The Closer — Yields Reverse, Doves Not So Clear, EIA, New Home Revisions — 5/23/18

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we recap recent price action in vol, rates, and metals markets. We also discuss today’s Fed Minutes, new home sales, EIA petroleum market data, and recent energy price action.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

Keeping Track of EM

There’s been a lot going on in emerging markets recently. Whether it’s political drama in South Africa, Malaysian elections, Argentina’s emergency rate hikes and request for IMF assistance, or the ongoing meltdown of the Turkish lira, it’s all a lot to stay on top of. Especially for investors that don’t spend their days in the weeds of EM, how to follow it all? Bespoke has a range of tools that can help.

First, one of the easiest ways to keep track of how things are going is to watch the value of EM currencies (EMFX) versus the dollar. We like to use an index of 20 equally-weighted EM currencies to get a broad feel for how things are going. The absolute level of the index is somewhat arbitrary, but since it captures the performance of a broad range of the asset classes, its trend gives a good feel for how things are going. As shown below, it’s been a pretty rough run of late. We also show the 3 month change in the index, which is useful for comparing how painful periods of stress are; the current selloff is akin to the dollar rally post-election, but not as bad and not as sustained as things were in 2015-2016. Of course, this measures spot only, so it’s only a rough gauge rather than a performance benchmark.


It’s also helpful to look at other asset classes. Using our Chart Tool, it’s easy to keep an eye on charts for relevant assets. The EMB ETF tracks USD-denominated bonds issued by EM governments, so it’s an interesting place to look.

Remember, though, that while these USD bonds trade at a spread to US Treasuries, they’re still very sensitive to moves in US interest rates that may have nothing to do with EM performance. So we also keep a close eye on local-currency EM debt via the EMLC ETF. Prices of this ETF are a function of both EMFX and EM local currency interest rates.

What about equities? EEM is the classic, highly liquid and representative of the broad EM space. Be careful, though: Chinese companies listed in Hong Kong are a huge weight, which can sometimes skew the message it sends.

In a recent Chart of the Day, we highlighted the extremely large share of EEM taken up by a single company, Tencent:

It’s always worth checking in on EMXC too, the EM ex-China ETF. A recent launch and not very liquid, this ETF nonetheless is probably more representative of thematic EM equity performance than EEM because it isn’t so heavily weighted to the rather unique Chinese equity markets.

If charts are your thing, you’ll also love our Chart Scanner tool, which allows you to quickly scan a large number of charts. One pre-loaded portfolio focuses on country ETFs, including a number of country-specific equity ETFs for EM (note: while included in the example below, the UK is not considered an EM).

Another helpful tool we’ve developed for looking at ETF data in bulk is our Trend Analyzer. This tool allows you to quickly size up the trend and tactical movement for a wide range of ETFs or stocks, including custom portfolios. Below we show a custom Trend Analyzer portfolio focused on EM ETFs.

Each week, Bespoke Institutional subscribers receive a chartpack highlighting financial market and economic data in a standardized format across 23 major global economies including a number of emerging markets. Below, for example, we show the data for Brazil in this week’s Global Macro Dashboard, sent out this morning.

Looking for more in-depth analysis that goes beyond price action? We regularly recap economic data, cross asset performance, and analyze various EM economies and related assets in The Morning LineupThe Closer, and our Fixed Income Weekly. Below is an example, with charts we included with this week’s Fixed Income Weekly dealing specifically with the mess ongoing in Turkey.

To gain access to all of the tools described above, please sign up for a Bespoke Institutional trial.  Some reports and tools are available at other levels, but Institutional clients receive access to ALL of our research and tools.

Mirror Days

Earlier this morning we tweeted out the following images from our Morning Lineup report (available to all Bespoke Premium or Bespoke Institutional clients) pointing out how the overnight and pre-market pattern from Tuesday into Wednesday was nearly a mirror image of the overnight to pre-market pattern of the prior day.  Heading into the day Tuesday, equities began to rally shortly into the Asian trading day and picked up steam right up until the US open.  Last night, our global composite intraday equity chart was right around flat at the open in Asia but then quickly started to lose ground and drifted lower right up until the US open.

Interestingly enough, just as the overnight patterns heading into each of the last two trading days were mirror images of each other, so were the intraday open to close chart patterns.  On Tuesday (5/22), the DJIA opened at its highs of the day and drifted lower throughout the day before really selling off into the close.  Then today (5/23), the S&P 500 opened right near its lows of the day only to pick up steam late in the session and closing right near the highs of the day!

This all reinforces the point that unless there is a major catalyst/event behind a move, what happens in the futures markets often has little bearing on what actually happens during the regular trading day.

 

Top Earnings Season Triple Plays — 5/23/18

Here at Bespoke, our job is to identify winners and losers, and one of the ways we try to find earnings-season winners is through our list of “triple plays.”

Long-term Bespoke subscribers know how much we like triple plays, but for those that haven’t heard of the term, we came up with it back in the mid-2000s for companies that beat analyst earnings estimatesbeat analyst revenue estimates and also raise guidance.  Investopedia.com is one of the best online resources for financial markets education, and they’ve actually given us credit for coining the “triple play” term on their website.  We consider triple play stocks to be the cream of the crop of earnings season, and we are constantly finding new long-term buy opportunities from this basket of names each quarter.

