Jun 16, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Once you know where the roller coaster is going, are you in for the ride?” – Robert Fulghum
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
It’s looking like a flat open to cap off what has been a very strong week, and once again the Nasdaq is outperforming after Adobe (ADBE) reported better-than-expected earnings last night after the close. It’s a quiet day for data, but Fed Governor Waller had some relatively hawkish comments and the University of Michigan Sentiment report will be released at 10 AM. The key item to watch in that report is inflation expectations.
139 years ago today, the first roller coaster in the United States opened in Coney Island, and for ‘just a nickel’, customers could get on board for the thrill of riding six miles an hour through twists and turns of metal and wood. Roller coasters have come a long way since their first introduction in terms of both speed and ups and downs, but If the stock market is a ride, these days the only direction it goes is up.
The S&P 500 closed back above 4400 yesterday and finished in positive territory for the eighth time in ten days. For the last ten trading days now, the S&P 500 has closed more than two standard deviations above its 50-day moving average (what we call short-term ‘extreme’ overbought levels), and yesterday almost closed three standard deviations above its 50-DMA (+2.97). That was its most overbought close since November 2004 which was right after George W Bush won re-election over John Kerry.
Streaks of at least ten trading days of extreme overbought (OB) readings for the S&P 500 haven’t been especially common over the years. Since 1952 when the five-trading day week started, there have now been 35 such streaks. The most recent was in April 2021, and the longest was 17 trading days in December 1995.
Looking at more recent history, the chart below shows the S&P 500 going back to 2000 with the red dots showing each prior ten-day streak of extreme overbought closes (each dot represents the 10th trading day in the streak). While none of these prior streaks occurred near a market low, they didn’t represent short-term or long-term peaks either. The closest any of these streaks occurred to a peak was in April 2021- more than seven months before the ultimate peak.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Jun 15, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“A military is built to fight” – Xi Jinping
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
China’s leader Xi Jinping turns 70 years old today, which in American politics would make him a spring chicken, and who better to celebrate his birthday with than US Secretary of State Anthony Blinken and Bill Gates who are both scheduled to visit with him in the next week. It’s just too bad that Xi couldn’t get some better economic data to celebrate over. Overnight, China reported that youth unemployment had hit a record high of 20.8%, but the PBoC’s gift to China’s leader came in the form of a rate cut in its key policy medium-term lending rate from 2.75% down to 2.65%.
In the US this morning, futures point to a lower open as European equities trade lower and the ECB just hiked rates. There was just a ton of economic data released, and the key items in the data were that initial jobless claims came in higher than expected (262K) and at their highest level since October 2021, Retail Sales and Empire Manufacturing both surprised to the upside with positive readings, but the Philly Fed remained negative coming in at -13.7 vs forecasts for a reading of -14.0. Basically, there was a little for everyone, but more signs of strength than weakness.
For the last few months, investors have been waiting for the rally to broaden away from the mega-caps to the smaller members. While we started to see some of that in the first week of June, the mega-caps have moved back into the lead in the last week. To illustrate, the chart below shows the YTD performance spread between the S&P 500 market cap and equal-weighted indices. Believe it or not, earlier in the year, the equal weight index was actually outperforming the market cap-weighted index, but by February they were pretty much back to even. In early March, though, we all know what happened, and ever since SVB Financial started to collapse, the market cap-weighted index has blown the equal-weighted index out of the water.
At the start of June, the YTD performance spread between the two indices had widened out to a peak of 10.62 percentage points. In the week that followed, the spread narrowed down to as low as 8.62 percentage points, but this week the mega caps have once again started to take the lead. After yesterday’s trading, the spread had once again widened out above 10 percentage points. At some point, the rally will broaden out, but up until this point, there have been more than a few false starts.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Jun 14, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“They always say time changes things, but you actually have to change them yourself.” – Andy Warhol
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Futures are mixed this morning, but the Nasdaq is indicated to open higher, and the May read on PPI hasn’t hurt sentiment. Headline PPI fell 0.3% m/m versus expectations for a decline of 0.1%. Ex Food and Energy, they increased 0.2% which was right inline with expectations. On a y/y basis, headline PPI was up just 1.1% compared to forecasts for an increase of 1.5%, and ex Food and Energy, they rose 2.8% versus forecasts for an increase of 2.9%. PPI certainly isn’t as closely followed by markets as CPI, but these numbers suggest that the headwind of inflation pressures continues to wane.
