Tuesday
Apr012008

Gold Breaks Short-Term Uptrend

Below we highlight a long-term and short-term price chart of Gold.  As shown below, the commodity is in a long-term uptrend that still remains in good shape.  However, the short-term uptrend that formed when the sharp rally began last June has recently been broken.  The next level of support is at the $850/ounce level created by the November '07 highs and January '08 lows.

Goldtechnicals   

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Tuesday
Apr012008

Baltic Dry/Shanghai Composite Divergence

The Baltic Dry Index measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.  Many look to the Baltic Dry Index as a leading indicator, and in recent years, its move has been fairly correlated with China's economy and the Shanghai Composite.  As shown in the chart below, China's equity market and the Baltic Dry Index had huge rallies from the end of 2005 to the end of 2007.  They also had huge declines after they peaked late last year.  Since late January, however, the Baltic Dry Index has been climbing while China's Shanghai Composite has been falling.  This divergence suggests that China's equity markets might be getting a little overdone on the downside at least in the short term.

Balticdry1

Tuesday
Apr012008

S&P 500 Down Five Months In A Row

March's decline in the S&P 500 of 0.6% marked the fifth straight month of losses for the index.  Since 1928, there have only been nine other periods where the S&P 500 went as long or longer than the current streak of five down months.  As shown below, the odds for a rebound in the six month are nothing to write home about.  The average S&P 500 return during the sixth month is a gain of 0.41%, with gains in only four out of nine periods.  The results are even worse over a three month period, with an average decline of 2.64% and gains in four out of nine periods.

Down_five_months_in_a_row

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Tuesday
Apr012008

Stock Declines From 52-Week Highs

Distance_from_52_wk_0331Heading into the second quarter of 2008, the average stock in the S&P 500 is currently trading 31.1% below its 52-week high.  On a market cap basis, small caps (S&P 600) have taken the biggest hit with an average decline of 35.3%, while the average large cap (S&P 500) is down 26.8%.

Breaking out the results by sector shows that Consumer Discretionary stocks have been the hardest hit, with an average decline of 39.6% from their respective 52-week highs.  While Financials have been ground zero for the market's weakness this year, the average decline in that sector is 33.6%, which places it as only the fourth worst behind Telecom Services (-38.2%) and Technology (-34.9%).

Distance_from_52_wk_0331_sectors

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Tuesday
Apr012008

Best and Worst Performing Russell 3,000 Stocks in the First Quarter

Below we highlight the 30 best and worst performing stocks in the Russell 3,000 in the first quarter (>$5).  Throughout the rest of the week, we'll be highlighting charts and descriptions of some of these companies.  As shown, the top stock for the quarter was BZP Resources, a production and exploration company that focuses on oil and natural gas in Peru and Ecuador.  BZP was up 94.37% in Q1 and was trailed by IDIX, CAO and EBS.  Walter Industries (WLT) ranks 5th at 74.31%.  Two key homebuilders made the top 30 -- MHO and HOV. On the downside, BSC tops the list at -88%, followed by RHD, SIRF and ABK.

Bestquarter

Worstquarter

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Monday
Mar312008

US Volatility Times Two

For investors that think things have gotten volatile here in the US, the average difference between the daily high and low of China's Shanghai Composite over the last ten days is all the way up to 5%.  In the US, the 10-day average high/low spread for the S&P 500 is currently 2.2%.  While volatility has steadily ticked higher here over the last six months, the recent action in China has been extremely hectic.

10dayhilo

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Monday
Mar312008

DJIA vs. Dow Transports

Below we highlight the performance of the Dow Jones Industrial Average vs the Dow Jones Transportation Average during the '02-'07 bull market, along with their performance since the DJIA peaked on October 9, 2007.  As shown, the Transports have outperformed during both periods, even though they fell off significantly towards the end of the DJIA's run to new highs last October.  Many look at the Transports as a leading indicator for the market, and the fall that occurred late last year is often cited as a clue that the market was headed lower (even though there are numerous periods where the trend hasn't worked in recent years).  The recent outperformance in the Transports is puzzling because oil prices are so high, but it seems that investors are playing the foreign revenues game and therefore like them because they don't have anything to do with Financials.  At any rate, Dow Theorists are probably happy.

Dowtran1

Dowtran

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Monday
Mar312008

S&P 500 Sector Performance: Q1 2008

As the first quarter comes to a close, the S&P 500 is poised to finish down close to 10%, which would be the worst performance since Q3 2002 when the index traded down 17.6%.  Looking at the performance of individual sectors shows some interesting trends. 

