Jun 24, 2024
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“A champion is someone who gets up when he can’t.” – Jack Dempsey
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US futures are pointing to a flat to slightly negative open this morning on what is going to be a quiet day of economic data. The only report on the calendar is the Dallas Fed Manufacturing report at 10 AM which is expected to come in slightly less worse than last month’s reading of -19.4. European markets started the week on a strong note with no specific news to act as a catalyst, but that doesn’t diminish the fact that the STOXX 600 is up a respectable 0.5%.
Like many stocks, Bitcoin has also found itself treading water for the last several months trying to hang on to the gains from the late 2023/early 2024 rally. This morning, prices are down another 4% near the $60,000 level. After peaking above $70,000 in March, prices have been drifting lower in a sideways range, and if the April lows in the $57,000 range don’t hold, it could be a long summer.
From a longer-term perspective, $65,000 seems to be a level that Bitcoin just can’t shake. In early 2021, it briefly flirted with that level and then quickly erased more than half of its value. Later that year, it got there again and managed to stay there for a few days before crashing over 75%. It took two years and a few months to get back there again, and this time Bitcoin managed to hang around $65,000 again and even take out $70,000, but that level has failed to hold again.
While the recent pullback in Bitcoin looks steep on an absolute basis, relative to its history, 17% is nothing. The chart below shows historical drawdowns in Bitcoin from a record high, and the average since 2011 has been 48%, meaning that on a little less than half of all days since 2011, Bitcoin has been down 50% or more from a prior all-time high.
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Jun 21, 2024
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“Saying that you don’t care about privacy because you have nothing to hide is no different from saying you don’t care about freedom of speech because you have nothing to say.” – Edward Snowden
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
From where markets stand now, equities would finish the week with gains, after breadth in the S&P 500 came in positive yesterday for the third day in a row. That may not sound like much, but the last time the S&P 500’s A/D line was positive for three or more days was in the first week of May. To stay positive on the week, though, we’ll have to get through flash PMIs for the Manufacturing and Services sectors 15 minutes after the opening bell and then Leading Indicators and Existing Home Sales at 10 AM. In Europe this morning, flash PMI readings generally were weaker than expected while UK Retail Sales rose more than expected. Equities on that side of the Atlantic are down between 0.5% and 1%, but the losses still aren’t enough to fully erase the week’s gains.
You’ve probably heard a lot lately about how the end of June can be a tough time for the equity market, and below we show how the numbers have played out since 1980. Usually, the S&P 500 declines from the close on 6/20 through month-end. The S&P 500’s median change during the period has been a decline of 0.09% with positive returns just 44% of the time. Even in years when the S&P 500 was up sharply YTD heading into the last days of June, performance was still on the weak side as the S&P 500’s median change from the close on 6/20 through month end was a decline of 0.23% with gains just 43% of the time.
The silver lining? Over the last four years, the S&P 500 has been up during this period each time, and in the last three years, it has rallied 3.1%, 3.0%, and 1.4%, respectively. As strong as certain seasonal tendencies can be over time, there are always exceptions.
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Jun 20, 2024
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“Why pay a dollar for a bookmark? Why not use the dollar for a bookmark?” – Steven Spielberg
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
While the US was closed in observance of Juneteenth, stocks worldwide were mostly higher, and US futures are playing catchup this morning as the Nasdaq and S&P 500 are indicated higher. At the same time, the Dow, which doesn’t include Nvidia (NVDA), is modestly lower. A bunch of economic data just hit the tape, and it was mostly weaker than expected. While jobless claims were only slightly higher than expected on an initial and continuing basis, Building Permits and Housing Starts were significantly weaker than expected. Those two reports covered the month of May, but the June Philly Fed Manufacturing report also came in weaker than expected, although it remained in positive territory.
Tech stocks are leading the charge again this morning as the ETF that tracks the sector (XLK) trades up more than 0.65% in the pre-market. Heading into today, the sector was already riding an eight-day winning streak, the longest since last November and the 31st such streak since the start of 1990. If the sector rallies again today, it would be the longest streak since September 1, 1990, and just the 17th such streak since 1990. In the chart below we show where each of the prior streaks that ended at eight days and those that stretched on to nine days occurred. Surprisingly, during the late 1990s, these types of streaks were pretty much non-existent.
While the Technology sector has had no problems hitting new highs this month, the same can’t be said for other sectors. Using June 18th as an end date, the chart below shows how many calendar days it has been since each sector’s 52-week high. The only other sector with a 52-week high in June is Communication Services. For three other sectors, their respective 52-week highs were just over a month ago, but for the majority of sectors, their 52-week highs were more than two months ago, including Real Estate where its high over the last year was nearly six months ago in late December!
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Jun 18, 2024
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“The greatest danger occurs at the moment of victory” ― Napoleon Bonaparte
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s only Tuesday, but futures are little changed ahead of what may feel like a Summer Friday as markets are closed tomorrow in observance of Juneteenth and the northern parts of the country bake in the first heatwave of the summer season. Between now and the closing bell, investors will still have to contend with Retail Sales at 8:30, Industrial Production and Capacity Utilization at 9:15, and then Business Inventories at 10 AM. How these reports come in relative to expectations will go a long way in determining whether the Nasdaq can stretch its current winning streak to a lucky seven. The first wave of these reports was just released as Retail Sales came in weaker than expected across the board, and April’s numbers were revised lower.
