Friday
Jun062008

Triple Crown and Stocks: The Big Brown Sell Off?

With tomorrow's racing of the Belmont Stakes, all eyes will be on Big Brown as the horse attempts to win the Triple Crown for the first time since 1978.  To horse around a little, we looked to see how stocks have performed during Triple Crown years, and the trend is disconcerting.  Of the eleven prior winners, three occurred during the Great Depression and three occurred during the 1970s - not exactly good years for the stock market.  In total, the average performance of the S&P 500 during years when there was a Triple Crown winner was a decline of 4.2% with positive returns in only three out of eleven years (27.3%).

Triple_crown_3

While there have been eleven Triple Crown winners, there have also been 20 Triple Crown misses, where a horse won the first two legs, but failed to win the Belmont.  In these years, the performance of the Dow was considerably better with an average return of 7.8% and positive returns in fifteen out of twenty years (75%).  For reference, the overall average return of the S&P 500 over the same period has been a gain of 7.6% with gains in 63 out of 96 years (65.6%).  For the bulls, this gives them even more reason to root for Casino Drive.

Triple_crown_misses

Friday
Jun062008

Unemployment Rate Jumps By Fastest Rate Since 1975

Today's 10% rise in the Unemployment Rate from 5.0% to 5.5% marks the largest monthly increase since January 1975, and the twelfth largest increase since 1950.

Unemployment_rate_largest_increas_2   

The individual components of the report show that the largest area of weakness was among 16 to 19 year olds (it looks like a lot of kids will be playing video games this Summer).  On a positive note, the rate for married men and married women only rose by slightly more than 3%.

Unemployment_rate_5

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

Friday
Jun062008

Percentage of Stocks Above 50-Day Moving Averages

Below we hightlight the percentage of stocks in the S&P 500 and its ten sectors that are trading above their 50-day moving averages.  This is a good measure of breadth to see how healthy various areas of the market are.  It's a good sign when more than 50% of stocks are above their 50-days, and as shown, the level for the S&P 500 is currently at 63%. 

The only two sectors with less than 50% of stocks above their 50-days are Financials (42%) and Consumer Discretionary (48%).  Utilities, Telecom, Energy and Technology currently have the highest percentage of stocks above their 50-days.  After hitting 0% in early January, 76% of stocks in the Tech sector are now back above their 50-days.

Spx50day

Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day

    

Thursday
Jun052008

NYSE Short Interest Hits Another Record High

NYSE short interest data for the end of May was released after the close today, and from the looks of the report, the market's weakness in the second half of the month emboldened the short sellers.  Total short interest on the Big Board rose by 2.7% to another record high.  At current levels, short interest represents 4.3% of all shares outstanding and has now risen by more than 40% from its levels in October when the S&P 500 peaked.

Short_interest_end_of_may

On an individual stock basis, it's easy to see where the shorts are focusing their bets.  Of the ten stocks with the highest short interest as a percentage of float, all of them come from either the Consumer Discretionary or Financial sectors.

Short0530_2

Thursday
Jun052008

Today's Market Performance

Below we highlight the 1-day, 5-day and 1-month performance of key ETFs across all asset classes.  The S&P 500 tracking SPY ETF was up 2% today, but it's only up 0.56% over the last 5 days and down 4 bps over the last month.  SPY outperformed the Dow 30 and the Nasdaq 100 today, but underperformed the Midcap 400 (IJH) and Smallcap 600 (IJR).  On a sector basis, Energy was up the most at 5.22%, followed by Materials and Telecom.  The worst performing sectors today were Industrials and Health Care -- both up less than 1%.

Looking at country ETFs, Brazil (EWZ) was up the most today at 4.53%, followed by China (FXI), Russia (RSX) and India (INP).  Nice going, BRIC.  Japan's EWJ was the only country ETF that was up less than 1% on the day.  Of the commodity ETFs, USO was up a whopping 5% as oil soared.  And even though oil was up and the dollar was down, gold (GLD) was down 23 bps, causing gold bugs around the world to scratch their heads.  Finally, fixed income ETFs were down once again across the board.

To get performance and other technical measures for more than 200 ETFs on a daily basis, subscribe to Bespoke Premium today.

Recentetfperf

Thursday
Jun052008

Obama The Next President?

We use Intrade to track election sentiment, and as shown in the chart below, Obama has quite a big lead on John McCain in the Presidential election winner contract.  Currently, actual money is giving Obama a 60% chance of winning the election, while McCain is at 36%.  Interestingly, Hillary Clinton's chances of winning are still at 6.1%, and since this adds up to more than 102%, a premium is being placed on one of them. 