So far this year, no area of the market has been safe, as all ten sectors are down.  Traditionally during down markets, investors are advised to stick to defensive sectors like Consumer Staples, Health Care, and Utilities.  However, as this quarter's returns indicate, only one of those sectors (Consumer Staples) is outperforming.  Additionally, with oil trading above $100 (even after today's $4+ decline), Consumer Confidence at multi-decade lows, and home foreclosures rising exponentially, one would expect the Energy sector to be outperforming the Consumer Discretionary sector.  As the results indicate, however, during Q1 the Consumer Discretionary sector actually outperformed the Energy sector by close to 200 basis points.

Sector_perf_q1_08_2

   

Monday
Mar312008

Bank and Broker Default Risk; LEH, MER Top List

Below we highlight the prices for insuring against default for the major global banks and brokers.  The credit default swap (5-Yr CDS) is quoted in basis points and is the yearly cost of insuring against default for 5 years.  So a CDS trading at 100 would cost $100 per year to insure $10,000 worth of bonds for 5 years.  As shown below, default risk at Lehman (LEH) and Merrill Lynch (MER) is currently the highest.  Both are currently more than 250 basis points.  Citigroup (C) ranks third, followed by BSC, WB, MS, GS, UBS and JPM.  At the bottom of the list (the safest) are BNP Paribas, Deutsche Bank (DB) and Wells Fargo (WFC).  While insuring against default is still very high for most of these companies, prices were much higher just a couple of weeks ago.

Bankbrokerdefault

 

Monday
Mar312008

Results of Bespoke's Reader Sentiment Poll

On Friday, we asked Bespoke readers to take part in a survey on whether or not the S&P 500 has seen its lows for the year.  After nearly 500 responses, the overwhelming majority has said no.  As shown below, 75% of participants think the S&P 500 has not yet seen its lows for the year.  From the results of this poll, investor sentiment remains bearish.

Spxdown

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Monday
Mar312008

Bespoke's International Snapshot

With equity markets in the US continuing to show signs of weakness, below we highlight the charts of 21 other country indices to see which, if any, currently look better.  The majority of countries remain in downtrends, with China, Japan and Europe looking the worst.  A few countries are currently in uptrends, however.  Brazil and South Africa have formed nice upward channels, while Russia, Mexico, India and Taiwan are attempting to turn positive.  Click here for a list of country ETFs.

Intl1_2

Intl2

Intl3

Intl4

Intl5

Intl6

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Monday
Mar312008

Fourth Quarter Negative EPS Surprises By Sector

As we highlighted on Friday, heading into Q1 earnings season, analysts are forecasting that the Energy sector is likely to show the strongest growth in earnings.  While the sector had strong fundamentals in its favor during the quarter (oil at $100 and natural gas at $10), we would note that given the high hopes for the sector, beating these expectations could prove to be tough.  Last quarter, analysts were expecting similar EPS growth, and the stocks had a tough time reaching the bar.  Of the ten sectors, only the Financial sector had more negative earnings surprises.

Negative_eps_surprises

Sunday
Mar302008

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 last 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: Last Day of the Quarter (a tough day for the markets), S&P 500 Technicals (our top rated stocks based on technicals), First Quarter Returns (typical market performance in Q2 and the rest of the year based on similar Q1 results), Stocks With High Cash Levels (tough times call for cash), Analyst Buy Ratings (surprising results from analysts and their top rated stocks), Housing Futures (what they're telling us about the real estate market), Hedge Fund Holdings (most and least widely held stocks by hedge funds), Decile Analysis (what worked and didn't work during the recent rally), Weak Consumer Confidence Reports (market performance following similar negative readings), Buying Stocks and Selling Gold (typical performance following periods when stocks rally and gold declines), Stocks Up, Bonds Down (recent market rallies have coincided with weakness in bonds), S&P 500 1,350 Takeout (a technical takeout), Short Interest in the Brokerage Stocks (interesting divergences appear).

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Friday
Mar282008

Sector EPS Growth Estimates For the First Quarter

Below we highlight the current bottoms-up, year-over-year growth estimates for the first quarter.  After a decline of more than 100% in Q4 '07, Financials are expected to see year-over-year declines of 51.3% in the first quarter.  Consumer Discretionary is the only other sector expected to see declines, but these two are enough to cause expectations for the entire index to be negative (-9.9%).  Eight out of ten sectors are expected to see growth in earnings compared with the first quarter of 2007.  Energy is expected to see the biggest gain at 22.8%, followed by Consumer Staples (8.1%), Technology (7.9%) and Materials (6.3%).

Q108eps

Friday
Mar282008

Bespoke Reader Sentiment

The S&P 500 is currently down 10% for the year.  With the first quarter coming to an end on Monday, we'd like to get a sense of what our readers think is in store for the markets going forward.  Please take part in the quick poll below and we'll report back with the results next week.  Thanks for participating!


Currently down 10%, has the S&P 500 seen its lows for the year?
Yes
No
  
Free polls from Pollhost.com