Tuesday
Jul152008

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Tuesday
Jul152008

Not a Headline You Want To See

Yesterday, when we went to the Yahoo! (YHOO) front page we saw the following picture and headline:

Yhoo_front_page

We can't imagine that this story and others likely to follow are going to help consumer, investor, or for that matter, anyone's confidence.

Monday
Jul142008

Financials Down 6.1% Today; Like the Days of the Tech Bust?

The S&P 500 Financials sector had its worst day of the credit crisis today, declining 6.1%.  The one-day declines in many of the banks today reminded us of the worst days during the bursting of the Tech bubble. 

To compare the two, we found the worst day for the S&P 500 Technology sector during the '01/'02 bear and found the worst performing stocks in the sector that day.  On March 28th, 2001, the S&P Tech sector suffered its worst day of the decade, down 8.07%.  As shown below, 26 stocks out of 78 in the index were down more than 10% that day, with Palm leading the way at -48%.  ADCT, MERQ, Nortel and Applied Micro were all down more than 15%.

Today, 15 of the 89 stocks in the Financial sector were down more than 10%, but 6 were down more than 15%, which is worse than the Tech sector on 3/28.  Washington Mutual was down the most today at -34.75%, followed by First Horizon (-25%), ZION (-23%), HBAN (-17%) and RF (-16.5%).  Misery seeks company.

Finltech_2

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Monday
Jul142008

Preferred Stocks Get Crushed

Preferred stock owners, especially financial preferreds, have seen share values evaporate over the last couple of weeks.  Below we highlight the S&P Preferred Stock index going back to late 2003, along with a chart of its 50-day moving average spread.  These shares are thought to be less volatile and less risky than common stocks, but with the index currently trading nearly 20% below its 50-day moving average, they have been anything but that.

Preferreds1

Preferreds 

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Monday
Jul142008

Another Bad Start

While we're only nine days into the month, the second half of the year is starting off just like the first half, and unfortunately for the bulls, it's a bad one.  The chart below shows the S&P 500's performance during the first 50 trading days of 2008 (red line) along with its performance so far during the first nine trading days of the second half.  As shown, the S&P 500 is down 3.54% so far this half compared to a decline of 3.55% during the first nine trading days of 2008.  Let's hope this pattern doesn't continue.

First_half_vs_second_half

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Monday
Jul142008

Global Bull and Bear Markets

We recently did a B.I.G. Tips report highlighting the state of equity markets worldwide.  Below is a list of the 84 countries we analyzed sorted by whether they are currently in a bull or bear market.  Currently, 48 of the 84 (57%) countries are in bear markets (which is at least a 20% decline that was preceded by a 20% rise).  Ireland is currently the worst bear of them all.  Its ISEQ index is now down 54.79% since the start of its bear.  Ireland is trailed by Iceland (-53.46%), Puerto Rico (-45.45%), Estonia (-45.26%) and Bulgaria (-44.50%).  Of the 48 global bear markets, at least the US is only the 42nd worst with a decline of 20.66% from its bull market high.

With 48 out of 84 countries in bear markets, it does mean that there are quite a few bull markets out there.  Some of these countries have been in long-term bulls and are on the brink of a bear (Brazil, Dubai), while some already made bear markets earlier this year and have rallied more than 20% since their bottoms (Vietnam, Japan).

Globalbearmarkets

Globalbullrmarkets

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Monday
Jul142008

SPY Gapping Higher

The S&P 500 tracking SPY ETF is currently trading up 1.24% in the pre-market following the FNM and FRE news over the weekend.  We found all opening gaps of 1% or more since SPY began trading back in 1993 to see what the market tends to do from the open to the close.  Since '93, the SPY has gapped up more than one percent 122 times.  Of these 122 occurrences, it has continued higher from the open to the close 69 times (56%) and averaged a gain of 0.23% (the median gain is 0.28%). 

Below we highlight all SPY gaps of 1% or more during the current bear market.  Of the 11 times it has happened since last October, SPY has gone higher 6 times and averaged a gain of 0.48%.  It has continued higher by at least another one percent 5 times, and reversed and gone lower by more than one percent twice.  Based on this small amount of data, prospects for a further rally after the open are somewhat promising.

Spygaps714

Update: That worked out well!  Just further evidence that nothing is working in this market.

Monday
Jul142008

This Week's Prediction Poll Results

For those that wish to track the results of our Prediction Poll, below we highlight the individual responses from this week's poll along with the average of all participants.  As shown, the average of all predictions for where the Dow would finish the week was 11,183.  Based on the closing price of 11,100.54 last Friday, participants are looking for a gain of about 74 bps this week.  After we get a couple months worth of results, we'll post a historical chart of the weekly averages compared with the actual Dow.

Predictionpoll713

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Friday
Jul112008

Where Will The Dow Close Next Friday?

The winner of last week's Bespoke Prediction Poll guessed that the Dow would close the week at 11,097.00 -- just 0.03% percent from today's actual close of 11,100.54.  Congratulations on the prediction and winning one free month of the Bespoke Premium service!  Please enter your prediction for where the Dow Jones Industrial Average will close next Friday.  The index is currently trading at 11,100.54.  Predictions must be in by this Sunday at midnight.  The person with the closest answer will receive one free month of the $40/month Bespoke Premium service.  Thanks for participating!









