Mar 22, 2024
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.
“Don’t be afraid of failing. Don’t be afraid of making an ass of yourself. I do it all the time—and look what I got.” – William Shatner
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Everything tends to move faster these days- except in sports where time seems to stand still. Did you watch the last four minutes of any of yesterday’s games? While the NCAA tournament is only just tipping off, the first Masters in Augusta started on this date in 1934. Today, because of TV and ratings, they don’t start the tournament until April after the college basketball champion has been crowned.
The Masters may have only been pushed out by a few weeks relative to when it first started in the 1930s, but the NHL’s Stanley Cup Championship is almost a summer event. Like the Masters, the puck was also dropped on the first Stanley Cup hockey Championship series on this day in 1894. These days, the playoffs (second season) don’t even start until the second half of April and last year, the Vegas Golden Knights didn’t clinch the cup until June 13th!
The markets are still as fast as ever, but this morning is quiet in terms of data. There’s no economic data on the calendar, and after a flurry of earnings reports after the close yesterday, no reports are hitting the tapes. That leaves investors with the opportunity to think about the barrage of central bank decisions that were released around the world over the last four days and ponder the fact that despite all of it, the S&P 500 is on pace for its best week of the year. That, or you can just enjoy the basketball, complain about your busted bracket, and wonder what if the refs hadn’t blown the whistle on a phantom foul at the end of the Kansas-Samford game.
Not only is the S&P 500 on pace for its best week of the year, but the stock markets of major global economies have been rallying in unison. As shown in the snapshot from our Trend Analyzer below, the ETFs of the G7 countries are all heading into the last trading day of the week at overbought or ‘extreme’ overbought levels. They’re all sitting on comfortable YTD gains with Japan and Italy both up over 10% while the UK trails the pack with a gain of ‘only’ 2.5%. The last five trading days have seen a similar pattern play out. Five of the seven country ETFs are all up over 1% in the last week, Germany has eked out a gain of 0.51% and Kentucky France is down 0.31%.
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Mar 21, 2024
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“We live in a world defined by the rapid pace of technological change.” – Jerome Powell
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Since yesterday’s close, we’ve seen multiple important central bank decisions from around the world (all discussed in today’s Morning Lineup), and at the margin, they have all been more dovish than hawkish with the Swiss Central Bank even announcing an unexpected rate cut. This morning’s economic data has also been positive with all three reports (Philly Fed, initial jobless claims, and continuing claims) coming in slightly better than expected. These trends have been good enough to push equity futures near their highs of the morning after stocks around the world rallied overnight.
The positive reaction to yesterday’s Fed decision and subsequent press conference was largely tied to the fact that, despite February data showing that progress on inflation has stalled, Powell showed little concern that the trajectory has changed. Within the dot plots, uncertainty over the Fed’s inflation forecasts appears to be declining, which indicates that the committee is more confident that inflation is still moving towards its 2% target. While a May rate cut, at this point, is out of the question, the market is fine with that if the ultimate direction of rates is still lower.
Yesterday’s reaction to the announcement and subsequent press conference was a complete 180 versus January. Back then, stocks were lower heading into the announcement and only fell further once Powell started talking and essentially took a cut at yesterday’s meeting off the table. Just as we live in a world defined by a rapid pace of technological change, the way the market reacts to Powell Fed meetings may also be starting to shift.
Yesterday’s reaction to the statement (purple) also bucked the general long-term “Powell plunge” on Fed days since he became chair in 2018. As shown in the chart below, whether you look at his entire tenure as Fed chair or break it up into different slices during that period, Jerome Powell has not exactly been a stock market whisperer.
With a gain of 0.89% for the S&P 500 yesterday, it ranked as the 14th best single-day performance on a scheduled Fed Day of the 48 since Powell became the chair in March 2018. Not only that, but it was also the 8th best post-decision performance of his tenure. Ironically, all the other days where the S&P 500 had a better post-meeting reaction have occurred since December 2021, essentially when the Fed started to telegraph the most recent tightening cycle.
To further illustrate how the market tide towards Fed decisions has been shifting, while the post-meeting reaction in January was one of the more negative post-meeting reactions under Powell’s tenure, the two meetings before that in November and December, were greeted warmly by the market (6th and 7th best under Powell’s tenure) and looked very similar to yesterday’s post-meeting reaction. If rate hikes are out of the equation, investors are willing to be patient with the timeline of rate cuts.
