Monday
Jun162008

Expected Earnings Growth Through Q1 '09

Earlier we posted estimates for Q2 earnings growth.  Below we highlight expected year-over-year quarterly earnings growth from Q2 '08 through Q1 '09.  As shown, things are expected to get progressively better after the current quarter, but it's important to remember that the bar has been set much lower for growth since earnings didn't really start to get weaker until Q3 '07.  As an example, Financials are expected to see year-over-year earnings growth of 452.7% in the fourth quarter versus Q4 '07.  Technology, Energy and Consumer Staples are expected to provide the most consistent earnings strength over the next four quarters.

Sectorepsgrowth

Sectorepsgrowth1

Sectorepsgrowth2   

Monday
Jun162008

Expected Second Quarter Earnings Growth

This week is somewhat of a practice round for second quarter earnings season that really kicks off in early July.  Along with FedEx (FDX), which reports on Wednesday, Morgan Stanley (MS) and Goldman Sachs (GS) report their numbers this week.  Since earnings season is almost upon us, we thought we'd highlight the current growth expectations for the S&P 500 and its ten sectors.  In the first chart below, we highlight year-over-year growth expectations for the S&P 500 in Q2 '08.  At the start of the year, estimates were actually positive at 3.2%, but they have steadily drifted lower and currently stand at -7.7%.

The bottom chart looks at current Q2 growth estimates for the ten S&P 500 sectors.  Once again, Financials and Consumer Discretionary are the main cause for the negative overall number.  As shown, Financial earnings are expected to be down nearly 46% from the second quarter of last year.  Consumer Discretionary ranks second worst at -19%.  On the positive side, Energy is not surprisingly expected to see the strongest growth at 20.5%.  Energy is followed by Technology at 12%, Consumer Staples at 8.6%, and Health Care at 5.9%.

Epsgrowthq2

Epsgrowthsector

 

Monday
Jun162008

Bespoke's Commodity Snapshot

Below we highlight our trading range charts for ten major commodities.  The green shading represents between one and two standard deviations above and below the commodity's 50-day moving average.  When prices move above the green shading they are considered overbought (and oversold for moves below the green shading). 

It's no surprise that the price of oil is trading at the top of its range.  The last time it traded close to oversold territory was in early February when all commodities experienced a selloff.  Since then, crude and natural gas have diverged from the rest of the bunch.  Gold, silver, copper and platinum continue to trade sideways or in downtrends, and the same goes for orange juice and coffee.  Flooding in the Midwest has caused corn and wheat prices to spike once again.  As shown below, corn prices went parabolic last week.

Oilnatg

Goldsilver

Platcopp

Cornwheat

Ojcof

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Monday
Jun162008

Option Expiration Weeks

A look at historical returns during option expiration weeks shows that the week is opening off according to script.  Since 2006, Mondays have typically been the worst day of the week, as it is the only one with an average return that is negative (-0.08%).  On Tuesdays, things get a little more dicier.  While it has the best overall average return (0.33%), it is also the most volatile.  On Tuesdays of expiration weeks, the S&P 500 has had a 1% move (up or down) 45% of the time.  Things typically start to settle down on Wednesday.  While it does not have the highest average return (0.21%), it has been the most consistently positive, with gains 69% of the time.

Option_exp_week

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Monday
Jun162008

AAII Bearish Reading Above 50%

Last week's American Association of Individual Investors' (AAII) survey of investor sentiment showed that bearishness among this group is back above 50%.  As of June 12th, the percentage of bullish investors came in at 31.25%, 53.58% were bearish, and 15.18% were neutral.  This week's bearish reading was the 11th time in the last year that negative sentiment based on this survey exceeded 50%.  The only other time since this survey began in 1987 that bearish sentiment reached these levels this many times in a one-year period was back in 1990-1991, when there were 14 weekly readings of bearish sentiment above 50%.

Aaii_bearish_above_50

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Saturday
Jun142008

This Week's B.I.G. Tips Reports at Bespoke Premium

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: The Week In Review (summarizing the week's events), Extreme Divergence in Sector Performance (Energy and Financials move in opposite directions), Treasury Yields Rally (what happens to stocks and bonds after yields rally as much as they have?), Retail Sales by Category (interesting charts provide a breakdown of this month's Retail Sales report), Financial Declines (when will the bleeding stop), Largest Four-Week Declines in Oil Inventories (how do oil inventories affect oil prices), Global Technicals (chart analysis of 21 country stock markets), Throwing Good Money After Bad? (should investors be helping Financial firms raise extra capital?), Market Bottoms and 52-Week Lows (has the bottom been made yet?).

