The Closer 5/24/16 – “Households Hot, Industry Not”

Looking for deeper insight on global markets and economics?  In tonight’s Closer sent to Bespoke clients, we analyze today’s much stronger than expected New Home Sales print (see chart below), and we also dive deep into the state of the consumer from a credit perspective.  We also provide key equity market stats and update the Bespoke Market Timing Model.

nhs

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More Presidential Betting Odds

In a post yesterday, we highlighted the fact that based on trading in the Iowa Electronic Markets (IEM), the odds for the Democratic nominee to win the Presidential election in November were crashing.  We pointed out that while other betting markets were moving in a similar direction, they weren’t seeing nearly as sharp a move as the IEM.  A case in point is the betting market Betfair.  The chart below shows the historical price of the contract for Hillary Clinton winning the November election.  Similar to the IEM, Mrs. Clinton’s chances have been declining in the last few weeks, falling from 74.4% in late April to 66.0% today.  Unlike the IEM, though, the price decline hasn’t been nearly as sharp and remains comfortably above 60%.

Like our chart of the IEM, in this chart for the Betfair contract, we have also overlaid the performance of the S&P 500 so far this year.  Here again, the patterns of both series have been remarkably similar.  Tuesday’s rally in equities would suggest to some that either Clinton will see a bounce or the relationship is breaking, but until we can convincingly break that downtrend from the April closing high, the relationship remains intact.

BetFair Clintin

Strongest Oil Bull Market Since 2010

Oil continues to trade in a very well-defined uptrend channel.  Since making its bear market low of $26.21 on February 11th (the same day the stock market bottomed as well), the price of oil has rallied 85.16% up to its current level of $48.53.  A bull market is defined as a 20%+ rally that was preceded by a 20%+ decline, and the current bull market for oil has now lasted 103 calendar days.

Below is a list of all oil bull markets since 1983.  Again, these are 20%+ rallies that were preceded by a 20%+ decline.  For comparison’s sake, at the bottom of the table, we highlight the average and median gain and length of all oil bull markets.  Notably, the current bull market for oil has already eclipsed the average and median bull in terms of price change.  With a gain of 85%, this oil bull is nearly 23 percentage points stronger than the average oil bull, and it’s nearly 50 percentage points stronger than the median oil bull!  In terms of length, though, this bull has been just half as long as the average bull and 40 days less than the median bull.  On both a median and average basis, bull markets in oil have been much shorter in duration than bull markets of other asset classes like equities or gold.

 

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oilbulls

ETF Trends: International – 5/24/16

Global markets are getting a bounce today, and that’s helping the Nasdaq outperform along with microcaps.  Homebuilders in the ITB are buoyed by strong new home sales this morning (which we’ll be discussing in-depth in our end-of-day report, The Closer, tonight).  Gold continues to get hit hard as the dollar rallies and rate hike probabilities edge higher (at about 40% chance of a June hike as of today).

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Best Performing Nasdaq 100 Stocks

The Nasdaq 100 is only up a couple percentage points off its recent lows, but the average stock in the index is actually up 8% off its 30-day closing low.  Below is a list of the Nasdaq 100 stocks up the most off their 30-day lows.  (Note that we’re using 30-day lows since most of these stocks have put in short-term bottoms within the last few weeks, but they’ve come on different trading days.)

As shown, NetEase (NTES) and NVIDIA (NVDA) have been absolute beasts, rallying 30%+.  Monster Beverage (MNST), Endo International (ENDP) and Electronic Arts (EA) rank third, fourth, and fifth with gains of 22%+.  Other notables on the list include Amazon (AMZN) — up 19.4%, Netflix (NFLX) — up 15.2%, Facebook (FB) — up 10.5%, and Apple (AAPL) — up 9.1%.

naz100

 

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Chart of the Day: 5/24/16

The S&P 500 has moved back above its 50-day moving average on the back of a 1%+ gain today.  As shown in our sector trading range screen below, the Tech sector has also just moved back above its 50-day.  That puts half of sectors above their 50-days and half below.

sector ranges

In today’s Chart of the Day sent to paid subscribers, we take a look at the chart patterns of the large-cap S&P 500 and the small-cap Russell 2,000.  To view the report, please start a 14-day free trial below.

 

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Gold Breaks Short Term Trend

Last week’s FOMC minutes sure weren’t kind to the price of gold.  Since the release of those minutes on 5/18, gold hasn’t had a single up day, declining by nearly 3%.  With today’s 1% decline, it is now poised to close below its 50-day moving average for the first time since 4/22 and has also broken its short-term uptrend in the process.  Granted, the long-term technical picture for gold still looks attractive, but for now, it seems to be establishing an extended sideways range.

Gold Front Month 052416

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Bespoke Morning Lineup

Highlights

  • Dollar, stocks, & oil all up pre-market (Snapshot)
  • AUD getting ready to base? (Asia)
  • German growth is unsustainable (Austria)
  • Strong rally across equity & credit (Europe)
  • Richmond Fed, New Home Sales ahead (US)

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The Clinton Crash of May 2016

The Iowa Electronic Markets (IEM) is a platform that allows people to wager real money on the outcome of various political elections.  Instead of simply asking people their views using a poll, the IEM tracks where people are actually putting their money.  The chart below shows the odds (since the start of the year) of the Democratic candidate emerging victorious in November with an overlay of the S&P 500.

We have been providing regular updates to this chart for some time now, and up until recently there was a strong similarity between the performance of the S&P 500 and how the democratic candidate (presumably Hillary Clinton) was faring in the polls.  When the odds of the Democratic candidate increased, the market rallied and vice versa.  Over the last two weeks, though, the contract for the Democratic candidate winning in November has not only come under pressure, but it has outright crashed from a high of 74.0% on 5/10 to just 56.1% through yesterday.  When the Democratic contract had its initial decline on 5/11, we figured it was a one-day blip, but since then it has gone on to make new lows.  Before reading too much into the decline in the IEM, we would note that other betting markets haven’t seen nearly as sharp of a move as IEM (although they have all been moving in the same direction), so the IEM is certainly the outlier right now.  That being said, the outlook for Republican candidate Donald Trump has shown considerable improvement in recent days, and Trump has actually moved into the lead by 0.2 points in the Real Clear Politics average of general election polls.

What, if any, are the stock market implications of the changes in the election betting markets?  Without getting into any sort of political debate, we would note that from strictly a historical perspective, equity market performance has been better under Democratic Presidents versus Republican Presidents.  In addition, there has been an argument made that Clinton would represent a more predictable choice for the economy and markets over Trump.  Obviously, there are exceptions to every rule, but the equity market’s rally has definitely run out of steam as the outcome of this fall’s election has become less certain.  Thankfully for market bulls, the correlation between the two has not been nearly as strong in the last two weeks as it was from the start of the year through early May.

IOWA052316
 

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ETF Trends: US Sectors & Groups – 5/23/16

Semis and biotech continue to outperform on a trailing 1 week basis. Gold is finally starting to give back some of its outperformance as the GDX miners ETF has fallen 5.7% over the last week. Junior miners are also weak with the yellow metal itself.  The remainder of underperformers are basically EM and yield vehicles (VNQ, XLU).

Bespoke provides Bespoke Premium and Bespoke Institutional members with a daily ETF Trends report that highlights proprietary trend and timing scores for more than 200 widely followed ETFs across all asset classes.  If you’re an ETF investor, this daily report is perfect.  Sign up below to access today’s ETF Trends report.

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