This earnings season (Q1 2018), there were a total of 133 earnings triple plays.  That’s a high reading indicative of a healthy corporate environment.  Throughout earnings season, Bespoke Premium and Institutional members have access to our Earnings Triple Plays page, which keeps a running tally of the 100 most recent triple plays.  We also publish our Top Triple Plays Report, which filters the list of most recent triple plays down to the ones with the most attractive chart patterns.  We’ve just published our newest Top Triple Plays Report featuring 28 stocks with chart patterns that we like.  Learn how to see the stocks below!

See our Top Earnings Season Triple Plays by signing up for a Bespoke Premium membership now.  Click this link for a 14-day free trial!

Fixed Income Weekly – 5/23/18

Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class?  Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday.  We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week.  We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea.  We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.

This week we take a look at the dismal prospects for Turkey.

Sample

Our Fixed Income Weekly helps investors stay on top of fixed income markets and gain new perspective on the developments in interest rates.  You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes free for the next two weeks!

Click here and start a 14-day free trial to Bespoke Institutional to see our newest Fixed Income Weekly now!

Bespoke’s Global Macro Dashboard — 5/23/18

Bespoke’s Global Macro Dashboard is a high-level summary of 22 major economies from around the world.  For each country, we provide charts of local equity market prices, relative performance versus global equities, price to earnings ratios, dividend yields, economic growth, unemployment, retail sales and industrial production growth, inflation, money supply, spot FX performance versus the dollar, policy rate, and ten year local government bond yield interest rates.  The report is intended as a tool for both reference and idea generation.  It’s clients’ first stop for basic background info on how a given economy is performing, and what issues are driving the narrative for that economy.  The dashboard helps you get up to speed on and keep track of the basics for the most important economies around the world, informing starting points for further research and risk management.  It’s published weekly every Wednesday at the Bespoke Institutional membership level.

You can access our Global Macro Dashboard by starting a 14-day free trial to Bespoke Institutional now!

Bespoke Morning Lineup – Pre-Market News and Analysis

Bespoke’s Morning Lineup is the top pre-market report on Wall Street. We cover everything you need to know to get your trading day started, including international market moves and events, post-market and pre-market earnings news, upgrades and downgrades, dividends and splits, economic indicators and estimates, big stock movers, market internals and much more. It’s all presented in the original and concise format that Bespoke is known for so you can digest lots of information quickly and efficiently.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.

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The Closer — 3 of 5 Feds, EM Spreads Holding In — 5/22/18

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we review Fed manufacturing activity data given 3 of 5 regional indices are now released. We also discuss the resilience of USD EM debt spreads given chaos in EMFX.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

The Closer — Freight & Italy — 5/21/18

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we review monthly freight price data from Cass, before reviewing the backdrop for the current crash in Italian assets, especially government bonds.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

Investors Liked What They Saw During Earnings Season

Roughly 2,100 companies reported earnings during the unofficial Q1 2018 reporting period that ran from April 9th through May 18th.  We track the one-day stock price performance of every company that reports earnings.  This obviously helps us monitor individual stock performance, but it also gives us an idea of how investors are reacting to earnings results at the macro level.  (In order to track performance, remember that for a stock that reports earnings in the morning before the open of trading, we use its price change on that trading day.  For a stock that reports earnings after the close of trading, we use its price change on the next trading day.)

Below is a chart that shows the one-day price reaction (%) for every stock that reported earnings during the Q1 reporting period.  We’ve separated the distribution by stocks that beat EPS estimates, missed EPS estimates, and reported inline EPS estimates.  As shown, 67.9% of stocks beat EPS estimates, while 24.5% missed and 7.7% reported inline.  The average stock that beat EPS estimates gained 1.78% on its earnings reaction day.  The average stock that missed EPS estimates had a one-day drop of 2.75% in response, while the average inline report saw a one-day price drop of 0.73%.

While the average stock that beat EPS estimates gained 1.78% on its earnings reaction day, you can see in the chart that there were hundreds of stocks that beat but still fell in price.  Similarly, while most stocks that missed EPS estimates fell on the news, there were plenty that gained as well.

For investors looking for detailed earnings report analysis, our Earnings Screener is an amazing tool.  The Earnings Screener allows users to pull up historical quarterly earnings report analysis for every US stock going back to 2001.  The Screener also allows users to track macro trends related to earnings using our “Aggregator” functionality.

The chart below uses data pulled directly from our Earnings Screener.  It shows the average one-day stock price reaction to various earnings outcomes during the Q1 2018 reporting period compared to all periods since 2001.  As shown, the average stock that beat EPS estimates this season gained 1.78% on its earnings reaction day.  Since 2001, the average stock that has beaten EPS estimates has gained 1.90% on its earnings reaction day.  So this season, earnings beats gained slightly less than normal.

For stocks that missed EPS estimates, this season they fell an average of 2.75% on their earnings reaction days.  Since 2001, stocks that have missed EPS estimates have averaged a one-day decline of 3.48%.  So this season, stocks that missed EPS estimates fell much less than they usually do.  Stocks that reported inline EPS fell a lot less than they normally do as well.  Combining the beat, miss, and inline outcomes, the average one-day change for all stocks that reported this season was +0.48%.  Since 2001, the average one-day change for all stocks that have reported earnings has been +0.08%.  That means that this season, stocks reacted much more positively than usual, and the reason was because the inline and missed reports fell less than they usually do.

To gain access to our Earnings Screener tool, please sign up for a Bespoke Institutional trial.  The Screener is only available at the Bespoke Institutional level.

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