Monday
May192008

Bespoke's Sector Snapshot

Along with our commodity snapshot, we start off the week with our sector snapshot that highlights the one-year trading ranges of the S&P 500 and its ten sectors.  The top of the red area is two standard deviations above the sector's 50-day moving average, and the bottom of the green area is two standard deviations below.  All sectors except for Financials and Health Care are currently trading in or above the red zone.  Energy, Materials and Technology are the most overbought sectors at the moment.  Since the March lows, most sectors have developed nice short-term uptrends, but at current overbought levels, sectors could see a pullback to the bottom of their upward sloping channels.

Spxte

Finlindute_2

Inftenrste

Condconste   

Hlthmatrte

Utiltelste

Monday
May192008

Bespoke's Commodity Snapshot

Below we highlight our commodity snapshot using our one-year trading range charts.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.

After breaking to new highs a couple of weeks ago, corn prices pulled back last week and broke below a tight trading range that had been in place since early April.  Corn had been one of the only other commodities to keep up with rising oil and natural gas prices after the correction experienced a couple of months ago. 

Metals rallied again last week for the first time in awhile.  Platinum prices had the best run, and it is now trading into overbought territory.  The double bottom it made earlier this month has proven to be an almost perfect technical setup on the long side.  Fortunately, wheat prices continue to decline, and last week they hit their lowest levels since December 3rd of last year.  Orange juice continues in its downtrend and coffee is trading right in the middle of its trading range.

Oilnatg

Goldsilv

Platcop

Cornwheat

Ojcof

    

Friday
May162008

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: Bespoke's Torture Index (a bad sign for consumer), Earnings Estimate Revisions (stocks and sectors with the most upward and downward earnings revisions), May Options Expiration (typical market performance on May expiration days), Oil and Dollar Rallies (what happens when they both rally), Weekly Investor Sentiment Surveys (what is investor sentiment telling us), Sector ETF Technicals (a technical perspective of the ten S&P 500 sectors), Food Inflation (an in-depth look at food prices), Gold and Oil Splitting Up (what happens when the two commodities diverge), VIX Declines (market performance following large declines in the VIX), Retail Sales (market performance when Retail Sales is weaker or stronger than expected), Triple Play Charts (a look at the best stocks from this earnings season), Monthly Short Interest Report (sector and stock short interest analysis).

Click here to sign up for Bespoke Premium and begin receiving our B.I.G. Tips reports today.

Friday
May162008

Oil & Gas Equipment & Services ETF

We received a positive response to our post on the stocks that make up the Clean Energy ETF (PBW) yesterday.  Below we highlight the stocks that make up the S&P Oil & Gas Equipment & Services ETF (XES).  As shown in the chart below, XES is currently trading well above its 50-day moving average.  Obviously, its holdings are trading well into overbought territory as well.  Superior Energy (SPN) is the furthest above its 50-day moving average at 24.48%.  SPN is followed by FTI, PTEN and CAM.  TDW, ESV and RDC have the lowest estimated P/E ratios of the stocks that make up XES, while FTI, EXH and SLB have the highest.

Xes50day_2

Xesholdings_2

 

Friday
May162008

Donald Trump on Oil

CNBC viewers had the "privilege" to get Donald Trump's thoughts on the economy, oil and OPEC yesterday morning.  Click here to view the video.  One of Trump's proposals was to "tax the oil companies into oblivion" since they're making so much money now.  Joe Kernen eventually went on to ask Trump if he would support the same taxes on real estate if it was as hot as oil was right now.  Trump's response, "Yeah, but the fact is it's not hot like oil.  You know, oil's been hot forever...I tell people to go into the oil business because since I've been growing up, literally, it's never had a down tick.  I mean, it had one year where it was a little bit down, but basically it's never had a down tick."  Kernen went on to ask about the long periods when oil didn't go anywhere, but Trump wasn't having any of it.