A year ago today, the S&P 500 was just entering bear market territory following what was a sharp sell-off due to the Fed signaling to investors that not only were rate hikes coming, but they were coming in big bites. After a Michigan Confidence report showed consumer inflation expectations were rising more than expected, the FOMC went on to hike rates by an unprecedented 75 basis points for four consecutive meetings.
The snapshot from our Trend Analyzer below shows where the major US equity index ETFs stood relative to their trading ranges as of the close on 6/13/22. Leading the way to the downside, the Nasdaq 100 was down over 30% YTD, but nine indices were down over 20%. The week leading up to June 13th had been especially painful as every index ETF in the screen was down over 7% in the prior week, and most were at least 10% below their 50-day moving averages (DMA) and trading at ‘extreme’ oversold levels.
What a difference a year makes. As we head into the June FOMC rate decision this year, the Fed has signaled that after ten straight meetings where they hiked rates, today will be the first time in over a year that the committee leaves rates unchanged. Instead of inflation expectations surging, this week’s NY Fed Survey of Consumer Expectations showed that one-year inflation expectations are at the lowest level since May 2021, and three-year expectations are actually slightly below their ten-year historical average.
From a market perspective, whereas the S&P 500 was just entering bear market territory at this time last year, it is now just entering bull market territory as the S&P 500 finally closed 20% above its October 12th closing low last Thursday. Contrast the way the snapshot of index ETFs from our Trend Analyzer one year ago looked with the way it looks as of today. Now, the Nasdaq 100 is leading the way to the upside with a gain of over 30%. All but three of the index ETFs are up over 2% in the last week, and most of them are trading at least 5% above their 50-DMAs, and every single one of them are trading at ‘extreme’ overbought levels.
Historically, the market’s reaction to short-term ‘extreme’ oversold levels is very different in magnitude to how it responds to short-term ‘extreme’ overbought levels but given the sharp rally of the last couple of weeks, it shouldn’t be a surprise, if the rally we’ve seen experiences at least a pause for the next several days.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Jun 13, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“There are so many worlds, and I have not yet conquered even one” – Alexander the Great
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Futures are little changed, and that’s understandable given the focus on the release of May CPI. Outside of the US, the PBoC lowered its 7-day reverse repurchase rate by 10 basis points, and there are reports of other policy decisions under discussion. Oil prices are higher, but with WTI at $68 a barrel, it’s hard to say that prices are rallying. Ahead of the May CPI, small business sentiment from the NFIB came in slightly higher than expected at a level of 89.4 versus expectations for a reading of 88.5. In individual stock news, shares of Zions Bancorp (ZION) are down 2% after the company noted at an investment conference that they expect loan growth to moderate.
The May CPI report just hit the tape, and both the headline and core readings were right in line with forecasts on a m/m basis. On a y/y basis, headline CPI was one-tenth lower than expected (4.0% vs 4.1%) while the core reading came in a tenth higher at 5.3% versus the 5.2% forecast. There’s been little change in markets in reaction to the report, and there’s nothing here to suggest that the Fed can’t pause tomorrow, although the hotter-than-expected y/y reading in the core reading is probably more negative than the fact that the lower-than-expected headline reading is positive.