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Friday
Jun132008

Links for Friday the 13th

As if the market hasn't been bad enough lately, tomorrow is Friday the 13th.  For those readers who are superstitious, we calculated the historical performance of the S&P 500 on these days going back to 1960.  The average return on Friday the 13th has been a gain of 0.03% which is right inline with the average of all days since 1960.  Over the last ten years, though, the returns improve significantly with average returns of 0.28% and positive returns 63% of the time.

Friday_13th_61208_3

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Friday
Jun132008

Stocks Down, Bonds Down: Global Returns

Below we highlight the year-to-date changes of major equity indices and ten-year government bond yields for a number of countries.  As shown, the majority of equity indices are down, while the majority of bond yields are up (bond prices down).  Across the globe, stocks and bonds haven't really worked this year, as the money has all flowed into commodities.  China's Shanghai Composite is still by far the worst performing index at -45%.  China is followed by India, Hong Kong, Italy, France and Germany.  The US has held up relatively well, ranking 6th out of 21 countries analyzed in terms of market performance.  Mexico, Brazil, Canada and South Africa are the only countries with positive stock market returns.

Bond yields have risen the most in Singapore, where their 10-year government bond rate has gone up 47% in 2008.  South Africa, Japan, the UK and Switzerland trail Singapore with the highest rises in yields.  Again, the US hasn't done poorly when compared to other countries.  With yields up just 6% this year, government bonds here haven't gotten hit nearly as hard as elsewhere.

Ytdstocksbonds   

Equityperf

Govtbondyields

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Friday
Jun132008

Best and Worst Performing Stocks in the Russell 3,000 Year to Date

For momentum investors out there (both on the long and short side), below we provide the best and worst performing Russell 3,000 stocks year to date.  The list of winners is primarily made up of stocks in the Energy sector.  Clayton Williams Energy (CWEI) is up the most at 245%, followed by Patriot Coal (PCX), Finish Line (FINL) and Alpha Natural Resources (ANR).  Currently, 23 stocks in the Russell 3,000 are up more than 100% this year, and two-thirds of stocks in the index are down on the year.  The list of losers this year is mostly dominated by Financials, but a Health Care name tops the list- KERX.  Ambac and Thornburg Mortgage have been the second and third worst performers in the index this year. 

For those that think the current trend of Energy outperforming and Financials underperforming will continue, these lists could remain similar only with the performance of the winners getting better and the performance of the losers getting worse.  For those that think the trend will reverse in the second half of the year, these names could fall off the best and worst lists quickly. 

Bestrussell_2

Worstrussell

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Friday
Jun132008

Mortgage Rates Fly Higher

The national average for 30-year fixed mortgage rates has risen from a low of 5.62% on April 14th to 6.29% as of yesterday's close.  As shown in the first chart below, similar spikes occurred in the first half of 2006 and 2007 as well.  Anyone that wants the real estate crash to come to an end soon knows that a rise in rates like this is not going to help.  And clearly the rate cuts from the Fed have done nothing to move mortgage rates lower.  The national average for 30-year fixed mortgage rates was at 6.24% when the Fed first cut the Discount Rate from 6.25% to 5.75% on August 17th last year.  Since then, the Fed Funds Rate has declined from 5.25% down to 2.00%, but mortgage rates are now up 5 bps to 6.29% over the same time period.

30yrfixedrates   

Friday
Jun132008

Bespoke's Morning Lineup

One of the hardest things about this market for active investors is coming into the office in the morning and trying to catch up on all the news and events taking place.  For that reason, one of the more popular reports included in the Bespoke Premium product suite is the Bespoke Morning LineupThe report is your premarket source for up to date information concerning market events occurring overnight and in the pre-market.  On a daily basis, we summarize major international market events, stock specific news of note, analyst actions, and economic indicators/events.  In addition, we also outline what major indicators, events, earnings reports, conferences, dividends, splits, and upcoming index changes are due the following day so that you can plan ahead and be ready.  The report's concise format allows readers to get the information they need without taking up their valuable time.

