Friday
Mar142008

What Has Worked During The Bounce?

At the close on March 10th, the S&P 500 was down 13.28% on the year.  The next day the market got a nice bounce, and the index is now up 3.31% since the 3/10 close.  Below we highlight the performance of the ten S&P 500 sectors during the current 3-day rally as well as their year to date performance through March 10th.  As shown, the two best performing sectors since 3/10 have been Materials and Financials, while the worst performing sectors have been Health Care, Telecom and Consumer Staples.

Secperf

We performed our usual decile analysis of the Russell 1,000 to see which stocks have led the rally and which ones have lagged.  We broke the index into deciles (100 stocks in each decile) based on year to date performance through the 3/10 bottom.  The decile of the 100 best performing stocks is decile one, while the decile of the 100 worst performing stocks is decile ten.  We then calculated the average performance of stocks in each decile over the last three days and plotted the numbers in the chart below.  As shown, the decile of the best performing stocks through 3/10 were the second best performers, while the decile of the worst performing stocks through 3/10 ranked first.  So both momentum investors and bottom fishers have outperformed during this rally -- something we don't see happen too often.

Decperf 

Thursday
Mar132008

New Short Interest Report at Bespoke Premium

Many investors track the flow of short interest to judge market sentiment and find areas of the market that could see nice rallies due to heavy short covering.  At Bespoke Premium, we have a monthly report that highlights trends in short interest across all sectors and groups of the market.  It also highlights the stocks that have seen the biggest increases and decreases in short interest each month.  The thumbnail below is an example of the monthly report, and as you'll see, it's very user-friendly and easy to read.  If you incorporate or want to incorporate short interest into your overall perspective on the market, or if you're looking for buy and sell ideas based on increases and decreases in short interest, this report will do it for you.  Click here to subscribe to Bespoke Premium and receive this report along with our many other unique, anticipatory reports.

Thursday
Mar132008

Updated Consensus Economist Estimates

Yesterday, we mentioned that consensus economist estimates for Q1 '08 GDP had ticked down to just 0.1%.  Below we highlight what the estimates are for various economic indicators over the next five quarters.  These come from a monthly Bloomberg survey of 65 economists.  While things are still expected to get better as time passes, estimates look worse across the board from where they stood in the prior survey.

GDP growth is expected to be a paltry 0.1% in Q1, then tick to 0.5% in Q2, 2.2% in Q3 and Q4, and 2.3% in Q1 '09.  As shown, each of these quarterly estimates are lower than they were last month.

Gcp313

Unfortunately, just like GDP estimates, the unemployment rate is forecast to tick higher and max out at 5.4% in Q3, Q4 and Q1 '09.

Unemp313

CPI is expected to be very high this quarter and decline each quarter through Q1 '09 down to 2.3%.  Like the rest of the indicators, however, economists raised their inflation quarters over the last month.

Cpi313

Economists expect the Fed Funds Rate to stay at 2% in the last 3 quarters of 2008, and actually increase by 25 bps in Q1 '09.

Fedfunds313

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Thursday
Mar132008

Gold/Dollar Ratio Has Gone Parabolic

Below we highlight the Gold/Dollar ratio since 1975.  This divides the US Dollar index (DXY) into the price of an ounce of Gold.  As shown, recently we took out the prior highs of the ratio made in January 1980, and things have now gone completely parabolic.  Things don't stay like this forever, and those who have recently joined the party and entered the long Gold/short Dollar trade should tread very carefully.

Golddollarratio

Thursday
Mar132008

Down Opening Gaps in SPY Versus Open To Close

The S&P 500 tracking SPY ETF opened down more than one percent this morning after overseas markets fell sharply.  We created a scatter chart that plots the percent change in SPY from the prior night's close to the next day's open (opening gap) versus the percent change from the open to the close.  In the chart below, we only include opening gaps of -1% or more.  When we insert a trendline, it slopes upward from right to left, which suggests that large down gaps have a slight bias towards gains from the open to the close.  The historical average change from the open to the close when SPY gaps down 1% or more is +0.45%.

Spy313

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Thursday
Mar132008

Take Your $200 bln liquidity plan and ...

While the stock market enjoyed a brief rally Tuesday on the heels of the Fed's liquidity injection plan, credit markets (which are the area that needs help the most) were unimpressed.  As shown below, while high yield spreads fell on Tuesday, by the time the market closed Wednesday, they were higher than they were Monday. 

High_yield031208

Thursday
Mar132008

Gisele and Jay-Z Need Not Apply Here

While Gisele and Jay-Z made the biggest headlines with their public preference for Euros over US dollars, an increasing amount of goods and service providers are now demanding to be paid in Euros.  In response to this trend, Airbus parent EADS announced this week that it will require its suppliers to bid for new contracts in dollars.  The company's policy is intended to "shift the punishing burden of dollar risk on to suppliers".  Talk about an unpopular currency.

Euro

Wednesday
Mar122008

Health Care Stocks Significantly Below 50-Day Moving Averages

Below we highlight the most oversold Health Care stocks in the Russell 1,000.  After poor guidance from WellPoint (WLP) and Humana (HUM) in the last two days, many Health Care stocks have gotten crushed.  As shown below, 11 stocks out of 95 in the sector are currently trading more than 20% below their 50-day moving averages.  HUM is 45% below its 50-day, followed by WLP, PDLI, SEPR, UNH and WCG.  It sure hasn't paid to use Health Care as a defensive play in this declining economic environment.