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Mar 20, 2024
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“Never give up, for that is just the place and time that the tide will turn.” – 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.
Happy Fed Day! After opening lower and rallying throughout the trading day yesterday, futures are more contained this morning but indicated to open slightly higher on the day as traders await the latest policy decision from the FOMC. It may sound hard to believe with the S&P 500 closing at a record high yesterday, but given last week’s hotter-than-expected inflation data, the market seems to be more worried about some hawkish commentary from Powell. Therefore, if there is no change in his commentary from prior speeches in the last several weeks, that could pave the way for some further gains.
Overnight in Asia, Japanese markets were closed for the Vernal Equinox, but that didn’t stop the Yen from continuing its post-BoJ slide versus the dollar. Other indices in the region were mostly positive with China up 0.6% and back above its 200-DMA while Korea rallied over 1%. In central bank news, BoJ governor Ueda said that easy monetary policy will remain in place for the bank to reach its inflation target, while in China, the PBoC kept its one and five-year loan rates unchanged.
In Europe this morning, it’s been a mixed back with Germany trading up about 0.30% while France is down 0.5% with most other major countries somewhere in between. There was some good news on the inflation front as both German (PPI) and UK (CPI) data came in below forecasts, and this comes after comments yesterday from ECB Governor Kazaks who said he was comfortable with where the market was on rate cuts this year (three).
The S&P 500’s advance-decline (A/D) wasn’t particularly extreme yesterday, but relative to the last several weeks of subdued readings, it stood out. As shown below, at +269 yesterday’s A/D line was the largest single-day reading in just over a month (2/15). While strong daily breadth readings have been hard to come by lately, significantly weak daily breadth readings have been uncommon in recent weeks. Last Thursday’s daily reading of -281 was also the lowest single-day reading in over a month (since 2/13). As shown in the chart below, while these two daily readings were extreme relative to the last month, they hardly stand out from a long-term perspective. In fact, over the last five years, the S&P 500’s average daily breadth reading was +/-212, so readings in the 200s have hardly been extreme.
The fact that breadth has been subdued on both the upside and downside means that overall market breadth has remained on a solid footing. As shown in the chart below, just like the S&P 500, its cumulative A/D line also made a new high as of yesterday’s close.
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Mar 19, 2024
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“Destiny is not a matter of chance, it is a matter of choice; it is not a thing to be waited for, it is a thing to be achieved.” – William Jennings Bryan
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 not a pretty morning for risk assets as two of the areas of the financial universe that had been the subject of the most investor enthusiasm – AI and crypto – are getting hacked this morning. In the AI space, after Jensen Huang’s keynote speech yesterday, investors are taking a sell-the-news reaction. Despite countless companies issuing press releases that they were “working”, “collaborating”, or “partnering” with Nvidia (NVDA), the stock is down just over 2% in the pre-market. The sell-the-news reaction also applies to Super Micro Computer (SMCI) which just announced that it was selling 2 million shares of stock. Based on yesterday’s closing price, that works out to $2 billion or just under 4% of the company’s market cap. In crypto, bitcoin is trading down over 6.4% in what would be its worst day in just over a year. Bitcoin is currently trading at just over $63,000, but overnight on one exchange (BitMex), it crashed down to $8,900 due to a large number of sell orders totaling $55.5 million. For an asset class that is worth over $1 trillion, a $55 million sell order causing a crash of that magnitude certainly doesn’t suggest a lot of liquidity.
On the economic calendar, Building Permits and Housing Starts were just released and both reports exceeded forecasts. Along with that, January’s reports were also revised higher. These better-than-expected housing numbers also follow yesterday’s better-than-expected homebuilder sentiment report.
For Williams Jennings Bryan, his destiny was clearly not to become President of the United States. Along with Henry Clay, Bryan is one of only two people to unsuccessfully run for President of the United States on the ticket of a major political party three different times (1986, 1900, and 1908). Do you know the other person? Benjamin Franklin (who it wasn’t) once said that “energy and persistence conquer all things” but for Bryan, his political career ended with “three strikes and you’re out”.
