Wednesday
Apr302008

You Can't Always Get What You Want

On Monday we asked Bespoke readers for their opinions on today's FOMC meeting.  We specifically wanted to know what readers think the Fed will do with rates and what they want the Fed to do with rates.  As shown in the results below, the majority of respondents want the Fed to leave rates at 2.25%, while the majority thinks the Fed will lower rates to 2%.  If the Fed does lower today, will investors sell stocks since they didn't get what they want, or are they already positioned for one more rate cut?  Only time will tell.

Wantfed

Thinkfed

Wednesday
Apr302008

Crude Oil Inventories

Crude oil inventories are set to come out at 10:30 this morning, and the consensus is calling for a build of 900 thousand barrels.  So far this year, over half of the weekly inventory reports have shown a larger than expected build in inventories, yet oil was trading at an all-time high and up over 20% on the year just this Monday.  So what gives?

In the chart below, we show weekly crude oil inventories this year versus their long-term weekly average.  As shown, at the start of the year total inventories were well below average, and while the gap has narrowed, total crude oil inventories are still less than their long-term trend.  While the narrowing of the gap is a step in the right direction for those who would like to see lower oil prices, the current environment shows that oil supplies remain tighter than normal.

Crude_inventories_3

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Wednesday
Apr302008

Fed Days Throughout The Most Recent Hiking and Easing Cycles

Below we highlight the actions of the Fed and the S&P 500's performance around Fed days since Greenspan began hiking rates back in June 2004.  Since then, the Fed Funds Rate has gone from 1% to 5.25% and back down to the 2.25% level that it's at today (with many expecting another 25 bps cut).  On these days, the S&P 500 has been up 17 times and down 15 times for a median gain of 0.32%.  March 18th was the third best day for the market on a Fed day since 1990, but the best when eliminating inter-meeting Fed days.  Over at Bespoke Premium, we have run a more in-depth screen based on performance around Fed days for those interested.

Fedays_2

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Tuesday
Apr292008

S&P Case-Shiller February Home Price Data

Caseshillerfeb_2The February S&P/Case-Shiller Median Home Price data was released today, and as shown in the table at right, the Composite 10-City and Composite 20-City year-over-year declines were once again extremely negative.  Las Vegas, Miami and Phoenix all registered 20% year-over-year declines, while Los Angeles, San Diego, Tampa and San Francisco weren't far behind.  While Miami has fallen 22% from its highs, it still has the highest median home price at $218,740.  Chicago was down 8.5% from 2/07 to 2/08, while New York was down 6.5%.  Charlotte was the only city that maintained year-over-year gains at 1.48%.

And the median home price in Detroit has now fallen below $100,000 for the first time since December 1999.  The average person buying a house in this decade is now down on their investment in Detroit, which has the lowest median home price of all 20 cities analyzed.

Caseshillerdetroit_2 

Below we highlight the monthly year-over-year percentage changes of the 20 S&P/Case-Shiller cities and the two composite indices.  As shown, the fall from the cliff hasn't hit the ground yet. 

Caseshiller1

Caseshiller2

Caseshiller3

Caseshiller4   

Tuesday
Apr292008

First & Last Day of the Month Returns

After five straight months of negative returns and its longest monthly losing streak since 1990, the S&P 500 is poised to finish the month of April in positive territory.  But how does the market typically perform on the last day of the month?  In the table below, we calculated the average performance of the S&P 500 on the first and last trading day of each month since 1980.  The average return on the last day of April is 0.15%, which is above the overall average of 0.10% for the last day of all months.  As we head into May, the S&P 500 has averaged a return of 0.20% on the first trading day of May, which is slightly below the overall average for first of month returns.

Day_of_the_month_returns

Tuesday
Apr292008

Market Rallies Since the Start of the Credit Crisis

Since the onset of the credit crisis last Summer, the S&P 500 has now had four rallies of more than 5% (using closing prices), which are highlighted in the chart below.  Many investors believe that the market has a different and more positive feel during the current rally, and when we compare it to the prior two rallies, they have a point.  Prior to this run, the S&P had two rallies that lasted two weeks or less.  With the current rally continuing on for more than thirty trading days, things should feel different. 

However, before we all call an official end to the market's declines, we would note that from last August through October, the S&P 500 rallied by more than 11% over a 38-day period.  The current rally, on the other hand, has shown a gain of 9.77% over a 33-day period.  Until this rally shows that it has more staying power (in time and/or magnitude) than any of the prior head-fakes, investors should continue to keep a cautious stance, and keep tight stops on their short-term positions.  With a flood of economic and earnings reports, an overbought market, as well as a Fed meeting which could set the stage for a pause in rates, the reaction to this week's news will tell a lot about the market's health.

5_rallies

Tuesday
Apr292008

Best and Worst Performing Stocks This Earnings Season

Below we highlight the biggest winners and losers so far this earnings season (4/7-present).  These are the 25 best and worst performing stocks on the first trading day following their earnings reports.  For stocks reporting in the morning, we use that day's trading, while we use the following day for stocks reporting after the close. 

As shown below, ANAD, YRCW, OSTK and CLS all had one-day gains of more than 30% in response to their earnings reports.  After the stock suffered a big decline following its last quarterly report, Google (GOOG) made the best list this quarter with its gain of 19.99% on April 18th. 

ABK tops the list of losers, declining 42% following its earnings report.  UAUA, OMCL, AMFI and NCC round out the top five decliners.  Other notables on the list of decliners include NFLX, TASR, ISRG and NTGR.