Thursday
Jun052008

Oil Support Levels Update

Earlier today, we posted that oil was at a key level right above its uptrend line.  Now that the commodity is up $5.63 on the day, it definitely seems to have held its uptrend!

Oilup605

Subscribe to Bespoke Premium today.

Thursday
Jun052008

Natural Gas Inventories

Today's release of Natural Gas in storage showed that inventories increased during the weak by 105 bcf, which was just slightly more than expected.  As the chart below indicates, natural gas in storage remains at above average levels and has not only been rising, but it has also been rising at a greater than average rate.  In early April inventories were 68 bcf above their long-term average.  Following today's report, inventories have increased to 138 bcf above average.

Nat_gas_inventories

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

Thursday
Jun052008

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!

Thursday
Jun052008

Oil Support Levels

Oil's recent decline has sent the commodity to the bottom of its uptrend line.  The trading action in oil over the next couple of days should tell us whether the declines were a simple pullback during the commodity's continuous uptrend or the start of its first real correction this year. 

Oil2008

Thursday
Jun052008

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.  We have also included a chart of the relative strength of the Transportation sector versus the S&P 500.  While it has not been considered an 'official' sector since 2001,  interest in the group has risen given its performance in the face of higher oil prices.

Over the last several months we have been noting the lack of relative strength in defensive sectors such as the Consumer Staples, Health Care, and Utilities.  The fact that these sectors were underperforming the market was a positive signal for the overall economy and the stock market.  However, over the last week, we have seen signals that trends in these sectors may be beginning to shift.  Relative strength in both the Consumer Staples and Health Care sectors are starting to break short-term downtrends, while the Utilities sector has peaked its head above resistance that has been in place for the last several months.  While it is still too early to say the longer-term trends in these sectors are broken, they should be watched closely in the following weeks for signals that the economy may be facing additional weakness.

Relative_strength_0605a

Relative_strength_0605b

Relative_strength_0605c

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

Thursday
Jun052008

Broker Default Risk

Below we highlight historical default risk for JP Morgan, Lehman, Morgan Stanley, Merrill, Goldman and Citigroup as measured by their 5-year credit default swap prices.  After peaking in March during the Bear Stearns blowup, default risk for banks and brokers declined sharply but still remained elevated when compared to normal historical levels.  As questions about Lehman and other firms have returned in recent weeks, default risk has begun to rise again, with Lehman and Merrill seeing the biggest increases.  While the price of Lehman's stock is now very close to its closing lows of March, default risk still remains below its March peak.  However, the spike is still disconcerting.  The rankings of default risk from lowest to highest are JP Morgan, Goldman Sachs, Citigroup, Morgan Stanley, Merrill Lynch and Lehman.

Brokercds_2 

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

Wednesday
Jun042008

Unfortunately, There's an "I" in BRIC (and a "C")

"Give me a BRIC...hold the I and the C" is an order many BRIC investors would have loved to have made over the last six months.  While BRIC (Brazil, Russia, India, China) has a huge investor following, India and China have done nothing but go down over the last half year.  As shown in the chart below, Brazil is up 9% and Russia is up 7% since early December, while India is down 21% and China is down 31%.  If things don't begin to turn around for the two laggards soon, we'll probably start seeing just "Brussia" ETFs.

Bric

Wednesday
Jun042008

Most and Least Shorted Stocks in the Russell 1,000

With the S&P 500 down this year, it's no surprise that the most heavily shorted stocks (when compared to their equity floats) are down significantly as well.  As shown below, NutriSystem (NTRI) is the most heavily shorted stock in the Russell 1,000, with 64% of its float sold short.  The stock is down 26% year to date.  WBMD and VMW trail NTRI and are both down 20% as well.  Other notables on the list of heavily shorted stocks are SHLD, SPWR, CROX, BIG (which is up 94%), KBH, LEN and ETFC.  While the shorts have pounded most of these names lower thus far in 2008, they should pop on any significant broad market rally going forward.  ABT, GE, T, PEP, XOM and KO (all largecap names) are all on the list of the least shorted stocks in the Russell 1,000.

Heavilyshorted

Leastheavilyshorted

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

Wednesday
Jun042008

Oil Prices vs Expectations

The forward contracts on crude are projecting prices to stay above $123/barrel from now through 2011.  This is much higher than the median projections from oil analysts according to Bloomberg.  As shown below, the consensus prediction from analysts is for oil to remain at $100 or less from Q3 '08 through 2011.  The median projection for oil in 2010 and 2011 is $92 versus the forward contract price of $123 and change.  Hopefully in this case the actual money isn't right.

Analystforward