopharma (KERX) is up the most at +211.07%.  The next biggest gainer is Coronado Biosciences (CNDO) at 149.45%, followed by SunPower (SPWR), SUPERVALU (SVU) and Astex Pharma (ASTX).  Other notables on the list of this year's big winners include Netflix (NFLX), Best Buy (BBY), Zillow (Z) and Trulia (TRLA).

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S&P 500's Best and Worst Months of May Since 1928

With the month of May beginning tomorrow, we wanted to highlight the best and worst S&P 500 performances during the month since 1928.  Overall, the S&P 500 has averaged a decline of 0.15% during the month, which is among the weaker average monthly performances of the year.  

While investors debate the merits of sell in may and go away, we thought it was worth pointing out that May has increasingly become a volatile month in recent years.  As shown in the table below, two of the ten worst months of May going all the way back to 1928 have both occurred during the current bull market (2010 & 2012).  Furthermore, one of the ten best Mays of all time also came during the current bull market (2009).  In other words, three of the four Mays during the current bull market have qualified as one of the ten best or worst Mays of all time.  That leaves 2011 as the only year where May was not one of the ten best or worst Mays ever.  In that year, the S&P 500 declined 1.4%.  With the month of May averaging a decline of 2.64% during the current bull market, you can't blame bulls for wanting to take the month off in 2013.

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Apple (AAPL): Fifth Time the Charm?

Shares of Apple (AAPL) had a nice rally of more than 3% today, but the stock closed just shy of its 50-day moving average (DMA).  The 50-DMA has been a hard nut to crack since AAPL first closed below it in early October.  In fact, over the 138 trading days since then, AAPL has only closed above its 50-DMA on three trading days, and there have been four prior rallies in the stock that failed just shy of or slightly below the 50-DMA.  Will the fifth time be the charm?

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