Options Expiration Week

While volatility is likely to be high this week given Tuesday's Fed meeting, the fact that it's also options expiration week should only add fuel to the fire.  Below we highlight the performance of the S&P 500 during options expiration weeks since 2006.  Typically, Wednesdays have the highest overall return with an average gain of 0.25%.  Although the average change on Tuesdays is only 0.05%, it is actually the most volatile day of the week.  Over the last twenty months, the S&P 500 has had a 1% move nine times (45%).

Not All is Down

While the majority of stocks in Bloomberg's US Homebuilder Index are down sharply this year, there are a couple that have actually seen gains.  WLSC and CHB are up 41.18% and 22.01% respectively.  WLSC is a mobile office and storage building company that recently agreed to be bought by the parent of privately-held European competitor Algeco.  CHB is a producer of factory-built housing and other mobile structures for prisons, military accommodations, hotels and residential units.  So while these are not homebuilders in the purest form, they are in the same industry and have remained strong.

Bears Tick Higher

Bearish respondents moved to their highest levels ever for the third week in a row.  Sixty-four percent marked "Bearish" as their current view on the S&P 500 last week.  With a number of market moving events coming up this week, it will be interesting to see what our readers are expecting.  Let us know what you think about the markets by taking part in the Bespoke Market Poll below.

My current view on the S&P 500 is:
	Bullish
	Bearish
Free polls from Pollhost.com

Best and Worst Performing Stocks Year to Date (YTD) -- TBSI, ONXX, BCSI, FSLR, ELON Up the Most

Although US markets have registered single digit returns this year, there are plenty of stocks that have had stellar years and plenty that have had horrific years.  Below we highlight stocks in the Russell 3,000 that have gained over 100% year to date as well as stocks that are down more than 60% year to date.  As shown, there is only one stock out of 3,000 that has returned over 300%.  TBS International (TBSI), an ocean transportation company, has been the best performer at 337%.  TBSI is followed by ONXX (286%), BCSI (250%), FSLR (230%) and ELON (228%).  The remaining are up between 100% and 200%.

By looking at the charts of these stocks, you'll get a good idea of the technical patterns that have been working this year.  One way to analyze them is to look at their setups at prior dates to find where the best entry points were.  Knowing these situations can help when analyzing the current chart patterns of stocks.  (Another way to gauge your technical acumen is to analyze the charts of a list of stocks you're unfamiliar with as they stood 3,6 or 9 months ago and code them as a buy or a sell.  Then see how they performed from that date forward to see how your calls stacked up.)

We'll also be providing an in-depth technical analysis for many of these stocks for our subscribers at www.bespokepremium.com, so subscribe today if you're interested.

On the negative side, NovaStar Financial (NFI) has been the worst performer of companies that are still in business at -92.40% year to date.  NFI is followed by LUM (-81.26%), BZH (-79.98%) and TARR (-79.21).  There are bound to be some turnaround situations for a few of these stocks, but right now it doesn't look pretty.

 

Click here to learn about Bespoke Money Management. 

Bespoke Indices

Below we provide info on a new page we have created for Think B.I.G.  In the future, it can be viewed by clicking on the Bespoke Indices button in the left sidebar of this page.

At Bespoke Investment Group, we are continuously analyzing what works on Wall Street.  While there are many indices that highlight styles and strategies such as large caps versus small caps, growth versus value, etc., there are many strategies that have not been quantified.  In order to fill this gap, we have created the Bespoke Indices.  These Indices track the performance of various methodoligies on Wall Street.  Some strategies are very mainstream that have yet to be indexed and some are off the beaten track.  We are also surprised that ETFs have yet to be developed for some of these strategies, but we are hoping to have them created in the future.  Regardless of how well known these strategies are, many have outperformed or underperformed the overall market over the years.  Based on their historical performance during various market periods, Bespoke will even use some of these strategies for our money management accounts as well. 

Below we provide the first four of our Bespoke Indices.  These will be updated regularly to track their performance.  Over time, we will be adding more indices, so be sure to check back for new ones.  All Bespoke Premium subscribers have access to the stocks that make up each of the Bespoke Indices upon request.  If you have any questions regarding the Bespoke Indices, or if you have an idea for an index of your own, please fill out a contact form or call 914-315-1248. 

Panic Selling

During our regular weekly technical analysis of US stocks, we came across an interesting chart pattern that highlights panic selling.  On August 16th, a day when the overall market fell over 300 points only to reverse and close only slightly lower, FedEx (FDX) dropped sharply and briefly moved below $100.  The following day, the stock moved right back into its normal range, and it has remained in that range ever since.  These type of situations clearly highlight herd selling behavior.  Unless a down move is due to stock or sector specific negative news, remember to take a step back the next time you're faced with a similar situation and don't panic. 

Below is a chart of FDX without the awkward 8/16 move.

Click here to learn about Bespoke Money Management.   

Volume at Market Bottoms

Since the closing low on August 15th, there has been a camp that argues that the low put in on that day will not hold.  The primary reason for this stance is that volume was weaker on the way up than it was on the way down.  We looked at S&P 500 volume following declines of 5% of more and found that in the ten days following the August 15th low, volume was less than it was during the ten days leading up to the low.  However, this has also been the case in the prior eight market lows following a decline of 5% or more.  In fact, the last time volume following a market low was greater than the volume leading up to the low was over four years ago.

