Oct 2, 2020
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“Every morning I jump out of bed and step on a landmine. The landmine is me. After the explosion, I spend the rest of the day putting the pieces together.” – Ray Bradbury
Just when you thought things couldn’t get more chaotic, we got the news late last night that the President, his wife, and an aide tested positive for COVID. Obviously, we wish the President and everyone else around the world who has come down with this virus a speedy recovery. Time will only tell how the President’s diagnosis will impact the election, but with the added amount of uncertainty, you can’t fault investors for taking some chips off the table heading into a weekend.
With the news regarding the President’s positive COVID test, you may have forgotten that there was a jobs report this morning. The results were mixed but more negative than positive with Non-Farm Payrolls missing expectations (661K vs 859K) due to a larger than expected decline in government jobs from the loss of census workers. The Unemployment Rate, however, came in a bit lower than expected at 7.9% versus expectations for a level of 8.2%.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
Earlier this week, we noted that the relative strength of the semiconductors had hit a new record high, which was a positive sign for the broader market. Taking a look at the semis from another angle, below we show the cumulative A/D line of the Philadelphia Semiconductor Index (SOX). After moving basically sideways for well over a month now, the SOX’s cumulative A/D line now looks to be breaking out of that range as it has moved to new highs in the last two days. Can the SOX itself be far behind?
Oct 1, 2020
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“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill
Japanese equities were unexpectedly halted for the day due to a trading glitch, but European and US equities are trading on the positive side of unchanged. US equities are indicated higher by more than half of a percent ahead of a very busy day of economic data and optimism over a new round of stimulus. How many times can the market rally on the same rumor?
Initial Claims are expected to come in roughly unchanged from last week while Continuing Claims are expected to drop modestly. Both Personal Income and Spending, on the other hand, aren’t expected to show nearly as much strength as their prior readings. Finally, the Markit US Manufacturing and ISM Manufacturing PMIs are expected to show small improvements versus August’s readings.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, Markit Manufacturing data from around the world, trends related to the COVID-19 outbreak, and much more.
The first big economic report of the month will be the ISM Manufacturing report at 10 AM eastern. Already, we have seen signs of strength in the manufacturing sector based on the positive regional Fed manufacturing surveys, but one of the most closely correlated indices to the ISM Manufacturing report is the Chicago PMI. As noted in last night’s Closer report, the r-squared of the monthly levels for each report is 0.76. Based on the results of yesterday’s release which came in well above expectations (62.4 vs 52.0) and was the strongest relative to expectations since October 2013, today’s ISM Manufacturing report should be positive as well. Even with this month’s increase, though, the Chicago PMI remains well below its peak levels of the prior expansion.
Adding together July’s strong gain, a modest decline in August, and now September’s surge, the Chicago PMI has seen its largest three-month increase in the history of the survey. With a gain of 25.78 points during that period, the only other period that was even close in terms of the magnitude of the gain was exactly 40 years ago in the three-months ending September 1980 (+24.29). Looking at the chart, what’s notable about September 1980 and many of the other large three-month rallies in this index is that they occurred right in the early stages of an economic expansion. That’s the good news. The one but, and there’s always a but, is that the 1980 period, which was the period with the most similar three-month increase to now, was quickly followed by another recession. Let’s hope we don’t see double-dip this time around too.
Sep 30, 2020
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“Full of sound and fury, signifying nothing.” – Macbeth
In the markets and life in general, the most hyped events almost always fail to live up to expectations, and while last night’s debate was eagerly anticipated, it was a big disappointment that devolved into shouting and name-calling devoid of any substance. The seven words from Macbeth summed it up best.
In other news this morning, ADP Employment topped expectations by 100K (749K vs 649K), and the Chicago PMI was so strong that they released it early (62.4 vs 52.0 expected). The second revision to Q2 GDP also came in slightly less disastrous than expected (-31.4% vs -31.7%).
The initial reaction to last night’s debates in the betting markets was clearly in Biden’s favor. Over at electionbettingodds.com, the odds for Biden to win the November election jumped back nearly to new highs after rising 4.9 percentage points in the last day to just under 60%. Trump’s odds, conversely, dropped more than four points to below 40%.
