Feb 3, 2023
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“The key to a 3-peat is change. You can’t ‘repeat’ the formula. Your opponent has already figured it out.” – Phil Jackson
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Heading into this morning’s jobs report, market enthusiasm has waned following some lackluster reports from Alphabet (GOOGL), Amazon.com (AMZN), and Apple (AAPL), but it certainly could be worse. Treasury yields are lower while crude oil is basically flat.
This week was billed as the most consequential week of earnings season, and through Thursday at least, the bulls have delivered. After both the S&P 500 and the Nasdaq kicked off the week with declines of more than 1%, they have bounced back over the last three days with gains of over 1% for three straight days. Since the inception of the Nasdaq 100 tracking ETF (QQQ) in March 2009, the current run is only the 12th time that both QQQ and the S&P 500 tracking ETF (SPY) have each been up 1%+ for three straight days. Below we show a price chart of SPY since 1999 indicating each time when both ETFs experienced back to back to back 1%+ daily gains. In today’s Morning Lineup, we took a more detailed look at performance following these prior three peats. To see that analysis, sign up for a trial today!
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Feb 2, 2023
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“If you just set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing.” – Margaret Thatcher
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Ultimately, it all comes down to the fact that everyone just wants to be liked. After months of hawkish rhetoric even as inflation pressures started to ease, Powell has become as popular as the plague in financial circles, but yesterday he decided to tone it down a bit. It wasn’t a lot, but a comment like “We have no desire to overtighten”, was all the market needed. They took that centimeter and went miles with it. The Dow may have been flat on the day, but the S&P 500 finished up 1% and the Nasdaq tacked on a rally of 2%. We hear Powell even got a smile at the newsstand when he picked up the Post this morning (we’re not sure if it was the Washington or New York version). This morning futures are higher again as Meta’s stock surges close to 20%, but lower-than-expected Unit Labor Costs added another leg to the advance.
Except for the Dow, all of the major index ETFs in our Trend Analyzer finished the day at ‘overbought’ or ‘extreme overbought’ levels, and YTD they’re all (again excluding the Dow) up at least 7% YTD with many already up by double-digit percentages.
For the S&P 500, it finished the day 1.95 standard deviations above its 50-DMA. Since Powell became the Fed boss in February 2018, the only other time the S&P 500 was further above its 50-DMA on a Fed meeting day (scheduled or unscheduled) was on 11/3/21. That was the last meeting before Powell ditched the term ‘transitory’.
The S&P 500 has ‘passed’ a number of tests in recent weeks. First, it was the 200-DMA, and then it broke above its downtrend line from the highs in January 2022. Yesterday, the latest resistance to go by the wayside was the December peak which resulted in a higher high. Now, with the S&P 500 trading just under two standard deviations above its 50-DMA, it is at overbought levels where four prior rallies in the last 12 months have stalled out. Each milestone that the market crosses reinforces the sustainability of this rally, but on the way up, there are always ‘roadblocks’ ahead. They don’t call it a wall of worry for nothing!
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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Feb 1, 2023
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“Money is the MC-mansion in Sarasota that starts falling apart after 10 years. Power is the old stone building that stands for centuries.” – Frank Underwood, House of Cards
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What a January that was! After closing out an already bad year on a down note, the Nasdaq stormed into 2023 rallying 10.7% in January. Never mind the fact that it’s still only 1% higher than where it was when it closed November, the strong start to the year has a lot of bulls newly emboldened, although there’s more than a small minority of investors saying they won’t get fooled again.
