Bespoke’s Morning Lineup – 9/17/21 – Slow Going into the Weekend

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“If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffett

Futures are pointing to a modestly lower open this morning, and they’re right near the lows of the morning as European stocks opened the day higher and have steadily sold off throughout the morning session there. Two culprits are behind the weakness in Europe.  The first is a hot CPI report which showed y/y increases of 3.0% versus 2.2% last month.  The second is technical; after opening back up above its 50-DMA this morning, the STOXX 600 couldn’t hold on to that level after closing below it in each of the last two trading days.

The economic calendar is light today with the only report on the calendar being Michigan Sentiment, and economists are expecting a modest rebound following last month’s plunge.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

With the S&P 500 on pace for its eighth down day in the last 10 trading days, there’s a good degree of trepidation on the part of investors lately.  Look no further than this week’s sentiment survey from the American Association of Individual Investors (AAII) where bullish sentiment plunged as an example. One encouraging aspect of trading the last several days is the performance of semiconductors, a sector we consider to be a good barometer of the market’s direction.  Yesterday, for example, the VanEck Semiconductor ETF hit a new record high and finished in positive territory for the sixth day in a row.  Not only that, but in the last 20 trading days, the ETF has finished the day lower only four times.

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Bespoke’s Morning Lineup – 9/16/21 – Busy Day of Data, Sentiment Plunges

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 “It’s not like the CIA. We don’t have private, secret data on the economy.” – Jerome Powell

We’ve seen a fair amount of weaker than expected economic data over the last several weeks, and today will be a test for the strength of the recovery as a number of key reports are on the calendar.  Retail Sales, Jobless Claims, and the Philly Fed will all be released at 8:30, while Business Inventories will hit the tape at 10 AM.

Yesterday was a nice relief from the recent selling, but it has been surprising to see just how quickly investors have reversed course in terms of sentiment.  According to the weekly sentiment survey from AAII, bullish sentiment plunged from 38.9% down to 22.4% this week (lowest level since June 2020) while bearish sentiment surged from 27.2% up to 39.3% (highest level since last October). That was quick!

This morning, there’s been little movement in different asset classes as equity futures are just slightly lower, the 10-year yield is modestly higher, and oil is lower. Even in the crypto space, there’s little life as bitcoin is trading down just … 77 cents!

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

When it comes to seasonal patterns in the market, one less widely known trend is related to the Jewish calendar regarding Rosh Hashanah (the Jewish New Year) and Yom Kippur (Judaism’s most solemn day of the year). The old saying says to “Sell Rosh Hashanah and buy Yom Kippur” as the period between these days tends to be a weak time of year for the market. We’ll leave it to others to try and explain the reasons behind the axiom, but the actual results don’t refute the pattern.

The table below shows the performance of the S&P 500 from the close before the start of Rosh Hashanah to the closing price on the day Yom Kippur ends from 2000 through 2020 (2021’s performance is through Wednesday’s close). During that span, the S&P 500’s median performance during this period has been a decline of 0.50% (average: -0.92%) with positive returns less than half of the time.

While equity market returns have been weak during the period between these two days on the Jewish calendar, Yom Kippur ends tonight at sundown, so what are market trends from after Yom Kippur ends through year-end?  Overall, the broad market trend has been positive.  In the twenty-one prior years shown, the S&P 500’s median rest of year performance has been a gain of 6.07% with gains 71% of the time. In the table, we have also shaded those years where the S&P 500 bucked the market headwinds and posted positive returns during this period, but it tended to have no impact on performance for the remainder of the year.

While we have seen all sorts of theories over the years as to why the equity market has been weak in the period between Rosh Hashanah and Yom Kippur, it is also important to remember that both of these days occur at a time of year that is already seasonally weak to begin with.

