Jan 28, 2020
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In yesterday’s Chart of the Day we noted that Monday gaps down of 1%+ typically see the biggest bounce backs on the following day — the “turnaround Tuesday” effect. While it’s still early, futures are attempting a bounce this morning as news regarding the coronavirus hasn’t gotten materially worse. While the number of cases has ballooned, that trend is to be expected. What we haven’t seen overnight is an increase in the mortality rate. Relative to yesterday, in fact, it appears to have actually declined slightly. We caution, though, that it’s still very very early in the outbreak, and no one really knows how this is going to shake out. We can all make estimates and look at various models but in the end, they are only that. One thing we do know is that China is one of the world’s largest economies, and growth there is definitely going to take a hit.
Jan 27, 2020
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It’s going to be one of those days. US futures are down sharply this morning primarily on news of the spreading coronavirus and the Chinese government’s attempts to control it. S&P 500 futures are set to open down about 1.5% which would end the current streak of days without a 1% decline at 74.
Jan 24, 2020
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What a difference a few months makes. It was only six months ago that Intel (INTC) was starting to be considered an also-ran in the semiconductor space. After a number of management shakeups and production issues in its rollout of chips using 10nm technology, INTC was losing market share to AMD, and the stock languished. When the company reported earnings last July, its stock declined 1% in reaction to the report. While that wasn’t a sharp decline, it was the fifth time the stock had reacted negatively to earnings in the prior six quarters. Not only that, but the stock was also near 52-week lows when the Philadelphia Semiconductor Index was near 52-week highs. INTC used to be the leader in the semiconductor space, but last July it seemed to be looking more like Bethlehem Steel in the early 1990s than a leading company in the technology sector.
That report last July marked what was a low point for INTC on a relative basis, though. Ever since then the stock has been rolling, and even before last night’s earnings triple play the stock was already in the midst of a multi-year breakout that will likely look even more convincing after today. In pre-market trading, the stock has been losing some steam from its overnight highs, but it is still up over 5% after what was already a strong move heading into the report.
Jan 23, 2020
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The coronavirus is increasingly starting to show up around the world today, and authorities are taking additional steps to contain its spread. Travel has not only been restricted into and out of the city of Wuhan but has reportedly been expanded to other cities as well. Additionally, as we type this Singapore just announced its first confirmed case. Macau has even announced that all parties and festivities tied to the New Year celebration have been canceled, and the CEO of WYNN has said that they will not rule out closing its casinos on the island. Imagine if New York city just canceled the Times Square ball drop on New Year’s Eve? Even if the outbreak is contained, already it is having an economic impact.
Remember back in 2008 during the Financial Crisis when no one wanted to go home long on a Friday and risk a negative news event coming out over the weekend? Well, that’s the case in China now as the Shanghai Composite fell nearly 3% ahead of the week-long Lunar New Year holiday. With the coronavirus continuing to spread and no one knowing how the great migration in China during this holiday period will impact the spread, it is only natural that traders looked to lighten up in what will be their last chance to trade until next Friday.
While it’s only natural, today’s drop was the Shanghai Composite’s worst one-day decline on the last day of trading heading into the Lunar New Year holiday on record. While the last few days have been a downer for Chinese stocks, the uptrend from last summer’s lows remains intact, and if the steps being taken in China to contain the virus are successful, those sales will quickly turn into buys when traders come back next week from the holiday.
Jan 22, 2020
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Jan 21, 2020
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It took a while but last week we finally saw a breakout in the number of stocks trading at overbought levels. At a level of 63.4%, the percentage of S&P 500 stocks trading more than one standard deviation above their 50-day moving averages is now at its highest level since last February. At the same time, just 6% of S&P 500 stocks are oversold, and that’s actually a relatively high number given how many stocks are at overbought levels. Last February, the last time there were this many overbought stocks, the percentage of oversold stocks was under 4%. That suggests that there is a bit more dispersion in the market than there was this time last year.
