Thursday
Apr172008

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.

After the strong gains in commodities over the last week, it probably comes as little surprise that the Energy and Materials sectors have sharply outperformed.  In the short term, though, both sectors are trading at the upper end of their ranges, making longs more risky.

Strong earnings reports from INTC and IBM have helped to boost the technology sector as it tries to break the downtrend that has been in place since October.

Finally, for most of the year Utilities have been uncharacteristically weak given the bearish economic and market environment.  However, over the last couple of weeks, we have seen an uptick in relative strength, which is not necessarily something that the bulls should hope for.

Rs041608

Rs041608a

Rs041608b_3 

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Thursday
Apr172008

IBM At Bull Market Highs

Even with the markets struggling since peaking last October, IBM has managed to make new bull market highs this morning after reporting strong earnings last night.  The next high for the stock to take out is the $123/$124 level made in December 2001.  As the biggest point mover in the Dow, this is a good thing.

Ibm10year

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Wednesday
Apr162008

Stocks vs. Bonds: Stocks Reversing

After almost a year of underperformance, stocks have recently broken their downtrend of underperformance versus US Treasuries.  The chart below is reproduced from our Daily Morning Lineup, and it highlights the relative strength of stocks versus bonds over the last year.  When the line is rising, it indicates that stocks are outperforming bonds, and vice versa for a falling line. 

Two weeks ago, we highlighted that stocks had finally broken the downtrend that had been in place since the start of the year.  Leading up to today, stocks drifted lower relative to bonds until yesterday where they found support at the downtrend.  With today's rally, though, the relative strength pattern is also showing signals of a head and shoulders bottom, which is considered a positive technical signal.  Hopefully tonight's positive news from IBM can carry over into the trading day tomorrow.

Bonds_vs_stocks_april_16

To receive the Daily Morning Lineup in your inbox every morning, subscribe to Bespoke Premium today.

Wednesday
Apr162008

Another Up Day During the Correction

Today's gain of 2.27% marks the 25th time the S&P 500 has had an up day of 1% or more since the market peaked on October 9th, 2007.  For those interested, the index has averaged a decline of 0.30% on the day following these +1% days and a decline of 1.12% over the next week.

1days

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Wednesday
Apr162008

Today's 52-Week High List - Energy Dominates

Fifty-five stocks in the Russell 1,000 have made new 52-week highs today as the market rallied +2%.  As shown below, with oil approaching $115 per barrel, the list is dominated by Energy stocks.  Conversely, not one Consumer Discretionary stock is on the list.  Notables on the list include Wal-Mart (WMT), HAL, BTU, AFL, BNI, FSLR, MON and MOS.  In what has primarily been a red market this year, it's good to see some greens again.

52weekhighs

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Wednesday
Apr162008

ISRG - The Wonder Stock

lntuitive Surgical (ISRG) is set to report earnings after the close tomorrow.  For those not familiar with the name, ISRG develops robotic surgical systems and has gone from the single digits in 2003 to a price of $344 today.  To say that ISRG has been a good performer since going public would be the understatement of the year. 

Part of that performance has been caused by the astonishing moves it has made in reaction to its quarterly earnings reports.  As shown in the bottom table below, the company has beaten earnings estimates 100% of the time for the quarterly reports we have on file since mid-2004.  Its average 1-day change in reaction to all earnings reports has been 11.24% (yes, 11.24%), and it has gained an average of 16.79% on the day following its last 5 reports.  On the day following its evening report on January 31st, it was up $51.61 (20.32%), and it went up 32% following its July 2007 report. 

To say that expectations are high for tomorrow's report is also a huge understatement.  With investors so used to an earnings "beat" along with big gains, anything less than a strong beat will most likely be met with heavy selling pressure.  But we thought the same thing prior to its last report and once again it didn't disappoint. 

Isrgchart

Isrgearnings

 

Wednesday
Apr162008

Writedown Poll Results

On Monday we polled Bespoke readers for their thoughts on the Q1 writedown amounts for Merrill Lynch (MER) and Citigroup (C).  We asked if Merrill's writedown would be more or less that $5 billion and if Citi's would be more or less than $12 billion.  Those numbers seemed to be the consensus writedown amounts earlier in the week, but today's front page article in the WSJ says MER's could be between $6 and $8 billion.

As shown below, 73% of the 271 respondents think Merrill's Q1 writedown will be more than $5 billion.  Of the 269 participants in the Citi writedown poll, 58% think its writedown will be more than $12 billion.  There are analysts that think writedowns will be much less for each of these firms, but our consensus shows that investors are looking for things to be worse than the $5/$12 billion levels.  If writedowns turn out to be less, look for shares to rally.

Merwrite

Citiwrite

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke. 

Wednesday
Apr162008

Bespoke's Commodity Snapshot

The green shading in the charts below represent 2 standard deviations above and below each commodity's 50-day moving average.  At $114, oil is now back to extreme overbought territory, so a short-term pullback to the $110 level (which is now support) is most likely in the cards.  Natural gas and corn are the only other commodities trading at the very top of their trading ranges.  Gold, silver and platinum are just about in the middle of their trading ranges, while coffee is closer to the bottom and orange juice remains in its downtrend.