With the release of the May CPI, the pace of increase in y/y inflation has now declined for eleven straight months. In the history of the report dating back to the early 1900s, this is just the third time that the y/y reading has decelerated versus the prior month’s reading for ten or more months. This month’s decline topped the ten-month streak that ended in July 2012, and the only streak that was longer lasted 12 months and ended in June 2021 just after WWI and the Spanish flu epidemic. During that 12-month streak, the y/y rate of inflation dropped from a peak inflation rate of 23.7% to deflation of 15.8%. Talk about a reversal. In the current streak, the rate of inflation has only declined just over 5 percentage points from a peak of 9.1% to May’s reading of 4.0%
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Jun 12, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“That wall has to come down. That’s what I’d like to say to them.” – Ronald Reagan
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Continuing the trend from last week and the last several months for that matter, equity futures are indicated higher this morning with the Nasdaq leading the way. The S&P 500’s bull market was confirmed last Thursday when it closed 20%+ from its October 12th low, but it will quickly face a big test this week with important inflation data and a Fed meeting culminating on Wednesday.
There hasn’t been a whole lot of economic data overnight in Asia or Europe, but Japan did report a larger-than-expected decline in PPI, and Machinery Tool Orders were down over 22% y/y in May after falling 14.4% in April. With data suggesting slower economic activity than expected, treasury yields are lower with the biggest moves at the short end of the curve, and crude oil is back under $70 per barrel to $68.43.
Barring an epic collapse in stock prices today, the S&P 500 will have gone eight months without hitting a new low after falling 20% or more from a 52-week high. We discussed how this period compares to prior periods and how the market performed going forward in this weekend’s Bespoke Report, but the chart below compares the S&P 500’s performance in the eight months coming off October’s lows to the eight months that followed each of the prior lows.
With a gain of 20.2%, the S&P 500 just barely moved into official bull market territory last week and avoided being just the third period (along with 1947 and 1957) of the fourteen in which the S&P 500 did not reach the 20% threshold for a bull market in the first eight months of a rally off the lows. You’ll see in the chart that the S&P 500 was also up less than 20% eight months after the September 2001 low, but in that period, it had already rallied 20% and was in a new bear market once the eight-month anniversary of the September low occurred. While the S&P 500 managed to make it into bull market territory last week, its gain in the first eight months of the rally is just over ten percentage points weaker than the average for all fourteen prior periods which helps to explain why, if you don’t have exposure to Technology and Communication Services, it may not exactly feel like a bull market.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Jun 9, 2023
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“It wasn’t the money, it was just that we had them on the run and gave in. They knew it, and that’s why they wanted to come to terms.” – Al Davis
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
This weekend marks the 155th running of the Belmont Stakes, which is referred to as the “Test of the Champion” given it is the longest and most grueling of the Triple Crown legs. In many ways, the current bull market, which was confirmed yesterday with the S&P 500 closing 20% (barely) above its October 12th low, has been the Belmont Stakes of rallies off a bear market low. To find a period where it took longer for the S&P 500 to rally 20%+ off a bear market low, you have to go back to the late 1950s. The road may have been long, but it’s better than making new lows!
This morning looks like a continuation of the trend all week where there has been little news in terms of earnings and the economy, and futures are modestly lower. Enjoy the calm while it lasts, though, because next week will be another busy week for economic data and even a Fed rate decision to boot.
Megacap stocks may have taken a back seat to large caps in the last several trading days, but somebody forgot to tell Tesla (TSLA). Heading into today, the stock is riding a 10-day winning streak, and with shares up 5% in the pre-market, the streak looks likely to reach Spinal Tap levels today. TSLA has been a wild stock over the years, but in its history as a public company, the stock has only had two other double-digit winning streaks. The first was ten trading days ending in April 2020 while the second came less than a year later when the stock rallied for eleven straight trading days. A gain today would move the current streak into a tie for the longest on record.
The log chart below of TSLA since its IPO shows where each of the prior 10-day winning streaks occurred. The April 2020 streak marked the beginning of what was a massive post-COVID rally where the stock rallied an additional 191% over the next six months. Following the January 2021 streak, however, the stock went on to fall 21% over the next six months.
While TSLA is currently in the midst of one of its longest-ever winning streaks, the magnitude of the move during the last ten days has been less monumental. While 28.4% over ten trading days is nothing to push your plate away over, as recently as this past February, the stock rallied more than 48% over ten trading days, and since November 2021, there have been three other ten-day periods where the stock rallied as much or more than it has over the last ten trading days.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
