T. Boone Pickens Hedge Fund Holdings

T. Boone Pickens helped lift oil prices once again yesterday with his "$150 in '08" call on CNBC.  For those interested, below we provide the holdings of Mr. Pickens' hedge fund at the end of the first quarter.  As shown, just 5 of his 23 positions are down on the year, while the S&P 500 is down 3.32%.  His top ten holdings are all up an average of 21.7% this year, with his top holding (OXY) up 27%.  It's good times for energy funds.


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Still Overbought?

You would think that the next stop is the March lows with all the talk about today's sell-off.  To put things into perspective, however, the S&P 500 finished the day down less than 1%, and based on its 50-day moving average spread, the index is actually still trading at the upper end of its trading range.  As shown in the chart below, which we update daily in our Morning Lineup, the S&P 500 has been and continues to be in overbought territory.


Each morning, we also update where sectors are trading with respect to their trading ranges.  In the chart below, the circles represent where the sector is currently trading with respect to its trading range (white area is neutral, pink and red areas are overbought, and green areas are oversold), while the tail shows where the sector was one week ago.  As shown, there are currently no sectors that are oversold.  In fact, five of the ten sectors (Energy, Materials, Technology, Telecom Services, and Utilities) are still overbought.  While the remaining five are within their normal ranges, three of them (Consumer Discretionary, Health Care, and Industrials) are near the upper end of their ranges.   


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Sector Relative Strength

Below we have updated our charts of sector relative strength.  In each chart, rising lines indicate periods where the sector is outperforming the S&P 500.  Charts with red shading indicate that the sector has underperformed over the last year.  Additionally, in each chart we have also included red dots that highlight each of the Fed rate cuts since August.  This week, we also added a chart of the relative strength of the Transportation sector versus the S&P 500.  While it has not been considered an 'official' sector since 2001, we thought readers would be interested in seeing the chart given the recent attention on the sector in the face of higher oil prices.

One of the main trends we've been highlighting over the last several weeks is that even with heightened concerns over the economy, defensive sectors such as Consumer Staples, Health Care, Telecom Services, and Utilities are all underperforming the S&P.  At the same time, cyclical sectors such as Consumer Discretionary, Energy, Industrials, Materials, and Technology are all either holding up well or outperforming.  Finally, the Transports have been one of the strongest groups in the market, even though their largest cost (oil) has been hitting record highs practically every day.




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Volume Seasonality

Since the market's closing low on March 10th, volume has been anemic.  This has led many to complain that the current rally lacks staying power and is nothing more than a sucker's rally.  While the ultimate outcome of this rally is up for debate, the weak volume argument is weak.  At least part of the decline in volume can be explained by seasonal factors.

In the chart below, we show the daily volume on the New York Stock Exchange (NYSE) versus its 50-day moving so far this year.  We also created a composite yearly chart of NYSE volume versus its 50-day moving average using data since 1926.  As shown, while volume has been drying up leading up to this Summer, volume usually trends lower from early January through the end of the Summer. 


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How High Will Oil Go?

How high will oil go before experiencing a 10% correction (which would only be down to $117 based on current prices)?  Please let us know what you think by taking part in our poll below.  We'll report back with the results in a couple of days.

How high will oil go before experiencing a 10% pullback?
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Ben Franklin Speaks From The Grave

Quote of the Day: "Certainty? In this world nothing is certain but death and taxes and higher oil prices." -- Benjamin Franklin


Largecap, Midcap and Smallcap Performance

As we did yesterday with growth versus value, below we highlight the performance of large, mid and smallcap indices over the entire bull market and since the correction started last October.  As shown in the first chart, largecap stocks (as measured by the S&P 500) have lagged mid and smallcap stocks significantly since October 2002.  The S&P 500 is up 83.7%, the Smallcap 600 is up 129.2%, and the Midcap 400 is up 136.3% since 10/9/02. 

Since the October 2007 top, smallcap stocks have fared the worst and are still down 11.45%.  The S&P 500 is down 8.85%, while the Midcap 400 is down just 3.95%.





Strategist Price Targets of the S&P 500

Below we highlight the updated S&P 500 price targets of equity strategists surveyed by Bloomberg.  After weeks and weeks of analysts lowering price targets, a firm finally upped its price target earlier this month.  Merrill Lynch recently raised its 12-month price target for the S&P 500 from 1,430 to 1,500.  The average price target of all analysts surveyed is now 1,519, which is 6.49% above the current level of the S&P 500.  At the start of the year, the average price target was 11.12% above the S&P 500.


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Mid-Day Sell Off

Given that some of the hottest stocks of the last few weeks sold off sharply this afternoon, you would think that today's reversal was simply profit-taking after a big rally.  However, when we looked at the average intraday sell off of stocks in the S&P 1500 grouped by deciles according to their performance since the March lows, we found that not only were investors selling their winners, but they were selling their losers too.  The two groups of stocks that had the biggest reversal off their highs of the day were the 150 stocks that have performed the best and the 150 stocks that have performed the worst since the March lows.  Each of these groups closed an average of 2.5% off of their intraday highs.