Hlthcare50day

Wednesday
Mar122008

Consensus Economist Odds For A Recession

Along with their monthly survey of various economic indicators, Bloomberg also asks economists what they think the odds of a recession are in the next year.  Below we highlight all of the responses for each of the past three months.  As shown, economists have been increasing their expectations of a recession as the months have passed this year.  Back in January, the consensus was looking for a 40% chance of a recession.  In February, the odds stood at 51.5%, and this month they ticked higher to 56.5%. 

Recessionodd312

The odds from economists are still lower than the odds that futures contracts are predicting at Intrade.  Below we highlight the historical chart of the Intrade contract for a recession along with the consensus economist estimate each month.  As shown, traders putting their money where their mouth is have higher expectations than economists do. 

Recessionodds31208

   

Wednesday
Mar122008

Consensus First Quarter GDP Estimates Tick Down to 0.1%

Below we highlight the consensus first quarter 2008 GDP growth estimates since March 2007.  These estimates are compiled from a Bloomberg survey of 65 economists.  This month's survey was released yesterday, and as shown below, economists are now expecting GDP growth to grow at 0.1% in the first quarter.  Last year at this time, Q1 '08 estimates stood at 3%, a far cry from the anemic expectations currently in place.  As shown, the estimates have declined at about the same pace as the market has.

Gdpestimates

Wednesday
Mar122008

Bear Stearns (BSC): Talk vs Action

Bear Stearns (BSC) CEO Alan Schwartz was on CNBC this morning to dispel rumors of a liquidity problem at the company.  Mr. Schwartz went on to say that the company's liquidity position remains relatively unchanged since last November. 

Following Mr. Schwartz's comments, the stock initially traded higher indicating that his statements were reassuring to investors.  However, the gains quickly faded as doubts about the company's counter-party risk remain.  One step BSC could (and should) take to help reinforce its stance that it has no liquidity problems is to take some of its liquidity cushion and buy back some stock.  With a market cap of less than $9 bln, it wouldn't take much to make a meaningful statement regarding their confidence in the company.

Wednesday
Mar122008

Bespoke's Sector Snapshot

Even though yesterday was the biggest up day in five years, it still shows up as just a blip on the radar when looking at historical charts of the S&P 500 and its ten sectors.  As shown below, the S&P bounced nicely off of the bottom of its downtrend yesterday, but it still has a lot of work to do before the chart looks positive again.  The same can be said for Financials. 

Yesterday's gains also created a short-term double bottom in the Industrial and Consumer Discretionary sectors.  There are fortunately three sectors that aren't currently in downtrends -- Consumer Staples, Energy and Materials.  And unfortunately for the index as a whole, the Health Care sector exists.

Spxte

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels      

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Wednesday
Mar122008

S&P 1500 Short Interest

While yesterday's rally in the stock market may just have been another short covering rally, based on the final short interest data for February (NASDAQ numbers were released after the close yesterday), there may be a lot of shorts to cover.  While the short interest ratio (short interest divided by average volume) is one widely quoted measure of short interest, we also track short interest versus a stock's float, as it gives a clearer picture of what percentage of a company is sold short. 

In the chart below, we calculate the average short interest of all the stocks in the S&P 1500 as a percentage of the total float of those stocks.  As shown, over the last year short interest in the S&P 1500 has risen by over 45% from 6.68% of the total float to 9.93% as of February 29th.

Sp_1500_short_interest

Tuesday
Mar112008

Bespoke's Market Timing Model

Market_indicators031008a

Market_indicators031008_2During times when the market is seemingly in free-fall and all your stocks are going down, it is easy to let emotions take hold and lose the proper perspective.  In order to help avoid these pitfalls, our Bespoke Market Timing Model analyzes a series of forty widely (and not so widely) followed market indicators to see what they are telling us about the market.  For each indicator, going back at least six years, we isolate all of the prior occurrences where the indicator was moving in the same direction and stood at similar levels as it does now.  We then calculate how the S&P 500 performed over the next week, two weeks, and month following each prior occurrence.  After running the numbers for each indicator, we calculate an overall outlook for the market, which is included in each night's report for Bespoke Premium subscribers. 

As shown at the top of this post, on Monday our Market Timing Model hit its highest reading ever (click the thumbnail image to view the report).  Historically, high readings in this indicator signify an oversold market where conditions are favorable for a short-term rally. Whenever the model reaches these high levels, all it needs is a spark to get things going, and this morning that spark came in the form of the Fed's liquidity injection plan.

So the next time you feel like stocks are going to fall of a cliff, before making quick decisions, check to see how your emotions compare to what the market is telling you.  The Bespoke Market Timing Model is available to Bespoke Premium members on a daily basis.

Tuesday
Mar112008

Largest Positive Point Days Ever For The Dow

Today's gain of 415 points ranks 4th on the list of the top positive point days for the Dow.  Below we highlight all +300 point days for the Dow.  While investors should really look at the daily percentage change for comparison's sake, big up days based on points are significant because of their impact on investor sentiment.

Dowupdays