We recently released our new redesigned version of the Bespoke Morning Lineup.  In this version, we have added an additional page that provides more essential information on the market heading into the trading day.  While page one still provides the information subscribers have become accustomed to, we have also added a summary of the Bespoke Market Timing Model so that readers can quickly see how the sentiment, technical, and fundamental indicators are stacking up.

Morning_lineup_page_one

Page two of the report can best be described as the market's "rap sheet." By looking at this page, readers get a quick perspective of the market's record and where it is versus where it has been.  In the left hand column of the page, we provide the historical 50-day moving average spread of the S&P 500, the daily number of stocks in the index that are overbought and oversold, and the relative strength of stocks vs bonds.  The middle column of the page summarizes the current market internals as well as a graphical depiction of where sectors, bonds, and commodities stand with respect to their current trading ranges.  Finally, in the right hand column we highlight yesterday's biggest movers, as well as overbought and oversold stocks that are the most likely to rise or fall based on their prior price patterns.

Morning_lineup_page_two

To see a sample copy of the new Bespoke Morning Lineup, please click the following link: Bespoke Morning Lineup.  The last two pages of the sample also contain a helpful explanation of each category within the report.  If you like what you see, sign up for Bespoke Premium to receive this report every day and take back your morning!

Friday
Jun132008

Consensus Economist GDP Estimates and Recession Odds

Bloomberg recently released their monthly survey of 65 economists, and below we highlight the results on GDP and recession odds.  For the first time this year, consensus GDP growth estimates for Q2 '08 increased from 0.10% to 0.50%.  Q3 '08 also increased, but Q4 '08 and Q1 '09 ticked lower.  Based on median estimates from all economists surveyed, a recession as measured by two consecutive quarters of negative GDP growth is not expected.

Gdpestimates

The economists are also asked what the odds of a recession are over the next 12 months.  That number ticked lower for the second month in a row after peaking at 70% in April.  Currently, economists are putting the odds right at 50%.  Below we highlight a historical chart of recession odds on a monthly basis from economists compared to the recession odds from traders on Intrade.  While economists lowered their recession odds this month, the odds went up slightly at Intrade from 27.3% in May to 32.9%. 

Recessionestimates

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Thursday
Jun122008

Percentage of Stocks Above 50-Day Moving Averages

As shown in the first chart below, market breadth has taken a turn for the worse in the last week or so.  Currently, just 33% of stocks in the S&P 500 are above their 50-day moving averages.  Much of this weakness has come from the Financial and Industrial sectors.  After moving up to 80%+ in early May, only 17% of Financials and 25% of Industrials are above their 50-day moving averages.  These sectors clearly have some work to do to get back on track. 

Spx50day

Finlindu50day

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Thursday
Jun122008

Oil: Like Nothing We've Ever Seen?

Up five dollars one day.  Up ten the next.  Down three.  Up five.  Down three.

With all the ups and downs in oil lately, the recent volatility in the oil market seems extreme.  We've even heard some traders say that in all their years of trading, the volatility in oil is like nothing they have ever seen.  However, while oil has been having large swings in dollar terms, based in percentages, the swings have hardly been historic.  The chart below shows the 10-day average intraday high/low spread of oil since 1986.  At current levels, the average daily intraday spread over the last ten days has been 4.4%.  While these intraday swings are considerably higher than the long-term average, calling them 'historic' might be somewhat of a stretch.

Crude_oil_high_low_spread_2

 

Thursday
Jun122008

Commodity ETF Volume

As we all know, there has been a boom in commodity ETFs and ETNs over the last few years, and we recently counted 53 that trade on US exchanges.  Investors have increasingly plowed into these securities to trade the run-up in commodity prices as well as easily gain exposure to an asset class that was once difficult to get into.  We gathered the daily volume of these 53 commodity ETFs and ETNs from the start of 2006 and then calculated a 30-day moving average of the total daily volume of all 53 securities.  As shown in the first chart below, volume has soared since the start of 2006.  Given the significant rise in commodity prices, it's not hard to see why volume has surged.

Commodityetfs

Recently, there has been talk that the large number of new commodity ETFs has added to the rise in prices.  While it's hard to quantify the impact that they have had, it's important to note that relatively speaking, the volume is really not that big.  As shown in the chart below, the average daily volume of all commodity ETFs and ETNs is just 1/6th of the average daily volume for the S&P 500 tracking SPY ETF.

Commodityvsspy