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Bespoke’s Morning Lineup – 9/15/21

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 “I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.” – Henry Paulson

Futures were higher earlier this morning than they are now, and as we’ve seen the last couple of days, equity markets have been struggling to hold onto gains throughout the trading day.  The fact that today marks the 13th anniversary of the Lehman bankruptcy also probably doesn’t help sentiment either.  Overnight, Retail Sales out of China showed an increase of just 2.5% in August whereas expectations were for a rate of nearly triple that.  Chinese Industrial Production also missed estimates, but at 5.3% was much closer to consensus forecasts for growth of just under 6%.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

It wasn’t a good day for stocks in general yesterday, but the banks were one sector that was hit especially hard.  Of the six large banks shown below, Wells Fargo (WFC), which Senator Warren actually called for to be broken up yesterday, was the only one to finish the day in positive territory.  The other five were down anywhere from 1.36% (Goldman) to 3.14% (PNC).  Of the six, the only one that’s currently not in some sort of consolidation mode right now is Goldman which is still within 5% of its 52-week high from just two weeks ago.  While trading in the sector has been frustrating lately, look on the bright side, it’s not 13 years ago.

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Bespoke’s Morning Lineup – 9/14/21 – All Eyes on CPI

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“There is a time to make money and a time to not lose money.” – David Tepper

There’s not a lot going on in the futures market this morning as investors await the August read on CPI.  While the monthly increase is executed to show an increase of 0.4%, it would be the lowest rate of increase since February.  Already this morning, the NFIB Small Business Sentiment survey came in modestly better than expected showing continued tightness in US labor markets.  That tightness is only likely to get worse in the months ahead as Amazon announced plans to hire an additional 125K employees in the US at starting wages of $18 per hour.  Japanese stocks were higher overnight, but Europe has been drifting lower.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

Including yesterday’s gain, the post-Labor Day trading environment has been a weak one for every sector except Energy.  As shown in the snapshot below from our Trend Analyzer, the Energy sector is the only one that hasn’t moved down within its trading range over the last five trading days.  Weakness during this period has been led by Real Estate and Health Care which are both down over 3%.  Despite those losses, they are still both pretty much at or above their 50-day moving averages.  The Industrials sector hasn’t been the weakest of the eleven sectors, but its 2.26% decline has been enough to make it the only oversold sector in the S&P 500.

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Bespoke’s Morning Lineup – 9/13/21 – Green Start

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“The reason I’ve been able to be so financially successful is my focus has never, ever for one minute been money.” – Oprah Winfrey

The post-Summer trading environment hasn’t been particularly positive for bulls as the S&P 500 hasn’t had a positive day since 9/2.  Bulls are looking to regroup this morning, though, and futures on all the major averages are firmly in the green.  Both the economic and the earnings calendars are essentially blank today and the Fed is in its pre-meeting blackout period as well, so don’t expect much in the way of tape bombs on that front either.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

After hitting a record high back on 9/2, the S&P 500 has now traded lower for five straight trading days.  That’s tied for the longest losing streak since 2/22.  That streak back in February was also the last time the S&P 500 experienced five straight down days after a record closing high.  Since the end of the Financial Crisis in 2009, there have only been six prior periods where the S&P 500 was down for five straight trading days after closing at a record high, and before the most recent one in February, the one prior to that was right after the pre-COVID peak in February 2020.

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Bespoke’s Morning Lineup – 9/10/21 – Ending the Week on a Positive Note

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“No day shall erase you from the memory of time.” – Virgil

After four straight days of losses, the S&P 500 is indicated to end the week on a positive note.  That could change between now and the closing bell, but with the PPI report out of the way (mostly inline with expectations), there won’t be much on the data front to derail things.  The positive tone in futures this morning is primarily being attributed to news that President Biden and Chinese President Xi spoke on the phone last night for 90 minutes for the first time since February.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

After closing at a record high last Thursday, the S&P 500 heads into the day today riding a four-day losing streak.  Despite the string of weak days, the magnitude of the decline has been pretty well contained with a cumulative decline of just under 1%.  To put this in perspective, in the entire post-WWII period, the current losing streak represents just the 16th time that the S&P 500 had a 4-day losing streak but was still within 1% of a record closing high.

The log chart below of the S&P 500, where every horizontal line represents a doubling of the index, shows every occurrence mentioned above (there were none prior to 1960).  Interestingly, these streaks were pretty much bunched into three different periods.  The first was in the 1960s, but from 1968 through 1990, there wasn’t a single occurrence. From 1991 through 1993, there were three occurrences, but then there was another gap of twenty years without a single occurrence!  Then, from December 2013 through the present, there have now been six separate streaks.

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