Overnight in Asia, Japan bounced from yesterday’s 1%+ decline with a gain of 1% while most other major indices in the region rallied by smaller amounts. In Australia, the RBA left rates unchanged at 4.35%, and Chinese Premier Li wrapped up his visit to the country and expressed optimism that the two countries could improve their ties. The tone in Europe is also positive this morning with the STOXX 600 up about 0.5%. CPI for May came in at 0.2% which was in line with expectations and down from April’s reading of 0.6%, but the ZEW Economic Sentiment Index showed a much smaller than expected improvement.
Just when the conversation over the divergence between the S&P 500’s price and breadth reached a fever pitch, the S&P 500 kicked off the week yesterday with a gain of 0.77% and a breadth reading of positive 214, the strongest daily breadth reading of the month! The lack of strong breadth readings would have been understandable in a steadily declining market. This month hasn’t been weak, though; more than half of all trading days have seen record highs!
Even after yesterday’s positive breadth reading, there have still been seven trading days over the last four weeks (20 trading days) where the S&P 500 traded higher on a day when more stocks finished lower than higher. That’s one of the largest number of negative divergences in four weeks since at least 1990, and the most since August 2020 when there was a record of eight days where the S&P 500 traded higher and breadth was negative. Back then, the narrative was that the mega-cap tech stocks would benefit the most from the lockdowns and the new world of working from, learning from, eating from, socializing from home, etc. Four years later (can you believe it’s already been four years?), these same (and some different), mega-caps are now seemingly the only ones with the scale to benefit from AI.
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Jun 17, 2024
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“I’m afraid there are no replays or second chances in amateur or professional golf, and that’s the way it should be.” – Rory McIlroy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
S&P 500 and Nasdaq futures are off to an ever so slightly positive start to the week as the Dow underperforms with modest declines, and in other news, the sun also came up this morning. The underperformance of the Dow and smaller cap stocks relative to Nvidia (NVDA) the S&P 500 won’t last forever, but it hasn’t shown any signs of stopping either.
The only economic indicator on the calendar today is the New York Fed’s Empire Manufacturing report which was less negative than expected (-6.0 vs -10.0) after a reading of -15.6 last month. It’s a quiet week for earnings, and the only earnings reports after the close are La-Z-Boy (LZB) and Lennar (LEN). Overnight, Asian stocks were mostly lower with Japan leading the way as the Nikkei dropped nearly 2% as BoJ Governor Ueda suggested that a July rate hike is possible and that the pace of bond purchases would slow. In Europe, equities attempted to rebound from last week’s declines early on but erased all of those early gains, and the STOXX 600 is now marginally lower.
In the realm of strange weeks, last week fit the mold. The S&P 500 rallied 1.58% for the week, yet just 183 stocks in the index finished the week in positive territory, and only 99 stocks outperformed the index. That’s the definition of a top-heavy index. At the sector level, the disparities were just as pronounced. With the Technology sector surging more than 6%, it was the only sector that outperformed the S&P 500, and the only other sector that finished the week even up 1% was Real Estate. On the downside, two sectors – Energy and Financials- were down 2%, another two were down at least 1%, and three more finished down for the week. How often do you remember a week when the S&P 500 was up over 1% but twice as many sectors were down at least 1% than up 1%?
Digging down another level, of the 24 S&P 500 industry groups, only three managed to outperform the S&P 500, and they were all part of the tech sector (Semis, Tech Hardware, and Software). Here again, nearly twice as many industry groups finished the week down at least 1% (nine) as up 1%, and three times as many finished the week lower (18) as higher (6). It may have been an up week, but if your portfolio underperformed or was even down for the week, you were not alone.
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Jun 14, 2024
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“Common sense is seeing things as they are; and doing things as they ought to be.” – Harriet Beecher Stowe
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The S&P 500 has been up for each of the last four trading days this week, and each of those closes has been a record high, but the streak is unlikely to continue today based on where futures are trading. Import Prices were just released and showed a larger than expected m/m decline (-0.4%), but in the ranks of economic reports, Import Prices isn’t at or even near the top. The only other report on the calendar is the Michigan Sentiment report at 10 AM. Interest rates have continued to decline this week, so even if the Fed doesn’t feel like cutting rates at the moment, the market is lowering long-term rates. The 10-year yield traded to its lowest level since late March this morning while the 2-year yield was at its lowest since early April.
The haves vs the haves nots market trend continued yesterday as the S&P 50 closed at a record high and the Dow was down. If that sounds familiar, it’s because it was the fifth straight day that the S&P 500 outperformed the DJIA. That may sound somewhat extreme, but just back at the end of May, the S&P 500 outperformed the DJIA for eight days in a row, and besides that, there have been three other streaks this year where Wall Street’s equity benchmark outperformed the Main Street equity benchmark for at least five days.
Over the last month, there have been 16 trading days where the S&P 500 outperformed the DJIA daily, and looking at the post-financial Crisis period, these streaks haven’t been rare, but they’re also not particularly common. The last time there were as many days of S&P 500 outperformance over a 21-trading day period, was in May 2023, and there have only been four other periods when there were more days of S&P outperformance in a month.
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