The Energizer Market

The S&P 500 notched yet another new all-time high today.  Below is an updated look at our tables highlighting the length of days it has been since the last meaningful pullback.

As shown, we’re now at 445 days since the last 3%+ pullback (a record), 575 days since the last 5%+ pullback (18 days from a record), 712 days since the last 10%+ pullback (not close to a record), and 3,242 days since the last 20%+ pullback (2nd longest).

Another 100+ Trading Day Streak Without a 1%+ Decline

We’ve been saying this for a while now, but the next time the S&P 500 experiences a drop of more than 1%, it’s going to feel like a crash to many investors.  That’s because 1%+ down days have become so foreign lately.  As investors get used to only very small declines on very rare occasions, drops of 1%-2% — which were much more frequent up until the end of 2016 — feel MUCH more painful when they finally do occur.

Below is a chart showing historical streaks of trading days without a 1%+ down day going back to 1945.  While the current streak of 108 trading days isn’t that close to the record streak of 184 trading days seen back in 1963, it’s notable that we just had a 109-trading day streak end last March as well.

Prior to the two recent 100+ trading day streaks without a 1%+ down day, the last two came back in 1995.  1995 was a year that saw very similar action to what we’ve seen over the last 12 months.

If we tighten up the margin of the decline even more, the S&P 500 has not had a decline of 0.60% in 96 trading days.  As shown below, that’s easily a record going back to 1945!

Netflix (NFLX) Joins the $100 Billion Club

Netflix (NFLX) is up big yet again following its Q4 2017 earnings release last night after the close.  Prior to its earnings report yesterday, we sent the table below to Bespoke Institutional subscribers who have access to our indispensable  Earnings Screener tool.  As shown in the table, Netflix (NFLX) had gapped up following 14 of its 15 January earnings reports since it IPOd!  That’s an incredible trend, and it held yet again this time around.  Following today’s gap up of over 10% for NFLX, it has now gapped up following 15 of its last 16 January earnings reports.  If you have not yet tried out our Earnings Screener, you should really do so now!  The Screener allows you to easily filter through more than 150,000 quarterly earnings reports for more than 5,000 stocks going back 15 years.  Sign up for a 14-day free trial to Bespoke Institutional to gain access.

With Netflix’s (NFLX) move higher today, its market cap has pushed above the $100 billion mark.  That’s a big deal because it joins an exclusive club of 60 other companies that have a market cap of more than $100 billion.  Below is a look at these $100 billion companies sorted from largest to smallest.  Today alone, Netflix’s market cap surpassed companies like United Tech (UTX), Broadcom (AVGO), Morgan Stanley (MS), Goldman Sachs (GS), and Caterpillar (CAT).

While the $100 Billion Club is an exclusive list of just 61 companies, we wondered how big the list was back in early 2009 at the lows of the Financial Crisis.  The answer?  Back then, just nine companies were part of the $100 Billion Club at the Financial Crisis lows, and Exxon Mobil (XOM) was the largest at just $319 billion!  It’s truly astounding how far we’ve come since those dark days nine years ago.

Apple (AAPL) — now the largest company in the world — is nearly 3x as large as XOM was back then.  In fact, the combined market caps of Apple and Alphabet now (roughly $1.7 trillion) is larger than the combined markets caps of the 13 largest companies at the lows in 2009.  There are now 27 companies that are larger than the 2nd largest company (WMT) was in 2009.  We could go on and on with similar stats, but you get the point!

B.I.G. Tips – Everything’s Overbought…Except For Utilities and Real Estate

The chart below comes from the second page of our Morning Lineup report, and it shows the percentage of S&P 500 stocks that are trading at overbought (red line) and oversold (green line) levels.  For the purposes of this chart, overbought (oversold) is defined as a stock trading more than one standard deviation above (below) its 50-day moving average (DMA).  Since the start of the year, the number of overbought stocks has surged from a reading below 50% at the end of 2017 to above 70% yesterday (the highest percentage since March 2016).

What’s really interesting about the current set-up is that even though more than 70% of stocks in the S&P 500 are overbought, 11% are trading at oversold levels.  Going back to 1990, there has never been a time where the percentage of overbought stocks exceeded 70% and the percentage of oversold stocks was above 10% simultaneously!  The major culprits behind the high percentage of oversold stocks have been the Real Estate and Utilities sectors.  As shown in the screenshots below from our Trend Analyzer tool, these two sectors account for 46 of the 56 stocks in the S&P 500 that are oversold. The disparity between these two sectors and everything else is extreme, to say the least.

