Friday
Jun272008

The Bursting of the Non-Bubble?

This morning's WSJ has a cover story comparing the declines in financial shares to the declines of tech stocks during the Internet bubble.  We find that comparison hard to make at this point. 

Since its peak last year, the S&P 500 Financial sector is down 45%.  While that's a large decline, it's nothing compared to the 77% decline that the Nasdaq saw from its high in 2000 to its low in 2002.  For the Financials to be 77% below their record highs, the sector would have to fall another 60% from current levels! 

And the rally in Tech stocks completely drawfs the rally that Financials had.  In the first chart below, we highlight the percent change in the Nasdaq and the S&P 500 Financial sector since 1990.  As shown, the bubble and its subsequent burst in the Nasdaq stands out like a soar thumb.  In the bottom chart, we highlight the percent change in the Nasdaq from its low made in June 1994 to its low made in October 2002.  We also include the Financial sector from its low made in October 2002 to its low made yesterday.  While it's been a tough ride for Financials recently, the Tech bubble was more than double the fun and then double the pain.

Nasdaqfinancials

Nasvsfinl

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Friday
Jun272008

Mass Transit Traffic Spikes?

Here in the New York region of the US, the Metro-North train line is almost a staple of life.  While not everyone commutes on it every day, almost everyone has taken the train at some point in their lives. 

While it's not at all surprising, it has been interesting to see ridership increase day by day as the price of oil has risen in 2008.  Just last year, finding a seat on a train from Harrison, NY to New York City in the evening was easy.  When we got on the train last week to head to a dinner meeting, not a seat was to be found.  And riders continued to pile in as more stops were made along the way. 

With more and more commuters either taking public transit or carpooling, we have also noticed that auto traffic along the I-95 corridor (at least from Westchester County into Connecticut) has been down recently.  Leaving the office earlier than 7 PM has meant nothing but gridlock in the past, but recent trips home earlier than that have been brake free (although Thursdays and Fridays are still horrible). 

Along with our own anecdotal evidence, some recent articles on the matter caught our attention.  In the NY Times this past weekend, it was noted that Amtrak traffic had its biggest monthly traffic figure ever in May, which is usually not a heavy travel month.  The Greenwich Time recently had an article about Metro-North traffic, and just today we found this article that more and more people are running out of gas on the roads.

Got a traffic story to share with us?  Let us know in the comments section below.

Friday
Jun272008

Market Breadth Back to Lows

Below we highlight the percentage of stocks above their 50-day moving averages for the S&P 500 and its ten sectors.  Currently, just 17% of stocks in the S&P 500 are above their 50-days, which is just about as low as breadth has been during the prior lows seen back in August, January and March.  Eleven percent of Industrials and Materials stocks, 8% of Consumer Discretionary stocks, and just 3% of Financial stocks are above their 50-days.  Those looking to sell, sell, sell this market may want to wait for these oversold levels to at least move back to neutral territory.

Spx50day

Finlindu50day

Techenrs50day

Condcons50day

Hlthmatr50day 

Utiltels50day

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Thursday
Jun262008

Shorts Piling On

Since the short-term top in the S&P 1500 on May 19th, the average stock in the index is down 8.4%.  We broke the index into deciles (150 stocks in each decile) based on each stock's short interest as a percentage of float (at the market top) to see if the bears have been licking their chops.  Below we highlight the average performance of stocks in each decile from 5/19 to today.  As shown, the decile of stocks that are the most heavily shorted is down an average of 14.47% since 5/19, while the least heavily shorted decile is down an average of 6.43%.  Clearly, the shorts have been piling on and winning as the market struggles.

Shortintperf

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Thursday
Jun262008

International Declines

While markets have been bad here, they've been even worse in many other areas of the world.  Below we highlight the year to date performance of major equity indices in Japan, Germany, France, Canada, China, the UK, and the US.  As shown, Canada and Japan are outperforming the US, but the rest are down quite a bit more.  While the S&P 500 is down 12.6% this year, the UK is down 14.5%, Germany is down 20%, France is down 21%, and China is down 45%.  All you had to do was short China and buy the US and you'd be making a killing this year.  If it were only that easy.

Intlmarkets

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Thursday
Jun262008

New Lows For the Dow

The Dow just ticked to its lowest levels of the credit crisis, breaking below the lows we saw in January and March.  Since its peak in October, the Dow has now dropped 18.4% from its peak, and based on closing prices, it is about 250 points from hitting the technical definition of a bear market.  After a look at the YTD performance of the components though, it's hard to argue that we aren't already there.

Dow_ytd_0626

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Thursday
Jun262008

RIMM Trading Down on Earnings

With RIMM trading down nearly 9% in the pre-market after reporting earnings yesterday evening, below we highlight historical quarterly reports for RIMM since late 2001.  We have sorted the list by the amount that the stock has gapped at the open on the morning following earnings reports.  At -9%, it will be the second biggest down gap for the stock since 2001.  The stock's biggest down gap was -11.65% after its 4/9/02 report.  When RIMM has gapped down by 2% or more on earnings, it has gone up from the open to the close 4 times and gone down 6 times.  One week later from the open, the stock has averaged a gain of 0.87%.  Based on this analysis, investors wanting to buy RIMM at these prices might want to wait until the end of the day.