Bespoke's Sector Snapshot

When we last updated our country snapshot on August 22nd, almost all markets across the globe were oversold.  As shown below, these markets have stabilized recently and are now trading just about in the middle of their historical trading areas.  Japan and Italy are two countries that have struggled to rebound as much as others, while Hong Kong, China and India have led the gains.  The green lines represent each index's historical p/e ratios.  Interestingly, the Hang Seng's (Hong Kong) p/e ratio has not risen as fast as its price, indicating earnings strength amidst the market's gains.

    

Most Want Them to Leave It Alone

Most of the Bespoke readers who have participated in our recent Fed poll want the Fed to leave the Fed Funds rate at 5.25%.  This is a different opinion from the begging and pleading for a cut that we've been seeing in the media recently.  If you have yet to take part in our Fed poll, please let us know what you want the Fed to do, and what you think the Fed will do.

What do you want the Fed to do?
	Leave the Federal Funds Rate at 5.25%
	Cut the Federal Funds Rate to 5.00%
	Cut the Federal Funds Rate to 4.75%
	Raise the Federal Funds Rate to 5.50%
Free polls from Pollhost.com

What do you think the Fed will do?
	Leave the Federal Funds Rate at 5.25%
	Cut the Federal Funds Rate to 5.00%
	Cut the Federal Funds Rate to 4.75%
	Raise the Federal Funds Rate to 5.50%
Free polls from Pollhost.com

BSC, LEH, MS and GS Reporting Next Week

On Wednesday we detailed some of the things to look for when the brokerage firms report next week over at www.bespokepremium.com.  Below we have looked at our Interactive Earnings Database to see how two of the key names have typically traded on earnings in the past.  As shown, BSC gapped down on its last report only to reverse and close higher by the end of the day.  LEH, on the other hand, gapped higher but reversed and closed up slightly by the end of the day.  Both firms have beaten EPS estimates over 90% of the time since the end of 2001, with Bear missing for the first time on its last report back in June.  Overall, BSC tends to trade higher from open to close regardless of how it opens, while LEH tends to trade higher from the open if it gaps down and lower from the open if it gaps up.

For Bespoke's market thoughts and stock recommendations, visit our home page at www.bespokepremium.com.   

Today's Dynamic Upgrades/Downgrades Report

We are posting today's Dynamic Upgrades/Downgrades report on our free site for the last time today.  If you would like to receive this on a daily basis going forward, please subscribe to Bespoke Premium.  Below is a description of the report.

Anyone can find a list of the day's changes in analyst recommendations, but Bespoke provides the analysis needed to trade off of the info.  Our daily Dynamic Upgrades/Downgrades report provides a quantitative look at each morning's key upgrades and downgrades from Wall Street research firms.  We gathered over 35,000 analyst actions since 2001 and found each stock's price change on the day of the upgrade or downgrade.  We then calculated the average % change of all upgrades and downgrades for each stock to see how it typically trades on the news.  Our daily report provides the average price changes for each stock that gets upgraded or downgraded so subscribers can quickly find trading opportunities in the morning.  Please click the image below for an example of the Dynamic Upgrades/Downgrades report.  Click here to subscribe to Bespoke Premium today.

Bearish Sentiment Declines as Recession Chatter Rises

While last Friday seemed like investors the world over panicked after the employment report showed negative job growth in August, polls of bearish sentiment among newsletters and individual investors actually declined.  AAII's poll of bearish sentiment declined from 42.4% down to 35.2%, while the poll from Investors Intelligence fell from its highest levels of the year (37.4%) down to 31%.

High Yield Corporate Bond Spreads

After falling just short of a 100% increase since June 1st, spreads on high yield corporate bonds have now declined three days in a row.  Before we pop the Champagne though, we would note that spreads are still 90% higher than their lowest levels of the year, but at this stage we'll take what we can get.

   

Today's Key ETF Performance

Largecaps outperformed once again today, with SPY and DIA rising by 68 and 79 bps respectively.  Smallcaps and Midcaps were up significantly less.  Financials and Consumer Discretionary were the sectors up the most, while Technology -- the sector that has been performing the best prior to today -- was flat.  EWJ, the Japanese equity market ETF, was the only country that declined, while commodities and fixed income ETFs finally cooled.

For Bespoke's market thoughts and stock recommendations, visit our home page at www.bespokepremium.com. 

Bespoke's Dynamic Upgrades/Downgrades Report

Ever wonder how much impact an upgrade or downgrade is going to have on a stock?  At Bespoke Premium, we have just introduced a new daily report released in the pre-market that can help.

Anyone can find a list of the day's changes in analyst recommendations, but Bespoke provides the analysis needed to trade off of the info.  Our daily Dynamic Upgrades/Downgrades report provides a quantitative look at each morning's key upgrades and downgrades from Wall Street research firms.  We gathered over 35,000 analyst actions since 2001 and found each stock's price change on the day of the upgrade or downgrade.  We then calculated the average % change of all upgrades and downgrades for each stock to see how it typically trades on the news.  Our daily report provides the average price changes for each stock that gets upgraded or downgraded so subscribers can quickly find trading opportunities in the morning.  Please click the image below for an example of the Dynamic Upgrades/Downgrades report.  Click here to subscribe to Bespoke Premium today.