Where will the DJIA close on Friday, July 18th?
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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: Week in Review (our widely followed weekly newsletter on the markets), Earnings Estimate Revisions (stocks with the biggest increases and decreases in analyst estimates), Stock Ratings (a look at the most and least loved stocks from the major financial websites), Next Week's Earnings (a number of trade ideas for companies reporting earnings next week), Global Market Cycles (a look at bull and bear markets across the world), Big Reversal Days (market performance after big up days are followed by big down days), Investors Intelligence (a historical look at market performance when sentiment gets this low), S&P 500 Oversold Indicator (are we due for a rally?), Global Bank and Broker Matrix (an in-depth look at credit crisis measures for financial firms), Vix and Declines (does a low Vix mean further declines are to come?), Bespoke Earnings Scores (the top rated stocks for earnings season), Halfway There (a 60-page detailed analysis of what's to come in the second half of the year).

Thanks for taking part in the Bespoke Prediction Poll!  If you'd like to try out our Premium service, please sign up at BespokePremium.com.

Friday
Jul112008

Asset Class Performance in 2008

Individuals who have only been invested in equities this year are no doubt suffering.  Below we highlight the year-to-date performance of various asset classes in 2008.  The results clearly show the importance of asset allocation.  While the S&P 500 is down 15.82%, Treasuries are down just 44 bps, and commodities like gold and oil are up significantly.  With the amount of ETFs out there that track all asset classes, there really is no excuse to not be diversified.

Assetclassperf

At Bespoke, we offer two ways for investors to implement an all-ETF asset allocation strategy.  At Bespoke Premium, we have a Model ETF Portfolio that applies this approach.  For each asset, we provide the recommended weighting (stocks-50%, bonds-25%, etc.) and invest in various ETFs within the asset class that we currently believe are the most attractive.  The Bespoke Premium Model ETF Portfolio has held up exceptionally well for a long-only account during this market downturn, declining just 6.59% since inception last June while the S&P 500 has declined 18.35%.  For investors looking to take a more hands-off approach, Bespoke also offers a professional money management strategy using all ETFs that applies the same asset-allocation principles mentioned above.  For more information, please visit our money management page or call 914-315-1248.

Friday
Jul112008

Key Earnings Reports Next Week

In the chart below, we highlight the number of companies reporting earnings on each trading day through August 8th.  While things do start to pick up next week, they don't really get going until the following week.  Next Thursday (the 17th) will be the most active for earnings, with 93 companies releasing their quarterly results.

Epsreports

As we mentioned above, next week isn't the most active for earnings, but there are still quite a few key stocks reporting.  Below we highlight some of the most widely followed stocks releasing earnings next week.  As shown, DNA reports after the close on Monday, JNJ and INTC lead the reports on Tuesday, WFC and EBAY headline Wednesday, BLK, HOG, JPM, KO, NUE, SPWR, UTX, GOOG, IBM, MER and MSFT all report on Thursday, and C and HON wrap things up on Friday. 

For each stock, we provide its current EPS estimate and the four-week change in that estimate.  We also provide the percentage of the time since 2001 that the stock beat earnings and revenue estimates and guided higher.  Finally, we provide the average 1-day change in the stock on the first trading day following past reports.  Stocks highlighted in yellow have generally had the best reports and price reactions in the past.

If you're looking for more in-depth earnings analysis and stock ideas throughout earnings season, sign up for Bespoke Premium and access these reports today.

Epsreportskey 

Friday
Jul112008

Percentage of Stocks Above 50-Day Moving Averages

Currently, just 14% of stocks in the S&P 500 are trading above their 50-day moving averages.  While this is extremely oversold, the number got down to 8% last August and 11% in January.

Financials and Industrials are the sectors struggling the most.  Each of them have just 2% of stocks trading above their 50-days.  Consumer Discretionary isn't far behind at 5%, however.  The two sectors that look the best at the moment are Health Care and Utilities.  Health Care has 42% above their 50-days, while the Utilities sector sits at 39%.

Spx50day

Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day

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Friday
Jul112008

Lehman and Merrill Lynch Default Risk Charts

Below we highlight default risk charts as measured by 5-year credit default swap prices for Lehman Brothers and Merrill Lynch.  We also include each company's stock price.  As shown, default risk has increased significantly for both LEH and MER this week, and it is quickly approaching the highs reached in March.  While CDS prices aren't at their March highs yet, the stocks are much lower than they were then.

Leh

Mer

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Friday
Jul112008

NYSE Short Interest Hits Record Highs...Again.

Yesterday, the NYSE and NASDAQ both released short interest statistics for the month ending in June, and for each exchange, short interest levels increased.  On the NYSE, short interest rose to yet another record high, up 2.67% to 18.125 billion shares.  Looking at figures for the S&P 500, short interest as a percentage of float for the average stock rose from 5.8% to 6.0% of float.

Sp_500_short_interest_071108

A look at the stocks in the S&P 500 with the highest short interest shows exactly where the trouble lies- Consumer Discretionary and Financials.  Of the twenty stocks with the highest short interest as a percentage of float, seventeen of them come from those two sectors.

Highest_short_interest_0710

Thursday
Jul102008

Uninterrupted Declines

If you've forgotten what a rally feels like, you're probably not alone.  The S&P 500 hasn't had a 2% gain (in one day or over multiple days) since early June.  In the top chart below, we show all periods where the S&P 500 went more than thirty days without a 2% rally.  As shown in the chart, these uninterrupted declines are not too uncommon, as there have been 75 other periods since 1940.  What makes this period more painful, however, is the magnitude of the declines during this stretch.  Since June 5th, the S&P 500 has declined by 11.4% without a 2% rally in between (lower chart), which makes this the sharpest uninterrupted decline since February 2003.  The drought of rallies, compounded by the fact that any rally is more than erased the next day, make this one #%$& of a market.

Rallies_without_declines