Below we highlight the inflation adjusted performance of oil and new home prices from 1970 to 2000.  As shown, oil did nothing but tick down from 1981 to the late 90s, while real estate stayed in a pretty nice uptrend over the 30 year period.  We realize these are residential real estate prices, but the trend was pretty much the same in commercial, which Trump is involved in.  While oil has had its fun this decade, it definitely hasn't "never had a down tick."

Inflationadjusted

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Friday
May162008

Buffett: "Was It Something I Said?"

While Berkshire Hathaway typically does pretty well following the company's annual meeting in Omaha, the stock has taken a hit since this year's gathering at the start of the month.  After rallying 5.7% in the seven days leading up to the May 3rd meeting, BRK/A has since given it all back and then some, declining 8.87%.  While the company did have a disappointing earnings release right before the meeting, Warren Buffett must be asking himself, "Was it something I said?"  Actually, he's got about 62 billion reasons not to really care.

Brkaannual

Friday
May162008

The Enron Loophole -- Who Cares?

For those that listen to sports talk radio in the NYC area, you have definitely heard the "Close the Enron Loophole" advertisements calling for an end to the "speculation and manipulation of energy prices" in hopes of lower prices for consumers.  The "Close the Enron Loophole" lobbyists finally got their wish yesterday, and oil went down -- for about an hour.  Has all their time and money spent trying to get this through Congress already been washed away with oil back to record highs in no time?

Oil515

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Friday
May162008

Homebuilders When Housing Starts Are Stronger Than Expected

Today's Housing Starts report showed the strongest month-over-month gain in more than two years.  Does this mean investors should buy the homebuilders for a trade?  Not necessarily.  In the table below, we highlight the performance of the Homebuilder ETF (XHB) from the open to close on days when Housing Starts are released.  Since it started trading in 2006, the homebuilder ETF has done better from the open to close on days when Housing Starts were weaker than expected.  When the report is stronger than expected, the average return from open to close is 0.1%, but when Housing Starts come in weaker than expected, XHB averages a gain of 0.8%.

Xhb_on_housing_days_2

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Friday
May162008

A Look At The Respective Rallies in Tech, Housing and Oil

Bubblelab_2We did a B.I.G. Tips report last Tuesday comparing the tech and housing bubbles to the current rally in crude oil.  Paul Kedrosky asked to publish the chart from the report last week, and then he provided his take on the oil rally the next day.  Today the Wall Street Journal makes the same comparison in a front-page article titled "Bernanke's Bubble Laboratory."  Below is the first paragraph from the story:

"First came the tech-stock bubble. Then there were bubbles in housing and credit. Chinese stocks took off like a rocket. Now, as prices soar on every material from oil to corn, some suggest there's a bubble in commodities."

Click here to check it out.  It's worth a read.

Below is the chart from our B.I.G. Tips report last week.  Click here to subscribe to Bespoke Premium today.

Techhousingoil_2 

Thursday
May152008

2008 Country Returns

Below we highlight stock market performance for 86 countries (local currency).  So far this year, 30 out of the 86 country indices are up, while 56 are down.  Ghana is up the most at 44.67%, followed by Oman, Qatar, Jordan, Puerto Rico, Kuwait and Costa Rica.  Vietnam, Bulgaria, China and Romania are down the most.  The S&P 500 is down 3.05% on the year, which ranks 37th on the list.

Countryreturns515

Below we provide a chart of the best and worst performing countries in 2008 -- Ghana and Vietnam.   

Ghanavietnam 

Thursday
May152008

A Look at Q1 Hedge Fund Holdings

Below we highlight the cumulative sector weights of hedge funds based on their first quarter 13Fs (from Bloomberg).  As shown in the table below, Financials make up the biggest portion of hedge fund portfolios, just as they do in the S&P 500.  Energy ranks second, Technology third, and Industrials fourth. 

In the first chart below, we highlight the changes in holdings in the first quarter versus the fourth quarter of 2007.  Hedge funds increased their weight in Energy the most and decreased their weight in Technology the most.  Tech was one of the worst performing sectors in Q1, but it has been one of the best performers so far this quarter.

