Monday
Aug112008

Dollar 7-Day Winning Streaks

The US Dollar index has now been up for 7 days in a row.  This has now happened 24 times since 1970, and as shown below, the median return on day 8 and over the next week have been minimal.  Recently, the numbers have been more negative, however.  Six out of the last seven similar winning streaks have seen the Dollar fall on day 8 and over the next week.

Dollarstreak_3

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Monday
Aug112008

More on the Dollar

The US Dollar index is now up 6.33% since bottoming on April 22nd, making this the first rally of more than 5% since the 14% rally that ended in November 2005.  The previous decline of 22.75% without a 5% rally was the second longest for the currency since daily pricing began in 1971.  As shown below, the average 5%+ rally for the Dollar lasts 186 calendar days and sees a gain of 12.95%.  The current rally of 6.33% has lasted 108 days.

Dollardeclines_2

Dollarrallies

   

Monday
Aug112008

Stronger Dollar and The Stock Market

Given the dollar's recent strength, there has been some concern that exports, the one bright spot still underpinning the economy, will get hurt.  While a stronger dollar certainly makes US goods less attractive relative to foreign products, you would need to see a much bigger and longer rally in the dollar before the positive benefits start to reverse themselves.  Additionally, while exports would get hurt, the US imports more than its exports, therefore on a net basis the portion of the economy that benefits is greater than the portion that gets hurt. 

A look at the historical record also shows that a strong dollar is much better for stocks than a weak one.  Below, we highlight a chart from prior reports we have sent out to Bespoke Premium subscribers.  Since rallies and declines in the dollar are typically measured in years rather than weeks or months, the S&P 500 has averaged positive returns during both dollar bull and bear markets.  However, equity gains during dollar bull markets (20% rally preceded by a 20% decline) are much greater than dollar bears (20% decline preceded by a 20% rally).  As shown, the average return of the S&P 500 during dollar bull markets is over 80%.  During dollar declines, the average return is less than 20%.

Sp_during_dollar_rallies_and_declin

   

Monday
Aug112008

Global Market Snapshot

Below we highlight our trading range charts for 22 key equity markets around the world.  The light blue shading represents one standard deviation above and below each index's 50-day moving average.  The green shading represents between one and two standard deviations below the 50-day, and vice versa for the red shading.  Most countries continue to trade into oversold territory, but some have been getting hit extra hard while others have rallied off of their lows.  Some countries that failed to bounce off the July lows include Brazil, China, Hong Kong, Malaysia, Mexico, Russia and South Africa.  On the other hand, India, most of Europe, and the US have come off their lows and are testing their 50-day moving averages.

Intl1

Intl2

Intl3

Intl4

Intl5

Intl7      

Friday
Aug082008

Bullish or Bearish?

Where do you think the Dow Jones Industrial Average will close on August 15th?  Please enter your prediction by taking part in the poll below. The index is currently trading at 11,734.32.  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, August 15th?
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We recently released a B.I.G. Tips report titled the New Baby Boom that got mentioned quite a few times in the media.  Please click the thumbnail image below to view the report as an example of the unique research we provide at Bespoke Premium.  Click here to subscribe today.

Friday
Aug082008

Up Big Since the Fed

The S&P 500 is now up 3.67% since the 8/4 close prior to Tuesday's Fed Day.  Below we highlight sector performance since then as well.  As shown, Consumer Discretionary is up the most at 7.07%, followed by Tech (6.35%), Industrials (5.08%) and Health Care (3.79%).  Energy, Utilities, Materials and Financials are up the least.

Sectorchangefed

Looking at S&P 1500 stocks above $10/share, ROCK is up the most since Monday's close at 33.5%.  ROCK is followed LYV, LNY, INSP and THO.  VTIV, UTR, PRX and WFMI lead the list of losers.

Bestfed

Worstfed

   

Friday
Aug082008

International Revenues and the Dollar

Stocks with a large percentage of international revenues benefited significantly from the Dollar's declines over the past few years.  Because the Dollar was cheap, foreign companies and governments bought more goods from the US.  If the Dollar continues to rally, however, this trade will reverse, and companies that generate more sales domestically will benefit. 

We've posted on the international revenues topic numerous times, and we even have a database that breaks out international and domestic revenues for all stocks in the Russell 1,000.  From the database, we calculated the average percentage of international revenues for stocks in each sector.  As shown, Technology has the highest at just over 50%, followed by Materials, Industrials, Consumer Staples and Energy.  Financials, Utilities and Telecom have the lowest foreign revenue exposure.  If the Dollar continues to rally, sectors with low foreign revenues could outperform, although it will be more pronounced on a stock by stock basis. 

To access our database of international revenues, you have to be a yearly subscriber to our Bespoke Premium service.  Click here to subscribe today.