Bestearnings_2

Worstearnings_2

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Tuesday
Apr292008

Oil Bears Outnumber Bulls; Don't Expect $4/Gallon to be a Tipping Point

Last Thursday we polled readers for their thoughts on oil and gas prices.  Below we provide the results of our two polls.  At current price levels, almost two-thirds of Bespoke readers say they are currently bearish on the price of oil.  As The Big Picture has been highlighting recently, even though oil remains in a nice bullish uptrend, sentiment is negative, making oil bulls the contrarians.

When we asked readers what fuel price would cause them to change their driving habits, it was good to see that 39% say they already have.  But those looking for a demand decrease if gas gets to $4/gallon may not want to get their hopes up, as only 13% said that level would cause them to alter their driving.  Twenty-one percent said $5/gallon would cause them to change, and unfortunately, 16% said that no price will make them change.  Hopefully it's because they're already taking the train. 

Oilprices_2

Oilprices1

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Monday
Apr282008

High Yield Spreads Down 20% From St. Patrick's Day High

Since the St. Patrick's Day inflection point, spreads on high yield corporate bonds are down over 20% from their high of 862 basis points (bps) versus US Treasuries (based on the Merrill Lynch Index of high yield debt).  As long as spreads can continue to come in, the environment for equities should remain positive, but at a level of 685 bps, spreads remain over 180% off their lows last June. 

High_yield_credit_spreads_042808

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Monday
Apr282008

Oil's Bull Now Double The Average in Gains and Length

Energystocks1_3Since 1986, the average bull market (20% rally preceded by a 20% decline) in oil has lasted 242 calendar days and averaged a gain of 67.85%.  The current bull market in oil started on January 18, 2007, and to its peak on April 22nd, the commodity rallied 136.47%.  That makes the current rally more than double the average in gains and nearly double the average in length.

Below we highlight stocks in the S&P 500 Energy sector that are up the most during oil's bull market (as of 4/24).  As shown, CNX is up the most at 157%, followed by NOV at 155%.  RRC, HES and EOG round out the top five.  These stocks have had huge rallies, and when energy prices do pull back at some point in the future, these top performers will most likely struggle.

Energystocks

 

Monday
Apr282008

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.

Over the last year, four sectors have underperformed the S&P 500 (Consumer Discretionary, Financials, Health Care, Telecom Services), while six have outperformed.  Although Financials have outperformed in recent days, the sector remains in a downtrend and is currently approaching the upper end of the downtrend.  How the sector acts from here should be a good tell as to where we are in the credit crisis.  If the sector stalls, it may indicate that things still need to be worked out.  If the sector can break its downtrend, it would be a sign that the worst is over.

After sharply outperforming, both Materials and Energy have hit minor snags as they traded to the upper end of their ranges.  How the dollar performs from here may be the biggest variable in the outlooks for these two sectors.  Meanwhile, the Technology sector has broken its downtrend line that was in place since late last year. While the sector is short-term overbought, investors may want to use any pullback as a chance to increase exposure.

Rstrength0428a

Rstrength0428b

Rstrength0428c

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Monday
Apr282008

This Week's Fed Rate Decision

Investors will once again focus on the Fed this Wednesday when policymakers announce their decision on the Federal Funds Rate.  After peaking at 5.25% in June of 2006, the Fed has lowered rates 300 bps since last September.  This week's rate decision is a little more up in the air since inflation concerns seem to have taken over the weakening economy as the problem du jour. 

We want to know what Bespoke readers want the Fed to do and what they think the Fed will do.  Please answer the two poll questions below, and we'll report back with the results prior to the Wednesday announcement.


What do you want the Fed to do?
Leave the Fed Funds Rate at 2.25%.
Lower the Fed Funds Rate to 2.00%.
Lower the Fed Funds Rate to 1.75%.
Raise the Fed Funds Rate to 2.50%.
  
Free polls from Pollhost.com


What do you think the Fed will do?
Leave the Fed Funds Rate at 2.25%.
Lower the Fed Funds Rate to 2.00%.
Lower the Fed Funds Rate to 1.75%.
Raise the Fed Funds Rate to 2.50%.
  
Free polls from Pollhost.com

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Friday
Apr252008

This Week's B.I.G. Tips Reports

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: Weekend Relief (a technical look at the S&P 500), Earnings Season Update (beat and miss rates and price performance), Playing an Oil Decline (what sectors and stocks to buy if oil has a pullback), Worst New Home Sales Reports (a look at market performance on poor housing numbers), Debt Markets vs Growth and Stock Performance (a unique country analysis), AAPL, AMZN and MSFT Earnings (typical trading patterns on each stock's report days), Oil Overbought (expecting a short-term pullback), Earnings Yield vs Bond Yields (how attractive are stocks vs bonds), Country Technicals (a look at the price charts of 22 equity markets), Country PEG Ratios (a look at stock valuations and GDP growth).

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Friday
Apr252008

Historical Michigan Confidence Chart

Today's Michigan Confidence reading of 62.6 would make April's level the lowest since March 1982 (the number still has to be revised).  For those interested, below we highlight a historical chart of Michigan Confidence since 1978.  As shown, sentiment in the US has taken quite a hit in recent months.

Michconf

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Friday
Apr252008

Bespoke's Sector Snapshot

Below we highlight our trading range charts of the S&P 500 and its ten sectors.  The red area represents between one and two standard deviations above the sector's 50-day moving average.  When the price moves into or above the red zone, it is considered overbought.  After suffering through a nasty downtrend where the price rarely made it out of oversold territory, the S&P 500 and most sectors are now overbought.  Technology, Energy, Materials and Utilities are the most overbought, while Financials, Consumer Discretionary, Consumer Staples and Health Care are the least overbought.  Energy and Materials have pulled back in recent days, but still have a ways to go before they get back into the neutral zone.

Spxte

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels

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