Like Bryan, the emerging markets ETF (EEM) is currently making its third attempt since the start of 2023 for a breakout above $42. There’s still time, but the last couple of days have seen the ETF’s momentum start to slow putting its ‘destiny’ of a move into the high 40s in question.
Whether or not EEM breaks above resistance will be dictated in large part by the performance of Chinese stocks which account for more than a quarter of the ETF’s holdings. Chinese stocks have been in a steady downtrend for most of the last year. For much of that period, the 50-day moving average acted as consistent resistance, but after breaking above that level after the Lunar New Year holiday, the Shanghai Composite made a beeline right for the 200-DMA. It successfully closed above that level on Monday for the first time since last August, but the ‘breakout’ didn’t last long. Last night, the Shanghai Composite fell over 0.75% and back below its 200-DMA. Unfortunately, the Shanghai Composite’s one-day above its 200-DMA wasn’t even long enough to qualify as a streak.
At 143 trading days, the Shanghai Composite’s streak of closes below its 200-DMA was the longest since November 2022 and the tenth time since China entered the World Trade Organization (WTO) in late 2001 that it closed below the 200-DMA for six months or more. While the break above the 200-DMA may sound like a positive technical development, historically it hasn’t been. In the year that followed those nine prior streaks, the Shanghai Composite’s median performance was a gain of 4.0% with gains 56% of the time.
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Mar 18, 2024
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“Though the people support the government; the government should not support the people.”- Grover Cleveland
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After a slow week for stocks last week, bulls are running this morning. Overnight, Japan surged 2.7% ahead of a BoJ rate decision tonight, and China rallied 1%. European stocks are only modestly positive in early trading even as the Nasdaq is indicated to open up well over 1% and the S&P 500 is higher by about 0.7%.
It’s going to be a busy week in terms of global monetary policy, including the Fed on Wednesday. The big event for today, though, is Nvidia’s Developer conference which kicks off today with a keynote speech from CEO Jensen Huang today right after the market closes.
Although it may not necessarily seem like it, the S&P 500 and Nasdaq have now both been down for two weeks in a row. In what bulls are hoping will ultimately end up being a pause that refreshes, nearly half of all sectors have moved out of overbought territory, including Technology which was down nearly 1% last week. The sector is still up nearly 7% on the year which puts it in the number five position in terms of year-to-date performance, trailing Energy, Communication Services, Financials, and Industrials.
We touched on this briefly last week, but it’s been a pretty good couple of weeks for commodity-related stocks, and the two leading sectors last week were Energy and Materials with gains of 3.8% and 1.6%, respectively. Both sectors are at or very near ‘extreme’ short-term overbought levels, but from a longer-term perspective, they’ve forged very different paths. As shown in the one-year charts below, while the Materials sector (XLB) has been hitting 52-week highs on a near-daily basis for the last few weeks, the Energy sector is only now starting to test its 52-week highs from last fall. Does the sector still have enough gas in the tank to push through?
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Mar 15, 2024
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“If you can’t explain it to a six-year old, you don’t understand it yourself.” – Albert Einstein
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Were yesterday’s stronger-than-expected inflation data and weaker retail sales the catalyst to kick off a more significant pullback, or will the dip buyers step back in once again and take us to new highs? This morning’s economic news isn’t helping matters. While Import Prices were in line with forecasts, the New York Fed’s Empire Manufacturing report came in significantly weaker than expected as the headline index dropped to negative 20.9 versus forecasts for a reading of negative 7.0. Within the report, both the Prices Paid and Prices Received components also rose, so that’s not a particularly encouraging sign, even if this report has been notoriously volatile over time.
Futures have pulled back modestly following the reports. While the S&P 500 and Dow are still indicated to open higher, the Nasdaq is modestly lower following some weak earnings after the close on Thursday. The most notable of those was Adobe (ADBE). The stock is trading down over 11% in the pre-market and on pace for its fourth most negative reaction to earnings in the last 20+ years.
It may look like a chart of an AI stock and its name does have the letters “AI” (in reverse order), but the Materials sector has been on fire for the last two months.
Barring a decline of over 1.4% today, the sector will have its eighth straight weekly gain. That would rank as the longest weekly winning streak since May 2009 and just the sixth winning streak of eight or more weeks in the sector’s history dating back to 1990. That streak in May 2009 was also the only streak that stretched beyond eight weeks.
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