Sep 29, 2020
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“There is only one side to the stock market; and it is not the bull side or the bear side, but the right side.” – Jesse Livermore
There’s nothing like ending one week with a gain of 1.6% and starting the next with another 1.6% rally. Even after the 3%+ gain over the last two days, though, the S&P 500 still was not able to close above its 50-DMA yesterday. It traded above there for part of the day on Monday but finished the day just shy, closing two points below its 50-DMA. Futures have been trading on either side of the flat line this morning, as investors digest the gains of the last two trading days ahead of tonight’s debate between President Trump and former Vice President Biden.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, economic activity in the manufacturing and services sectors, trends related to the COVID-19 outbreak, and much more.
Like the old adage to “sell in May and go away,” there’s another less well-known axiom that says to ‘sell Rosh Hashanah and buy Yom Kippur’. While there’s not much in the way of a good explanation behind the saying, with Yom Kippur ending Monday night at sundown, we wanted to provide a quick look at how the strategy has performed this year and in the past. Even with this September being as weak as it has been already, we were a bit surprised to see that the S&P 500 was positive during the Rosh Hashanah to Yom Kippur period this year. With a gain of less than 1%, though, Monday’s rally basically accounts for the entire positive move.
Longer-term, the ten-day period between the two holidays has been negative more often than positive. Since 2000, the S&P 500 has seen an average decline of 0.92% (median: -0.50%) with gains just 43% of the time. In the two weeks after Yom Kippur, though, performance has been much better with the S&P 500 averaging a gain of 0.99% (median: 1.04%) and positive returns 75% of the time. For the remainder of the year, performance has been even stronger with the S&P 500 averaging a gain of 4.13% (median: 5.75%) with positive returns 70% of the time.
Since the S&P 500 rose during the period this year, does that mean we can expect the opposite trend to also play out in the next two weeks and for the remainder fo the year? Not necessarily. In the eight prior years since 2000 where the S&P 500 was positive in the Rosh Hashanah to Yom Kippur period (shaded years in the table), the S&P 500 averaged a gain of 2.14% (median: 1.59%) over the next two weeks with gains all eight times. For the remainder of the year, the S&P 500 saw an average gain of 4.08% (median: 7.02%) with gains 75% of the time.
Sep 28, 2020
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“Do more of what works and less of what doesn’t.” – Steve Clark
Will we or won’t we? Investor hopes over a potential new round of stimulus/relief out of Washington have been on the rise this morning after House Speaker Pelosi has indicated that she still thinks a deal with the White House is possible and that both she and Treasury Secretary Mnuchin have agreed to restart informal talks. With Pelosi and Democrats still at $2.3 trillion and the White House and Republicans refusing to go above $1.5 trillion, there’s still a wide gap, but at least they’re talking.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
In last week’s trading, the Nasdaq 100 was the only one of the major US index ETFs to finish the week in the green, but a number of other indices came close with the S&P 100, Russell 1000, and S&P 500 all finishing down less than 1%. With today’s rally at the open, all of these indices will erase last week’s losses right at the open and could even make a run at reclaiming their 50-day moving averages. Mid and small caps, on the other hand, will all need a bit of an added boost to erase last week’s losses, though. What is encouraging about the setup heading into the week, is that the timing scores on all of the ETFs shown currently rank as ‘Good’.
Sep 25, 2020
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Short term volatility is greatest at turning points and diminishes as a trend becomes established.” – George Soros
It’s been a relatively volatile night in the markets as futures vacillate between modest and steeper losses. Currently, they are closer to the side of modest weakness, but that’s subject to change depending on the market’s latest whims. European markets are seeing even sharper declines as we close out another lousy September week for markets. Investor concerns about the election and an expansion of the COVID outbreak continue to keep a lid on any market upside. Despite the rising concerns over COVID, the cruise lines are a notable bright spot this morning as Barclays upgraded the group.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, trends related to the COVID-19 outbreak, and much more.
September has certainly been a rough month for stocks, and the charts below show just how consistent the selling has been. The chart on the left shows a composite chart of the S&P 500’s performance this month, and the one on the right provides an hourly breakdown of performance. To sum things up, when the market has been open, investors have been selling. Besides some ever so modest gains in the opening half-hour, the rest of the day consists of investors hitting bids and unloading stocks. While the 10-11 hour has seen the steepest losses, every other hour of the day from 11 AM on has also seen losses on an average basis. Looking on the bright side, after today there are only three trading days left in the month.
