Wednesday
Mar262008

Election Odds Update

Below we have updated our historical charts of the Intrade contracts for the Democratic primary winner along with the Presidential election winner.  The contracts either expire at 0 or 100 based on the outcome of the event.  As shown below, the contract for Obama to be the Democratic nominee is currently trading at 80.5.  Buyers would spend $80.5 to receive $100 if Obama wins.  The contract for Hillary Clinton to win is currently trading at 18.9.  Based on these numbers, the hits to the Obama camp in recent weeks barely budged the odds of him winning the nomination,

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The contracts for the winner of the Presidential election, however, do indicate that struggles in the Democratic party have caused traders to increase their bets on John McCain.  As shown, the odds for McCain to become the next President have steadily risen to 39.2 in recent weeks, while the odds for Obama to win have dropped from a high of 57.6 to 47.6.  As shown, Mr. Obama is still currently favored to win in November.

Electionwinner

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Wednesday
Mar262008

Updated S&P/Case-Shiller Housing Numbers

Caseshillertable_2The January 2008 S&P/Case-Shiller housing numbers were released yesterday for 20 US cities.  Over the past few days, we've seen some better than expected housing numbers, indicating that things might be getting "less worse," so it's important to note that these numbers lag by three months.  If things have begun to get better, these numbers will be the last to show it.  Regardless, it's important to highlight which areas of the country have been hit the hardest.

As shown in the table at right, home prices in Las Vegas and Miami fell the most from January '07 to January '08.  Las Vegas also fell the most from December '07 to January '08.  Over that one-month period, Las Vegas fell sharply at 5.1%.  Phoenix was the second worst performer month-over-month at -4.05%.  Charlotte was the only city that saw year-over-year gains at +1.75%.  Charlotte also fell the least month-over-month at -0.15%.  The Composite 20-City index fell 10.71% year-over-year and 2.28% month-over-month.

Below we highlight historical monthly year-over-year changes for all 20 cities and the two Composite indices.

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Wednesday
Mar262008

S&P 500 Stocks Furthest Above and Below 50-Day Moving Averages

In our last post, we highlighted the percentage of stocks above and below their 50-day moving averages.  Below we highlight the individual stocks furthest above and below their 50-day moving averages.  As shown, Big Lots (BIG) is currently the furthest above at 33.56%.  BIG is followed by DRI, CIEN, CSX, HRB and NUE.  Other names on the list that usually appear on the 'furthest below' list include THC, NYT, KBH, HCBK, DFS and PHM.

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It's not surprising that Bear Stearns (BSC) is the furthest below its 50-day moving average in the S&P 500.  BSC is followed by CIT, ABK, WLP, HUM, NCC and S.  Other notables on the oversold list include LEH, GM, IP, VLO and SNDK.

Furthestbelow

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Wednesday
Mar262008

Market Breadth Looks Much Better

Along with looking at the technicals of simple price charts, we analyze the underlying breadth of indices and sectors by looking at the percentage of stocks above their 50-day moving averages.  Below we highlight these percentages for the S&P 500 and its ten sectors. 

As shown, with the recent break of the S&P 500's downtrend line, the percentage of stocks above their 50-days in the index has also broken out of the range that has been in place since late 2007.  This indicates that the rally has been accompanied by underlying strength.  At 57%, it also indicates that the rally could have further to go, since overbought levels aren't reached until the number hits the 80% mark.

On a sector basis, both Consumer sectors, Materials, Industrials and Technology have the highest percentage of stocks above their 50-day moving averages, while Health Care, Utilities, Telecom and Energy have the least.  Financials are right about inline with the index as a whole.

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Tuesday
Mar252008

S&P 500 Closes Above 50-Day Two Days in A Row!

You know it has been a bad market when the first quarter is nearly over and the S&P 500 is just now closing above its 50-day moving average for the first time.  We'll take what we can get though.  Following today's intraday rebound after the much weaker than expected Consumer Confidence report, the S&P managed to close above its 50-day for the second day in a row!  In addition, the index also broke above its downtrend line which had been in place since late November.  As the market digests its gains of the last few days, one sign of the market's health will be a hold above these levels.

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While the 58 consecutive trading days that the S&P 500 traded below its 50-day moving average may have seemed like an eternity, since 1928, there have actually been 28 other streaks where the index went as long or longer without trading above it.  The most recent streak ended in August 2002, when the S&P 500 went 86 days without trading above its 50-day.

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Tuesday
Mar252008

S&P 1500 Most Volatile Stocks

For traders with a more short-term time horizon, we have compiled a list of the S&P 1500 stocks which have the largest intraday high/low ranges (based on the average percent spread between the intraday high and low for the last fifty days).  We then grouped the stocks based on whether they have a rising or falling fifty-day moving average. Tickers highlighted in gray are new to the list since last month's screen.

While housing stocks have been on the list for several months now, they have typically been on the list of stocks with falling moving averages.  However, as this month's list highlights, homebuilders are now well represented on the list of volatile stocks in uptrends.