Oilnatg

Goldsilver

Platcopp

Cornwheat

Ojcof

    

Wednesday
Apr162008

Bespoke's Sector Snapshot

Below we highlight our trading range charts of the S&P 500 and its ten sectors.  The green shading represents between 1 and 2 standard deviations below the 50-day moving average and vice versa for the red shading.  As shown, the S&P 500 is currently in neutral territory, trading just below its 50-day moving average.

Spxte

The Financial sector is the only one trading slightly in oversold territory, while Energy, Consumer Staples, Materials and Utilities are in the red zone. 

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Tuesday
Apr152008

Treasury Yields and the Dollar

Both the 10-Year Treasury yield and the US Dollar index are at technical tipping points.  As shown in the first chart below, the yield on the 10-Year is hitting resistance at the top of its downtrend line.  Since stocks have been moving up as Treasury yields have risen (and fallen as yields have fallen), it would be nice to see this downtrend broken.

While it's hard to find many positives with the chart of the US Dollar, it has at least made a short-term bottom in recent weeks and is currently in a "flag" pattern.  When this happens, the price eventually breaks big to the upside or downside.

10yr415

Dxy415

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke. 

Tuesday
Apr152008

Bespoke's Paul Hickey on CNBC Tuesday at 2:15

Street_signs_4Bespoke's Paul Hickey will appear on CNBC's Street Signs today at 2:15 PM ET.  Topics of discussion will include the market's seasonal pattern following tax day.

Tuesday
Apr152008

INTC Earnings After the Close

lntel (INTC) reports earnings after the close today, and below we provide a snapshot of the company's historical quarterly reports since the end of 2001.  This snapshot is from the Bespoke Earnings Report Database that has the same information for more than 2,700 US stocks. 

There are a couple of things worth highlighting based on Intel's historical reports.  Since 2001, the company has beaten earnings estimates just over half of the time.  On the first trading day following its report, the stock has averaged a decline of 1.83%.  When the stock has gapped up at the open on earnings, it has averaged a decline of 1.52% from the open to the close.  When it has gapped down at the open following earnings, it has averaged a decline of 0.44% from the open to the close.

Traders and investors find this information useful for stocks they own in their portfolios as well as for finding trading opportunities around earnings reports.  If you'd like to learn more about purchasing the Bespoke Earnings Report Database, please email info@bespokeinvest.com

Intcearnings

Tuesday
Apr152008

Bad News on the Front; Good News In the Back

Russian_oil_productionOil is trading at another record high today, after eclipsing $113 per barrel.  One driver of today's surge is a front page story in the WSJ highlighting that Russian oil production in 2008 is set to decline for the first time in ten years.  The article explains that "Declining production from the world's largest oil producer and one of its largest exporters puts further pressures on an already strained market and adds to the potential for higher prices for a global economy coping with a slowdown."

While the front page story of today's Journal focused on a 1% decline (approximately 100,000 barrels) in Russian oil production in the first quarter of 2008, not all the news is bad.  On page 14 of today's issue, the Journal ran a story highlighting a potential 33 billion barrels in new supply off the coast of Brazil.  If confirmed, the discovery would represent the largest ever new discovery of oil in the world.  Why the 100,000 barrels in decreased production made the front page, while the 33 billion in potential new supply was relegated to page fourteen is not clear, but net net, you would expect these two stories to have a negative impact on the price of oil.

Subscribe to Bespoke Premium today.

Tuesday
Apr152008

LEH, MER and MS Credit Default Risk

Below we highlight the credit default risk for Lehman (LEH), Merrill (MER) and Morgan Stanley (MS) as measured by the prices of their 5-year credit default swaps (CDS).  These swaps are measured in basis points and represent the cost per year of insuring against default for the next five years.  We chose these three because they are currently the highest priced in the global bank and broker arena.  As shown, default risk has declined dramatically since late February/early March when financial markets seemed to be on the brink of collapse.  While they are sharply lower from their peaks, swap prices remain high.

Cdslehmerms

Interestingly, stock prices for LEH and MER have once again moved lower over the past couple of weeks, even as default risk has fallen.  Stock prices for each of these companies were much higher when CDS prices were at similar levels in early 2008.

Leh414

Mer414

Ms414

   

Monday
Apr142008

Writedown Poll -- Merrill Lynch and Citigroup

Merrill Lynch (MER) and Citigroup (C) are expected to report earnings (or the lack thereof) later this week.  MER is expected to report on Thursday morning, while Citi is expected to report Friday morning.  The current Bloomberg estimate for Merrill's Q1 '08 earnings per share is -$2.056.  Citi is currently expected to report a loss of 93.3 cents per share.

Investors will also be looking at how big the writedowns are for Citi and Merrill.  News reports seem to be using $12 billion as a target level for Citi's writedowns, while Merrill is at $5 billion.  We want to know what Bespoke readers think they'll be.  Will writedowns be more or less than the levels being thrown around in the financial world?  Please take part in the two polls below, and we'll report back with the results before the two companies report.


Will Merrill Lynch's Q1 writedown be more or less than $5 billion?
More
Less
  
Free polls from Pollhost.com


Will Citigroup's Q1 writedown be more or less than $12 billion?
More
Less
  
Free polls from Pollhost.com