Distance_from_52week_high_2 While the S&P 1500 is currently 6.1% off of its 52-week high, the average stock in the index is currently sitting more than 26% below its 52-week high.  As has been the case since last Summer, large cap stocks are holding up the best (down an average of 22.5%), while small caps have been hardest hit (-30.9%).

On a sector basis, even though the Consumer Discretionary sector has been one of the better performing sectors this year, they also fell the furthest from their highs last year.  For that reason the average stock in the sector is 31.1% off its 52-week high.  Financials and Technology round out the top three, with average declines of 29.3% and 29.1%, respectively.  Putting things into perspective, even though the Energy sector hit a 52-week high today, and the individual stocks seem like they are up every day, the average stock in the sector is currently 16.9% off of its high.  So even in the hottest of sectors, not every stock is close to 52-week highs.


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Growth Vs Value Performance

Since the bull market began on October 9th, 2002, the S&P 500 is up 84.4%, the S&P 500 Value index is up 102.8%, and the S&P 500 Growth index is up 68.2% (not total return).  Since the October 9th, 2007 peak in the S&P 500, however, growth stocks have handily outperformed both the S&P 500 and the S&P 500 Value index.  As shown in the second chart below, the Growth index is down 4.93%, while the Value index is down 11.99%.  If the market ends up making new highs before hitting the -20% bear market threshold (keeping the longer-term bull market intact), will the second act be led by growth instead of value?



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P/E Divergence Between Growth and Value Stocks -- The Wrong Way

Recently, growth and value stocks have seen a big divergence in valuations.  One index has an as-reported P/E ratio of 33.66, while the other is at 18.92.  The only problem is that it's the value stocks that have the 33.6 P/E, while the growth stocks have the 18.9 P/E.  Below we highlight a historical chart of trailing 12-month P/E ratios for the S&P 500 Growth and Value indices.  As shown, the Value P/E has spiked significantly in recent months, as supposed value names that typically pay high dividends (financials, etc.) have seen a big drop in earnings.  This isn't the first time the divergence has happened, however.  After growth valuations spiked during the tech bubble, value stocks followed with their own surge in P/E ratios in late '01 and '02.  Ironically, growth stocks have held their value much better than value stocks have in 2008.



Transports At New Highs; A Look At Its Members

Below we highlight a one-year chart of the Dow Jones Transportation Index.  As shown below, the Transports have been on fire recently, even with JetBlue, Continental Airlines and AMR part of the 20-member index.


As shown, 16 of the 20 stocks that make up the Transports index are up on the year, with Ryder Systems (R) up the most at 63%.  CSX, BNI, GMT, NSC, LSTR and JBHT are all up more than 30% as well.  The average estimated '08 P/E ratio of members in the index that have P/E ratios is 21.24.  The stock with the lowest estimated P/E is OSG at 10.28, followed by GMT (14.72) and ALEX.


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Bespoke's Sector Snapshot

Along with our commodity snapshot, we start off the week with our sector snapshot that highlights the one-year trading ranges of the S&P 500 and its ten sectors.  The top of the red area is two standard deviations above the sector's 50-day moving average, and the bottom of the green area is two standard deviations below.  All sectors except for Financials and Health Care are currently trading in or above the red zone.  Energy, Materials and Technology are the most overbought sectors at the moment.  Since the March lows, most sectors have developed nice short-term uptrends, but at current overbought levels, sectors could see a pullback to the bottom of their upward sloping channels.








Bespoke's Commodity Snapshot

Below we highlight our commodity snapshot using our one-year trading range charts.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.

After breaking to new highs a couple of weeks ago, corn prices pulled back last week and broke below a tight trading range that had been in place since early April.  Corn had been one of the only other commodities to keep up with rising oil and natural gas prices after the correction experienced a couple of months ago. 

Metals rallied again last week for the first time in awhile.  Platinum prices had the best run, and it is now trading into overbought territory.  The double bottom it made earlier this month has proven to be an almost perfect technical setup on the long side.  Fortunately, wheat prices continue to decline, and last week they hit their lowest levels since December 3rd of last year.  Orange juice continues in its downtrend and coffee is trading right in the middle of its trading range.








This Week's B.I.G. Tips Reports at Bespoke Premium

Below we provide the titles of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money. 

This week's B.I.G. Tips reports: Bespoke's Torture Index (a bad sign for consumer), Earnings Estimate Revisions (stocks and sectors with the most upward and downward earnings revisions), May Options Expiration (typical market performance on May expiration days), Oil and Dollar Rallies (what happens when they both rally), Weekly Investor Sentiment Surveys (what is investor sentiment telling us), Sector ETF Technicals (a technical perspective of the ten S&P 500 sectors), Food Inflation (an in-depth look at food prices), Gold and Oil Splitting Up (what happens when the two commodities diverge), VIX Declines (market performance following large declines in the VIX), Retail Sales (market performance when Retail Sales is weaker or stronger than expected), Triple Play Charts (a look at the best stocks from this earnings season), Monthly Short Interest Report (sector and stock short interest analysis).

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