Tuesday
May272008

Currency, Commodity, and Fixed Income Trading Ranges

Even after crude oil's three dollar plus decline today, it and other energy related commodities remain in short-term overbought territory.  The chart below is published each morning as part of our Daily Morning Lineup, and it shows the current levels of major currencies, fixed income, and commodities versus their typical trading ranges.  For each asset we show the current level (circle) as well as the change over the last week (tail).  When the circle is in the white area, it is considered neutral, while readings in the pink and red areas indicate overbought levels.  Conversely, readings in the green areas indicate oversold levels.

As previously mentioned, energy related commodities are all still in overbought territory even after today's declines.  The dollar is in neutral territory versus the Euro and Yen.  In the major metals, gold and silver are both in neutral territory, while copper is oversold.  Finally, US Treasuries remain weak as both the 2-year and 10-year notes are in oversold territory.

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Trading_ranges_commodities_and_cu_2

Tuesday
May272008

Historical New Home Sales Chart

Newhomesalesgoogle

As shown from the Google News search above, New Home Sales rose 3.3% in April.  Had we gone into a coma in 2003 and just woken up today, we might look at these headlines and think things were pretty good.  But a look at the chart below paints a much better picture of the current state of the housing market.  If you get real close to your computer, you can see the blip of a rise in the historical chart of New Home Sales since 1963.  While New Home Sales did rise 3.3% in April, it was a month over month comparison.   The real story is that sales declined 42% year over year.    

Newhomesales527

Tuesday
May272008

Exxon Mobil (XOM) Down Four Days In A Row

Last Tuesday, we put out a B.I.G. Tips report to Bespoke Premium members highlighting the 7-day winning streak for XOM.  Our historical price analysis showed that the stock has usually seen declines in the week following similar winning streaks in the past.  Since last Tuesday, the stock has now been down four days in a row for a decline of xxx%.  For those interested, when Exxon has been down four days in a row since 1980, the stock has averaged a gain of 0.44%

Click the image below to view last week's B.I.G. Tips report on XOM.  To receive these on a daily basis, subscribe to Bespoke Premium today.

Tuesday
May272008

March S&P/Case-Shiller Figures

Marchcaseshiller_3At right we highlight the month over month and year over year changes in median home prices from the March S&P/Case-Shiller figures.  As shown, Las Vegas is down the most at nearly 26% versus March 2007, followed by Miami, Phoenix, LA, San Diego and San Francisco.  Charlotte is the only city that showed an increase in median home prices from 3/07 to 3/08. 

Things weren't much better on a month over month basis.  Las Vegas and Miami both fell more than 4% from February to March.  Dallas and Charlotte were the only two cities to show month over month gains. 

The Composite 10-city index was down 15.3% from 3/07 to 3/08, and it is now down 17.78% from its peak in June 2006.

Below we provide historical year over year changes (%) in median home prices for the 20 cities that S&P/Case-Shiller tracks along with their two composite indices.

Housing1_2

Housing2

Housing3 

Housing

Tuesday
May272008

Shanghai Can't Break Through 50-Day

Below we provide a price chart of China's Shanghai Composite index, which is currently down nearly 36% year to date.  After staging a rally of more than 20% in late April, the index has once again corrected more than 10%.  As shown in the chart, the index just hasn't been able to break through its 50-day moving average. 

Chinashanghai_2

 

Tuesday
May272008

Stocks and Credit Spreads

Since last year, there has been a steady relationship between stocks and credit markets.  As strains emerged in the corporate bond market, credit spreads rose and the bull market stalled.  When the credit markets all but froze up in March, stocks across the globe swooned and the S&P 500 even briefly hit bear market territory with a 20% decline using intraday prices. 

As the S&P 500 rallied off the March lows, credit spreads maintained their relationship with stocks and began to decline.  Last week, however, that relationship weakened.  While the S&P 500 fell by over 3%, the Merrill Lynch index of high yield credit spreads barely budged.  On the week, spreads rose by only seven basis points from 663 to 670 over treasuries.  Furthermore, all of the rise happened on Friday when spreads rose by 11 basis points from a post Bear Stearns meltdown low of 659 basis points.  While the market still faces multiple headwinds, the continued stability in high yield spreads suggests that credit issues might be heading to the rear view mirror.

High_yield_spreads_thru_0523

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Tuesday
May272008

Volume During Last Week's Declines

Many market participants argued that the recent rally lacked staying power because volume had been so weak.  Last week we had the first real selloff since mid-April, and as shown below, volume was weak and below average during these declines as well.  Those that questioned the rally because of weak volume should also question the staying power of these declines, right?

Spxpricevolume

Friday
May232008

Memorial Day Reading

If you're looking for some additional reading while lounging around this weekend, we put out a number of reports this week for Bespoke Premium members covering recent market activity.  Along with our in-depth sector and ETF analysis, our B.I.G. Tips reports offer unique, objective analysis on indices, stocks, the economy, commodities, housing and everything else related to making people money.  We typically release two to three of these reports a day, and all of them are archived on our site for Premium members to view.  They are usually one or two pages of succinct, easy-to-read charts and commentary that are easily printable.  Below are the titles and thumbnails of the reports we released just this week.