Want this analysis for stocks in your portfolio?  Call us at 914-315-1248 to inquire about the Bespoke Interactive Earnings Report database.

Rimm

Thursday
Jun262008

Running of the...Bears

The latest surveys of investor sentiment from Investor's Intelligence and the American Association of Individual Investors shows that bearish sentiment is once again on the upswing.  After bottoming in May, both measures are now approaching their highest levels of the year.

Bearish_sentiment_surveys_062808

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Thursday
Jun262008

Key ETFs Most Overbought and Oversold

Below we highlight the ETFs in our daily ETF Trends report that are currently trading the furthest above and below their 50-day moving averages.  Five commodity ETFs top the list of the most overbought ETFs.  DBA, DBC, UNG, DBO and DBE are all more than 7% above their 50-day moving averages.  Other ETFs on the list of positive trending names include XME, OIL, USO, XOP, RSX and BBH.  Two currency ETFs are also on the list -- the Mexican Peso (FXM) and the Australian Dollar (FXA).

Currently, 160 out of the 190+ ETFs that we follow closely are trading below their 50-day moving averages.  The banking ETF (KBE) is the furthest below at -18%, followed by the regional banking ETF (RKH) at -15%.  India (INP) and Belgium (EWK) trail the two bank ETFs, while Sweden, the Netherlands, South Africa, Italy, Spain, China and France are other countries that are significantly oversold.

Ketetfsabove_2

Ketetfsbelow 

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Wednesday
Jun252008

A Look at Big Lots (BIG)

Big Lots (BIG) has been one of the best performing stocks this year.  As shown in the first chart below, it has been trading in a tight upward sloping channel for pretty much the entire year -- bouncing off the bottom and top of the channel as it has worked its way higher.  If one were to just look at this six month chart, it would seem that all was well for the stock to continue with its positive momentum.  But it's always important to look at multiple time frames when analyzing price charts to get the entire picture of a stock's price movements.

When we back the chart out a bit and go back to the start of 2006, it shows that there is significant resistance right around current price levels.  After a rally that was similar to this year's from early '06 to early '07, the stock fell by as many points as it has risen this year.  Now that's a V-shaped bottom that only the entire market can hope for. 

The first chart looks extremely positive from a technical point of view.  But the second one clearly shows that the stock still has a lot of work to do to break above its most recent highs.  There is simply a lot of supply left over from the last time the stock was this high.  If it can break through those highs, however, the positives will re-emerge.

Biglots

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Wednesday
Jun252008

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Wednesday
Jun252008

Recommended Stock Allocation Continues to Fall

Below we highlight the consensus recommended allocation to stocks from US strategists (as compiled by Bloomberg).  Currently, the consensus says investors should have 58.6% of their portfolios in stocks.  As shown in the chart, recommended stock allocation has been in a downtrend since late 2001, but it did see a pickup in late 2006/early 2007 just before the markets topped out.  When the credit crisis hit, recommended stock allocation fell sharply.  With the price of the S&P 500 included in the chart, you don't need us to tell you the usefulness (or lack thereof) of these recommendations.

Assetallocation

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Wednesday
Jun252008

Fed Expectations and Investor Wants

Yesterday we asked Bespoke readers what they thought the Fed would do and what they wanted the Fed to do with interest rates today.  Below we highlight the results from the two polls, and while less people responded to the "think" questions, the overwhelming majority believe the Fed will leave rates at 2.00% today.  While 88% think the Fed will leave rates the same today, only 50% want them to leave them there.  Forty-two percent of respondents want the Fed to begin raising rates immediately, with 27% saying to hike 25 bps and 15% saying to hike 50 bps.  Only 5% want the Fed to ease another 25 bps, and 3% want a 50 bps cut.  As the results of these polls show, investors seem more interested in curbing inflation than curing a slowing economy. 

Thinkfed_2

Wantfed

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Wednesday
Jun252008

Energy Inventories

In its latest weekly energy inventory report, the Department of Energy (DoE) announced that after five straight weekly draws, crude oil inventories increased modestly in the latest week.  However, as the chart below shows, crude oil stocks remain well below average.  At first glance, energy markets have sold off sharply on the news.  However, we don't need to tell you that things can change quickly in these markets, especially with a Fed announcement coming later in the day.

Crude_062508

Distillate fuels also showed a build in the latest week, and unlike crude inventories, stockpiles are above average and the spread versus average is at its highest levels of the year.

Distillates_062508

Finally, unlike crude oil and distillates, gasoline inventories actually declined slightly during the week.  At current levels the spread between the current and average spread is the lowest it has been all year.

Gas_062508_4   

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Wednesday
Jun252008

Fed Funds Rate Decision Days

Below we highlight the S&P 500's performance on days when the Fed has made a Fed Funds Rate decision since August 8th, 2006 when the Fed stopped its long period of hiking rates.  We also include the index's change in the week after the close on the FOMC day.  As shown, the average change in the S&P 500 on these days has been 0.46% since 8/06.  During the current easing cycle, the index has been up three times and down four times.  The days when the market has been up have generally been big up days (2.9%, 1.2% and 4.1%). 

Fedfunds625_2

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