Comparing hedge fund weightings to the S&P 500, hedge funds are most overweight in the Materials sector and the most underweight in the Consumer Staples sector.

Hfholdingstable

Hfholdingschg

Hfholdings

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Thursday
May152008

Farm Bill and Oil Prices

After being up over $2 in the morning, oil has reversed course and is trading sharply lower (over $5 from the high) in early afternoon trading.  This may in part be related to the Farm Bill that was passed earlier by the US Senate by a vote of 85 to 15.  As a result of the strong support for the bill, even if President Bush dusts off his veto pen, the Senate will have the necessary 67 votes to override the veto.

So why is the Farm Bill impacting oil prices?  One of the amendments to the Bill is called the "CFTC Reauthorization Act of 2008," which will put "all significant energy trades on electronic platforms within the regulatory confines of the Commodity Futures Trading Commission, and will impose limits on the size of traders' positions to prevent excessive speculation" (WSJ).  Presently, not all US exchanges are subject to the rules of the CFTC (Intercontinetal Exchange is one of the larger examples), and as a result, there are some who claim that speculators are using these non regulated exchanges to run up the price of oil.  These same people claim that the CFTC Reauthorization Act of 2008 will put a stop to this and cause oil prices to trade down to more realistic levels. 

Oil_farm_bill

Thursday
May152008

Clean Energy ETF (PBW) Holdings

PBW is an ETF that holds companies in the "business of the advancement of cleaner energy and conservation."  We've gotten quite a few requests recently about alternative energy plays, so we thought we'd publish a list of the stocks that make up the Clean Energy ETF.  For each stock, we include its sector, price, year-to-date percent change, estimated '08 PEG ratio, relative P/E ratio (to the S&P 500), and weight in PBW. 

Many alternative energy plays are still very speculative and have either very high valuations or no earnings at all.  Clearly not every company in this list is going to make it, and that's what makes holding the ETF and not trying to pick individual names so appealing to investors.  With oil up so much this year already, it's surprising to see that only 24% of the stocks that make up the ETF are up on the year.  FSYS, GU, ENER and MXWL are all up more than 50% this year, but three of the four don't even have earnings.

Pbw

Thursday
May152008

Bullish Sentiment Increasing

This week's investor sentiment readings from Investor's Intelligence and the American Association of Individual Investor (AAII) both show similar levels of bullishness in the mid-forty percent range, which is well above the highs from earlier this year.  While the Investor's Intelligence number is at its highest levels since January, it is still below its average of 50.7% since 2003.  The AAII number, which is generally considered to be more erratic, is actually slightly above its average reading of 43.3% since 2003.  So while both of these indicators are near their highs for the year, their implication for the market is neutral.

One of the interesting longer-term trends that has formed in the AAII weekly report is that over the last five years, bullish sentiment has been in a steady downtrend.  In 2003, bullish sentiment peaked at 79%.  Then in 2004, the peak reading was 70%.  In 2005 and 2006, bullish sentiment peaked at 59% in both years, while in 2007, the bullish sentiment topped out at 58%.  Finally, so far in 2008, the peak bullish reading has been 53%.  Typically, as a bull market ages, you expect to see bullish sentiment increasing and not decreasing.  However, the most recent bull market has been characterized by investors reigning in their horns.

Sentiment

Thursday
May152008

Percentage of Stocks Above 50-Day Moving Averages

Currently, 77% of stocks in the S&P 500 are trading above their 50-day moving averages.  As shown in the one-year chart of this indicator below, 77% is an overbought level and it usually doesn't last long without seeing a pullback. 

On a sector basis, Energy and Telecom top the list with 89% of stocks trading above their 50-days.  Technology is at 87% and just broke to a new one-year high.  Health Care and Consumer Staples currently have the lowest percentage of stocks above their 50-days, as investors have shunned defensive sectors over the last month or so.

Spx50day

Finlindu50

Inftenrs50

Condcons50_2

Hlthmatr50

Utiltels50