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Tuesday
Mar252008

Consumer "Nonfidence"

After a flattish open, the major averages took a hit at 10am with the release of the much weaker than expected Consumer Confidence report.  While economists were looking for the overall index to come in at 73.5, which itself is weak, the actual number came in at 64.5.  While the overall reading was very weak, the expectations component of the report hit its lowest levels since the early 1970s (47.9).

Consumer_confidence

Tuesday
Mar252008

Global Markets Off To The Races

Major global indices are up sharply this morning with Hong Kong's Hang Seng leading the way -- up 6.4% overnight.  While strong overseas markets typically set the tone for a positive open in the US, we would remind readers that most of these indices were closed yesterday in observance of Easter.  Therefore, international markets are playing catch up from yesterday's rally in the US.  As far as today's trading in the US is concerned, many investors are watching the 1,350 level on the S&P 500, where the downtrend that's been in place since last Fall comes into play.

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Monday
Mar242008

GOOG Downtrend Broken

After a 45% decline in less than six months, Google (GOOG) shares are up over 7% today.  As a result, the stock has broken its downtrend that has been in place since last December.

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Monday
Mar242008

Bonds Taking a Beating

Bonds are having their worst day since January today as the yield on the Ten-Year Treasury is back above 3.5%.  Below we have updated our trading range charts of international long-term interest rates.  As shown, with the exception of Australia, rates remain in downtrends near their lowest levels in a year.  So while today and the next few days may be tough for bond investors, the longer-term trend in interest rates remains down.

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Monday
Mar242008

Homebuilder (XHB) Breakout

Up 23.3% year to date and 56.4% from its intraday low in early January, the S&P Homebuilder ETF (XHB) has made a nice breakout to new highs this morning after better than expected housing numbers were released.  We've been positive on the group since the end of 2007, and we mentioned our bullishness once again in this week's Business Week.  We'll be even more bullish if the ETF can hold this breakout over the next couple of days.

Xhb324

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Monday
Mar242008

Sector Relative Strength

After a week like last week, it's often a good idea to look at how the different sectors of the market stack up against each other.  Below we have updated our charts highlighting sector relative strength over the last year.  In each chart, rising lines indicate periods where the sector is outperforming the S&P 500, while red shaded charts indicate that the sector has underperformed over the last year.  Finally, in each chart we have also included red dots that indicate each of the Fed rate cuts since August.

Over the last year, four of the ten sectors are currently underperforming the S&P 500.  While it comes as little surprise that the Consumer Discretionary and Financial sectors have lagged the market, defensive sectors such as Health Care and Telecom Services are also underperforming, which is puzzling given the current economic backdrop.  Following last week's sell off in commodities, the Energy and Materials sectors are approaching key support levels.  If these trends do not hold, the multi-year uptrend in both sectors will be at risk.

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Monday
Mar242008

The Decoupling Continues -- In Reverse

Below we highlight the year to date returns of the major equity indices for a number of key countries.  Using prices from this morning, the United States' S&P 500 and Dow 30 are down much less than the rest of the countries analyzed.  China is down 27.7%, India is down 24.6%, Hong Kong is down 24% and Germany is down 21.7%.  Leading up to the peak in global equity markets last year, many people thought that countries were finally strong enough to decouple from the US and perform well even if the US went down the tubes.  These days, however, the US is the one doing the decoupling on the upside.

Equity324 

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Monday
Mar242008

Bear Stearns Soap Opera Continues

An article in today's New York Times reports that JP Morgan (JPM) is in talks to raise its takeover bid for Bear Stearns (BSC) by 500% from $2 to $10 per share.  While one reason cited for the higher bid is the fact that JPM may not want to alienate BSC employees, the more important reason may be related to a 'mistake' in last weekend's contract that was 'inadvertently' left in the agreement. 

According to the New York Times story, "one sentence was 'inadvertently included,' according to a person briefed on the talks, which requires JPMorgan to guarantee Bear’s trades even if shareholders voted down the deal. That provision could allow Bear’s shareholders to seek a higher bid while still forcing JPMorgan to honor its guarantee, these people said."

Imagine that.  With 118 million shares outstanding, if JPM is forced to increase its bid to $10 per share, that would work out to about an extra billion dollars that they would have to pay for BSC.  While Jamie Dimon may be questioning the worth of his lawyer's fees, BSC shareholders must be thinking they are worth every penny.

Sunday
Mar232008

Commodities Sizzling?

While reading the "News You Need to Know" section of this week's BusinessWeek that arrived at our office on Friday, we were reminded of the scene in Dumb and Dumber where Jim Carrey walks out of the bar and sees the headline from an old newspaper that says, "Man Walks on the Moon".

The particular comments that we found to be somewhat 'dated' concerned the action in commodities.  The article reported that "Commodities are sizzling as investors rush away from the declining dollar and rocky equities markets, while emerging markets continue to stoke demand. Gold closed above $1,000 an ounce for the first time on March 17th, while crude oil spiked to $111 per barrel on March 13th."  While gold did in fact close above $1,000 on Monday, the more important and timely news you need to know was that it then proceeded to decline for the rest of the week before closing at a price of $920 for its worst week since 1990.