Sectorintlrevs

Friday
Aug082008

Dollar Delight

Two days ago we posted on the recent breakout for the US Dollar and its positive implications.  Today the Dollar is having its best day since July 2005 with a gain of 1.167%.  As shown in the charts of the Dollar index and the Euro below, the trend sure looks to be in the Dollar's favor for the time being. 

Yesterday we sent out a B.I.G. Tips report highlighting our belief that the Dollar was set for at least a 10% rally.  In the report we highlight how to play the rally with ETFs and stocks.  Click here to subscribe to Bespoke Premium and access the report today.

Dollars

Euros

 

Friday
Aug082008

Problems in Russia

The weekend hasn't started out nicely for Russia.  With a report that Georgia has shot down two Russian warplanes, the country's major stock index is down 4.55%, and the Ruble is having its worst decline versus the Dollar since January 10th, 2000.  Today's decline in the Russian Trading System index is the 3rd -4% decline in 11 trading days.  As shown in the first chart below, the index has now broken below key support levels and is down nearly 30% from its highs on May 19th.

Russiarts

Russiacurrency

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Thursday
Aug072008

Bespoke Ideas

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Looking for the most interesting business stories online?  Visit our B.I.G. News page to keep up with must-read articles 24/7.

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Thursday
Aug072008

Investor Presidential Survey Results: 8/4-8/7

On Monday, we introduced our Investor Presidential Survey, asking Bespoke readers who they would vote for if the Presidential election were held today.  In our first survey, McCain came in slightly ahead of Obama at 44% to 42%.  Obama currently holds about a 3-point lead in the regular polls.  Our weekly survey will be published again on Monday.

Electionsurvey_2

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Thursday
Aug072008

Big Days and Future Market Performance

An earlier post we did on 300 point days garnered a lot of commentary.  Incorporating the feedback from the comments section, we analyzed the performance of the S&P 500 following big percentage gains.  Since not everyone agrees with the standard definition of a bull and bear market (gains or losses of 20% or more), instead of analyzing when these big days are more likely to occur, we calculated what the average performance of the market was following all big up days.  After all, all we really care about is where the market is going. 

In the table below we show the average performance of the S&P 500 following one-day gains of more than 2%, 3%, 4%, and 5% since 1945.  The 2% category includes all gains of 3%, 4%, and 5% etc.  In the bottom row, we also calculated the average performance of the S&P 500 following all days since 1945.  As shown in the table, the average return following big days has exceeded the average overall return in every scenario except one (the week following 5% days).  While we won't go as far as to say that big days are a clear sign of a strong market going forward, based on these parameters, we find it hard to make the argument that they are bear market indicators.

Large_one_day_gains

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Thursday
Aug072008

Sector Relative Strength: Energy and Financials

If there are two sectors that have attracted the bulk of investors' attention, they are Energy and Financials.  Below we highlight the relative strength of both sectors versus the market over the last year.  In each chart, when the line is rising it indicates that the sector is outperforming the S&P 500 and vice versa when the line is falling.  Additionally, the red dots indicate days when the Fed cut rates.

Regarding the Energy sector, throughout the entire Fed easing cycle, oil and Energy stocks rallied.  It wasn't until shortly after the Fed went on hold that the sector began to crack.  Based on these trends, unless the Fed is forced to start cutting rates again, energy bulls may have to go into hibernation.  The Financial sector has had an impressive rally since mid-July.  Even after this strong rally, though, the sector remains below the downtrend line that has been in place for the last year.

  Sector_relative_strength_080708_4

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Thursday
Aug072008

Stocks At or Near 52-Week Highs

Below we highlight stocks in the S&P 1500 that are closest to their 52-week highs.  As shown, Covance (CVD) is the closest, followed by WCN, ADPT, PRXL and HBHC.  Key names on the list include AMGN, GIS, BAX, HNZ, JNJ, and QCOM.  In green we highlight names that are close their all-time highs.  Momentum investors find these stocks highly attractive, and the fact that they have held up well in this market proves their resiliency. 

Alltimehighs

Thursday
Aug072008

Personal Income By City

This morning, the Bureau of Economic Analysis released its summary of personal income growth by city for the year 2007.  According to the report, overall income growth in 2007 averaged 6.2%, which was down from the 6.8% level in 2006.  The chart provides an interesting representation of which regions of the country are doing the best and worst.  Of the 363 cities the Bureau looked at, income growth slowed in 208 (57.3%), rose in only 144 (39.7%), and was unchanged in 11 (3%).  As shown in the chart, the primary areas of weakness (golden shading) were the rust belt and Florida.  Cities which saw the strongest growth were along the Western Gulf of Mexico (Katrina rebuilding and oil) and the western US.  NYC was also strong, but this is likely to reverse as Wall Street bonuses are set to take a big hit in 2008.

Personal_income

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