Friday
Apr182008

Sector Overview

Whatworks_on_wall_street_3 Here at Bespoke, we strive to provide information in the most clear and concise manner possible. To that end, we're always looking for ideas as to how to display data in a way that viewers can grasp the most possible information in as short a time as possible.  One source we have found to be extremely useful is Edward Tufte's most recent book, Beautiful Evidence.  For those who are unfamiliar with his work, Tufte has published several books on analytical design, and he is considered as one of the experts in the field.  One of the ideas we have adapted from Tufte's most recent book are Sparklines, which are what he calls "small, high resolution graphics embedded in a context of words, numbers, images."

In the table and charts below, we summarize the historical trading ranges of the S&P 500 and its ten sectors. Currently, no sectors are oversold, while five sectors are overbought (Column 2).  We also highlight each sector’s correlation with the S&P 500 over the last year (Column 3).  As shown, the only sector that has had no positive correlation to the S&P 500 over the last year is Energy.  Sectors that have been the most positively correlated to the market include Telecom Services (0.96), Financials (0.88), and Consumer Discretionary (0.86). 

For each sector, we have also provided a chart showing the daily readings of the sector’s price versus its 50-day moving average over the last year. On each chart we also include the dates when each sector hit its most overbought and oversold levels over the last year. These charts allow readers to quickly and easily assess any relationships and patterns between sectors. 

One notable aspect of the relationship between the sectors is how the chart of the Industrial sector has been ticking lower, even as the rest of the market has recently been rising.  Part of the reason for this is due to GE's large weight in the sector (even though its industrial related units make up less than half of its revenues), and the stock's big earnings miss on April 11th.  Even still, given its large exposure to international markets and the so-called infrastructure play, shouldn't this sector be leading instead of lagging the market?

Sector_ranges_4

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

Friday
Apr182008

Percentage of Stocks Above 50-Day Moving Averages Shows Market Strength

Below we highlight the percentage of companies in the S&P 500 and its ten sectors that are above their 50-day moving averages.  As shown, recent market action has pushed these breadth measures to 2008 highs.  Currently, nearly 70% of stocks in the S&P 500 are above their 50-day moving averages.  Even though the market is well below its highs from last October, breadth is getting close to the same levels that it was at back then.  Even 70% of stocks in the Financial sector are above their 50-days.  Industrials, Energy and Utilities are all above 80%, while Consumer Staples, Consumer Discretionary, Health Care and Telecom rank the worst.

Spx50day

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels

      

Friday
Apr182008

Market Internals

Below we highlight our S&P 500 trading range chart and its historical 10-day advance/decline line.  As shown below, the price of the S&P 500 has moved slightly into overbought territory, but its 10-day advance/decline line is actually negative.  This divergence indicates that there is room for the index to run on the upside before actual breadth gets overbought.

Spxte

10dayadline

   

Friday
Apr182008

1% Gap Openings

With the S&P 500 poised to open up more than 1% this morning, we looked at recent positive gap openings (using the SPY ETF as a proxy) to see how the S&P 500 typically performs from the open to close.  As shown, since the second half of 2007, the average return is 0.4%. 

Today's intraday trading will be closely watched as a gauge of the market's sentiment.  In the table below, we have highlighted each of the 1% gaps since the S&P 500's low on March 10th.  In all three of these occurrences, not only did the market gap higher, but it followed through in the regular session with gains of another 1% each time.  If the market can manage to build on these gains when the opening bell rings, it will be an indication that this rally has room to run.

Spy_opening_gaps_2 

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

Thursday
Apr172008

Bespoke's International Revenues Database Updated for 2007

It has become common practice this earnings season for companies to highlight the percentage of revenues that they generate outside of the US.  Due to the falling dollar, many investors have placed a premium on companies with large overseas exposure. 

Bespoke has been covering the international revenue angle for some time now.  Last year around this time, we released an in-depth strategy piece on the topic for Bespoke Premium subscribers.  Due to high demand, last year we created the Bespoke International Revenues Database that highlights the percentage of revenues each company in the S&P 500 and Russell 1,000 generates in the US and outside of the US (see sample below).  Now that all of the '07 numbers have been released, we have just updated the database to include the most recent yearly international revenue numbers.

The Bespoke International Revenues Database is available to all yearly Bespoke Premium subscribers.  Please click here to subscribe, or if you are a monthly subscriber and would like to upgrade to our yearly subscription (a savings of over 20%), please email us or call 914-315-1248.

Thursday
Apr172008

Top Holdings of the Top Hedge Fund Earners Last Year

According to Alpha Magazine, hedge fund manager John Paulson earned $3.7 billion last year after reaping profits from bearish subprime bets in his Paulson & Co. fund.  Paulson was followed by George Soros and James Simons, who reportedly earned $2.9 billion and $2.8 billion respectively.

While they aren't required to report the stocks that they are short (something we think should be reported), they are required to report stocks they are long in their 13Fs.  From their year-end filings, below we highlight the top ten holdings in each of the funds run by the top 3 hedge fund earners in '07.  While Paulson's fund has less than 50 equity holdings, Soros Fund Management and Renaissance Technologies have an extremely large number of stock holdings, so the top ten make up a smaller portion of their overall portfolios.  For each stock, we also include its sector, price and year-to-date percent change.  Remember, these were their top holdings at the end of '07, so things could have changed significantly since then.  And Paulson made his money on his shorts and not his longs. 

Paulsonco_2

Sorosfundmanagement

Renaissancetech   

Thursday
Apr172008

Largest US Companies By Market Cap; WMT Gains, GOOG Drops

Last October, Google (GOOG) had climbed its way all the way up to the 5th largest US company.  Below we have updated the list of the largest US companies by market cap, and as shown, Google has dropped down to 13th.  While Google moved down the list the most, Wal-Mart (WMT) has taken its place, moving from the #13 spot to #5.  The top 5 in order are XOM, GE, MSFT, T and WMT.  PG, Berkshire Hathaway, CVX, JNJ and IBM round out the top 10.  Other stocks that moved up the list since last October include JPM (18 to 12), KO, COP, HPQ, PEP, SLB and ORCL.  Along with GOOG, stocks that moved down the list are BAC, CSCO, PFE, AAPL, C and AIG.  Also notable is that the combined loss in market cap of the largest 25 companies is the equivalent of losing XOM and JPM as companies.

Largestcompanies1

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