This Week's B.I.G. Tips reports: Should We Believe the Chicago Fed? (does the recession call merit attention), S&P 500 Technicals (where are we headed from here), Bank and Broker Default Risk (comparing default risk with stock prices), Oil Up, Oil Stocks Down (what happens when this divergence occurs), Sector Weights (financials fall, energy rises), Oil vs. Natural Gas (which one should be higher), XOM Winning Streak (7 up days in a row; is it due for a pullback), "What If" Screen of the Week (a new stock screener from Bespoke), Weak Volume In Rallies (does volume matter during rallies), Member Survey Results (what do Premium members think about the markets), Bespoke's Torture Index (our unique index that tracks torture for consumers), Economic Indicator Analysis (our monthly charts and gauge of all economic indicators).

Have a great Memorial Day weekend!

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Friday
May232008

Credit Crisis Indicators

In late March, we highlighted charts of a few credit crisis indicators.  Below we have updated those charts, and by the looks of them, things remain much better than they did a couple of months ago. 

The first chart measures default risk by looking at a credit default swap index of investment grade debt.  While the index has ticked slightly higher this week as equity markets have sold off, the rise has been puny compared to the spikes seen earlier this year.  The second chart looks at the national average of 30-year fixed mortgage rates.  While it would be nice if rates were lower, they have remained stable and are not spiking like they were in January and February when banks demanded huge spreads to take on any risk whatsoever.  The last chart tracks the municipal bond market through the MUB ETF of S&P's National Municipal Bond Index.  Another problem during the credit crisis was the failure of Auction Rate Securities, which tanked muni bonds and sent their yields sharply higher.  As shown by the price chart, muni bonds have come back nicely as investors became attracted to those high yields.

Cdx

30yearfixed 

Mub

Friday
May232008

Existing Home Sales Back to Prior Lows

Last month's uptick in Existing Home Sales (if you want to call it that) didn't last long.  Today's release of the April figures showed that Existing Home Sales came right in line with the all-time lows of 4.89 million seen in January.  Granted, the indicator has only been around since 1999, but the argument that real estate is getting better can't be made yet.

Existinghomesales

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Friday
May232008

The Best Have Been The Worst

Since Monday's close, the average stock in the Russell 1,000 is down 2.14%.  We broke up the index into deciles based on stock performance from the 3/10 bottom through the close on 5/19 to see which stocks have performed the worst and which have held up the best during this week's selloff.  As shown below, the deciles of stocks that did the best since the 3/10 bottom are down the most since 5/19, while the deciles of stocks that underperformed during the rally have held up the best.  This means investors have been taking profits in winners.

Decileperf

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Friday
May232008

S&P 1500 Earnings Revisions

With the S&P 1500 poised to open lower this morning, the index will be trading down about 3% from its recent highs.  When the week started, the market was trading at its highest levels since January, and things seemed good.  Four days later, the mood has shifted 180 degrees.  Suddenly, oil is going to $200 (Hey, Goldman Sachs said so), Lehman and the rest of the brokers are in trouble again (at least according to an investor who is short the stock), and Ford no longer expects to turn a profit in '09 (With the stock at $7 and change, did anyone really think Ford was close to turning a profit?).

While the news has been bleak, one positive trend that remains in place is analyst forecasts.  We track the net number of analyst EPS revisions (positive revisions minus negative revisions) for stocks in the S&P 1500 on a daily basis.  While revisions have been negative all year, since bottoming in January they have been consistently improving and currently stand at their highest levels of the year.  Even during this week's sell-off, analyst revisions haven't budged.  Admittedly, analysts have built a reputation of notoriously being late to the game in terms of lowering forecasts, but for now at least the individuals who supposedly follow these companies the closest are sticking by their forecasts.

Earnings_revisions_052308

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Thursday
May222008

Financials Back to Oversold

After briefly moving into overbought territory earlier in the month, the S&P 500 Financial sector has moved to the bottom of its trading range once again.  The short-term uptrend that formed off the March lows has also been broken, so the sector is now trending sideways until it takes out its recent highs or lows.  Breadth has also gotten weak again.  On May 1st, 85% of Financial stocks in the S&P 500 were trading above their 50-day moving averages.  Currently, just a third of the stocks are above their 50-days.  Hopefully the sector begins to stabilize at current levels and doesn't get back to the extreme oversold levels constantly seen over the past 9 months.

Finlte

Finl50day

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Thursday
May222008

Oil Pullback Poll

When oil was trading at around $128 on Tuesday, we asked Bespoke readers how high they thought the commodity would go before experiencing a 10% pullback.  Below are the results from our poll.  We were hoping to keep it going longer, but oil promptly went to $134 the next day.  As shown, 26% thought oil would stop at $130 and then correct, but that was a moot selection pretty much immediately after we released the poll.  The $140 and $150 marks each got 24% of the votes, while 9% said it would go above $200 before falling 10%.  We suspect the >$200 vote might have included people that are just frustrated in general with oil's rise.  However, the results do show that quite a few people think the rally isn't finished.

Oilpoll_3   

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Thursday
May222008

NYSE Short Interest Back Near Record Highs

Last night after the close, short interest figures for the New York Stock Exchange (NYSE) were released and showed that short sales as of May 15th rose 2.34% since the end of April.  Even though the S&P 500 closed at its highest level since January, short bets remain near all-time highs.  This is in contrast to October when short interest was declining leading up to the market's peak, and indicates that many investors are skeptical of the current rally.

Nyse_short_interest

The table below lists the twenty non-Nasdaq stocks in the S&P 500 (Nasdaq short interest figures will be released on May 27th.) with the highest short interest as a percentage of float.  Like last month, Consumer Discretionary and Financial stocks are well represented on the list of stocks most heavily shorted.  The list of stocks on the list of least shorted come from various sectors.  In fact, eight of the ten sectors are represented on this list (no Materials or Consumer Discretionary).

Sp_short_interest_vs_float_2 

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