So how common is it to see the Nasdaq rally 10% or more in a month? Since 2000, there have been 33 prior months where the Nasdaq rallied at least 10%, and if you narrow that down to 10% monthly rallies that followed a twelve-month period where the index was down, the list gets cut in half to just 16 prior occurrences. In the table below, we list each of those prior months since 2000 along with the Nasdaq’s forward performance over the next one, three, and twelve months. Since 2002, these 10%+ rallies after a decline in the prior twelve months have been followed by positive returns in the next year. During the year 2001, though, there were four separate occurrences, and each one was followed by declines over the next year. For a longer-term and more detailed look at the Nasdaq’s performance after 10+ monthly gains, check out today’s Morning Lineup.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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Jan 31, 2023
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“I would rather hire a man with enthusiasm, than a man who knows everything.” – John D. Rockefeller
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Futures are lower heading into the last trading day of the month, but they’re well off their lows of the morning. Treasury yields and crude oil are also lower but like equities, are off their lows of the morning. The Q4 Employment Cost Index was just released and came in at a level of 1.0% versus forecasts for a reading of 1.1%. That’s the third straight quarterly decline from a multi-decade peak in Q1 of 2022, and while it won’t change what the Fed does at its meeting that starts today, it could potentially make Powell slightly less hawkish when he speaks tomorrow.
Yesterday’s 1.3% decline was the third 1%+ decline for the S&P 500 this month and the 8th 1% move (up or down). While futures are only modestly lower now, if there is another 1% move today, it would be the most 1% daily moves in the month of January since 2016 when there were 13 (tied for the third most since 1953 when the current five-trading day week began). If there’s not a 1% move, this January will simply be tied with last year for the most since 2016. Thankfully, the result in terms of performance won’t be the same.
Yesterday’s decline may have been disappointing for bulls but in terms of drivers of the losses, it looks like nothing more than profit-taking following some big YTD gains. The scatter chart below compares the performance of Industry Groups YTD heading into this week (x-axis) versus Monday’s performance (y-axis). The two biggest losers on Monday were Autos & Parts (-5.5%) and Semiconductors (-3.0%), and heading into the week they were the two best performers on a YTD basis with gains of 36.1% and 17.2% respectively. At the other end of the spectrum, two of the only three groups that finished the day higher on Monday (Household & Personal Products and Food Beverage & Tobacco) were also the two worst-performing groups on a YTD basis heading into yesterday.
On the topic of semis, the group is currently tightly wedged between two key levels. About 3% below Monday’s close is the downtrend line that was broken to the upside earlier this month while about 5% above, resistance corresponding to the lows in March and the subsequent highs from June and August.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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Jan 30, 2023
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“There is no better teacher than history in determining the future. There are billion-dollar answers in $30 history books.” – Charlie Munger
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With just two more trading days left in the month, below is a chart we published in our Chart of the Day from last Tuesday looking at rest-of-year performance when January has been a positive or negative month. Remember, since WW2, the rest of the year has generally been stronger when January has been an up month versus a down month. As shown, the S&P has averaged a decline of 0.27% across all Februarys, but the index has averaged a gain of 0.37% in February when January has been up versus a decline of 1.21% in February when January has been down. The trend is the same when looking at the rest of the first half and the rest of the year.
Drilling down further, there have only been two other instances since WW2 where the S&P gained more than 5% in January after posting a double-digit percentage decline in the prior year: 1967 and 1975. See how things turned out in those years by reading today’s full Morning Lineup.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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Jan 27, 2023
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“If it doesn’t matter who wins or loses, then why do they keep score?” — Vince Lombardi
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It’s conference championship weekend for the NFL as the Bengals travel to Kansas City in the AFC and the 49ers travel to Philadelphia in the NFC. The AFC championship game is an exact repeat of last year’s match-up when the Bengals upset the Chiefs on the road. We’ve only seen the same two teams play in the same location in the AFC Championship game in back-to-back years two prior times, once in 2011/2012 (Ravens at Patriots) and once in 1978/1979 (Oilers at Steelers).
If you’re looking for more individual stock ideas, yesterday we updated our Bespoke 50 list of noteworthy Russell 3,000 growth stocks. We like this list as an idea generator for further research into the 50 names that make the cut each week.
At the index level, take a look below at our Trend Analyzer snapshot of major US index ETFs. It’s green across the board when it comes to 50-DMA spread, 5-day change, and YTD change. The Nasdaq 100 (QQQ) is in the lead on a YTD basis with a gain of 10.1%, and it’s also up the most over the last five days and the farthest above its 50-DMA. This is the opposite of what we saw in 2022 when QQQ lagged the rest of the market severely. As you can see, every single index ETF on the list is now “overbought” with the exception of the Dow 30 (DIA).
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