So what can we expect from the market following extreme readings in the percentage of stocks that are overbought? Our just published B.I.G. Tips report looks at prior periods where this reading reached extreme levels and shows how equities performed going forward.  Get your hands on it now with a two-week free trial to Bespoke Premium!

For anyone interested in this report, check it out by signing up for a Bespoke Premium membership 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 — Growth On Track, Credit Spreads Tight, North America Data Update — 1/22/18

Log-in here if you’re a member with access to the Closer.

Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, we review Chicago Fed’s National Activity Index for December, the current state of credit markets, and data today in Mexico and Canada.

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

Key Earnings Reports to Watch This Week

Using our Interactive Earnings Calendar available to Bespoke subscribers, below is a snapshot of the 40 largest companies set to report earnings this week.  For each stock, we highlight its current EPS and revenue estimate along with its historical beat rates.  We also provide the stock’s average one-day percentage change following past reports and its absolute one-day percentage change (to measure stock volatility in reaction to earnings).

Netflix (NFLX) reports after the close today, and historically it has averaged a move of +/-13.49% on its earnings reaction day.  That’s about as volatile as it gets!

Tomorrow we’ll get reports from key Dow stocks like Johnson & Johnson (JNJ), Procter & Gamble (PG), Verizon (VZ), and Travelers (TRV), while on Wednesday we’ll hear from General Electric (GE), United Tech (UTX), and Ford Motor (F).  Another big round of reports come on Thursday with 3M (MMM), Caterpillar (CAT), Biogen (BIIB), Intel (INTC), and Starbucks (SBUX) set to report, and then Honeywell (HON) rounds out the week with its report on Friday morning.

The Incredible Shrinking Dollar

You don’t need us to tell you that a dollar just doesn’t buy what it used to, but here’s some actual proof about just how weak the greenback has recently been.  With just over a week left to go in the month, the US Dollar Index is already down more than 1.7% on the year.  That’s a pretty big decline for a currency, but if you remember last year, the US Dollar Index kicked off 2017 with a decline of 2.6% in January, in what was its worst opening month to a year since 1987.

The chart below shows the US Dollar Index’s historical returns for the month of January going back to 1968.  As shown, the back to back 1%+ January declines has happened just three other times.  The other three periods were 1972 – 1973, 1986 – 1987, and 2011 – 2012.

Below we have provided charts of the S&P 500’s performance in the second year of each of the four periods highlighted above.  While there were some big moves in the S&P 500 in each of those years, there really wasn’t a whole lot in the way of a discernible trend. In 1973, equities just declined steadily throughout the year, falling over 15%.  In 1987, they rallied sharply early in the year, only to crash in October and erase all of the prior YTD gains.  Then, in 2012, the S&P 500 rallied finishing the year with a respectable gain of 13.4%.  One characteristic of each of the prior years shown, however, was there was more in the way of volatility than we have become accustomed to seeing recently.  Even in 2012 when equities gained over 10%, the S&P 500 saw an intra-year decline of more than 10%.

S&P 500 Stock Seasonality – 1/22/18

While we don’t ever suggest that investors should base their trading solely on the calendar, there is evidence that the market and many stocks do indeed follow seasonal patterns.  This makes our S&P 500 Stock Seasonality report a useful addition to every investor’s toolbox. Using the last ten years worth of price data, our Stock Seasonality report looks at the average returns for the S&P 500, its eleven sectors, and its 500 individual stocks.  In the report, we highlight the five stocks in each sector that have historically been the best and worst performers over the next two weeks.  For each stock, we also include information such as average returns, the percent of time each stock or sector is positive/outperforms the S&P 500, and its historical performance over the next two weeks for each of the last ten years.  The Stock Seasonality report is published on a weekly basis on Mondays, and it is available to all Bespoke Premium and Bespoke Institutional subscribers.

One stock that we wanted to highlight this week is Electronic Arts (EA).  With a median gain of 7.77% and positive returns in eight of the last ten years, EA is a gamer’s paradise in the upcoming two-week period.  So, what typically drives EA to such strong gains during this period? Earnings.  EA typically reports earnings right towards the end of January, so its Q4 report is almost always covered in the span of the next two weeks.  This year, EA report on 1/30 after the close, and given the stock’s track record, expectations will be high. If the company misses expectations, you can expect to see a reaction like the ones we saw during this period back in 2008 of 2016.

What’s even more amazing about EA’s performance in the upcoming two-week period is that it has historically been only the third-best performing stock in the S&P 500 during this period!


 

For active traders, our Stock Seasonality report is an excellent tool to help keep track of the best and worst times of year for the overall market, sectors, and individual stocks.  To see the report and which two stocks have performed even better than EA in the upcoming two-week period, sign up for a monthly Bespoke Premium membership now!

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