Mar 1, 2024
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“Wilderness is impersonal. It does not care whether you live or die. It does not care how much you love it.” – Lee Whittlesey
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 new month has started quietly in terms of equity futures trading, but activity will pick up at 10 AM Eastern with the releases of Construction Spending, Michigan Sentiment, and ISM Manufacturing data. Beyond the data, upcoming Fedspeak holds particular interest following a busy data week. Outside the US, Asian and European markets began March positively. In China and Japan, PMI Manufacturing data meets expectations, while the same report for Europe exceeded expectations but remains firmly in contraction.
152 years ago today, President Grant signed legislation officially recognizing Yellowstone as the first national park in the country. One of Yellowstone’s highlights has always been Old Faithful. While hundreds of geysers reside in the park, Old Faithful is unique as its eruptions can be predicted with relative accuracy. Since its discovery in the 1800s, and likely for millennia before, it has erupted at consistent intervals. Geologically, Old Faithful is exceptionally reliable, but eruption intervals have lengthened from just over an hour in the 1930s to an average of 90 minutes since 2000. And no, climate change is not the culprit; geologists attribute the change to subterranean earthquakes altering water levels. While Old Faithful has been one of the most reliable geysers for centuries, its continuation is far from guaranteed. If you haven’t witnessed it, make sure you do.
Markets, like most geological patterns and global changes, are impossible to predict. However, investors seem to have their own “Old Faithful” – the S&P 500’s consistent monthly gains. While bulls have enjoyed the last four months, it’s safe to assume that when the current streak ends, Old Faithful will still erupt roughly every 90 minutes. Yellowstone historian Lee Whittlesey’s words about nature aptly apply to markets: they are impersonal, indifferent to individual wins or losses, and unconcerned with how attached you are to a particular investment.
February saw the latest S&P 500 monthly gain of 5.2%, impressive in any market. This raises the question of whether investors typically take profits after such significant gains in the early days of a new month. While the historical record is mixed, some initial weakness in March wouldn’t be surprising.
The table below shows instances since 1953 (the first full year of the NYSE’s current five-day trading week) where the S&P 500 rallied over 4% in February, along with its cumulative month-to-date (MTD) performance in the first five trading days of March. Of the nine prior occurrences, the first day of March had an average and median positive return, but the S&P 500 only closed higher slightly more than half the time. The second day generally saw positive and consistent returns, with MTD gains in eight out of nine instances. However, MTD returns declined thereafter. By the fifth trading day, while the average performance remained positive (+0.44), the median change was a modest decline (-0.07%), with gains occurring only four out of five times. This compares to an average gain of 0.30% and positive returns 61% of the time for all other Marches since 1953. Overall, these figures are inconclusive, but as mentioned earlier, some weakness at the beginning of the month wouldn’t be unexpected.
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Feb 29, 2024
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“We must walk consciously only part way toward our goal, and then leap in the dark to our success.” – Henry David Thoreau
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
When looking at the market’s longer-term trend, we like to use a chart of the S&P 500’s 200-day moving average on its own with the daily price changes removed from the chart completely in order to eliminate the day-to-day noise and smooth the trend out. What’s notable here is that the S&P’s 200-day just recently took out its prior all-time high made in early 2022, ending a streak of 460 trading days without a new all-time high for the 200-DMA. While the S&P made a new all-time high on its daily price chart back in January, a new all-time high for the smoothed out 200-DMA is yet another confirmation of the current bull that has been legging higher for the last month or so.
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Feb 28, 2024
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“Truth is not determined by a majority vote.” – Pope Benedict XVI
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After gains in four of the last five days, equity futures were indicated lower ahead of some key GDP and inflation data this morning. Along with lower equity futures, bond yields are also lower, and that is welcome news for the housing market where Mortgage applications fell over 5% last week after falling more than 10% in the week before that.
US stocks have led the way during the recent bull market, especially since the lows of October 2022. The S&P 500 ETF (SPY) has gained 42.2% since then, compared to 31.0% for the rest of the world (iShares MSCI ACWI ex US ETF, ACWX). However, most of this outperformance occurred after late October. As the chart below shows, both SPY and ACWX were performing similarly until then.
Year-to-date, only the Japan ETF (EWJ) has outperformed SPY, with a gain of nearly 8%. However, international markets have shown recent strength. While the S&P 500 gained 2.05% last week, ETFs for China, Germany, Italy, and France all outperformed it. Only India’s ETF declined.
Looking at all ten country ETFs, most are near or at 52-week highs, except China (MCHI). While they haven’t experienced the same rapid ascent as the US (bottom chart), they have still reached significant levels.
For a closer look at how the market performed following prior moves like we saw yesterday, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Feb 27, 2024
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“No story has power, nor will it last, unless we feel in ourselves that it is true” – John Steinbeck
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 looking like a modestly positive open for stocks to kick off the day with the Nasdaq leading the way higher, but the real star of the morning has been Bitcoin where prices are up another 4%+ and briefly topped $57,000. The tone in Asia was also positive after some weakness to kick off the week. In China, 30-year yields dropped to a record low of 2.52% as economic concerns weigh on the country even as the ‘national team’ has been buying up stocks. The tone in Europe has been more mixed but still mostly positive.
Here in the US, Durable Goods Orders will be released at 8:30, and then at 10 AM we’ll get the release of the Richmond Fed and Consumer Confidence reports.
Last Thursday, 2/22, was the largest one-day gain for the S&P 500 in over a year, and while breadth was strong, the S&P 500’s advance-decline (A/D) line finished the day at +399 just shy of the threshold for an all-or-nothing day (days where S&P 500’s daily net A/D reading is at or above +400 or at or below -400) . Through yesterday’s close, 38 trading days into the year, the S&P 500 has yet to have an all-or-nothing day this year. If it doesn’t have one today it will go down as the latest into a year that the S&P 500 has gone without an all-or-nothing day since 2017 and the third longest since 2008 when ETF volume exploded in the post-financial crisis period.
While it is uncommon for the S&P 500 to go this long into a year without an all-or-nothing day, the current streak of 43 trading days without one hasn’t necessarily been strong relative to history. As recently as last August there was a longer streak of 49 trading days, and before that, there were multiple streaks that were longer including a 115-trading day streak that ended in February 2018 with the “Volmageddon” episode.
For a closer look at how the market performed following prior moves like we saw yesterday, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Feb 26, 2024
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“I Walk the Line” – Johnny Cash
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a short and extremely limited week of economic data last week, I hope you’re ready for a full week of trading and a busy week of data. Kicking off the week, futures have been little changed as traders await the release of New Home Sales and the Dallas Fed report. Overnight, most Asian equity indices were lower to kick off the week even as Japan bucked the trend to trade at another record high. Europe has also been sluggish in early trading, but overall, the pace of news has been quiet.
Taking a long-term look at the chart of the S&P 500, we’ve essentially seen a textbook breakout. After trading at new highs in late 2023, the S&P 500 successfully tested its breakout level early this year and hasn’t given investors much of an opportunity to get in ever since.
Looking more closely at a shorter-term chart of the S&P 500, it has been “walking the line” of a steep uptrend of higher highs since mid-November, and while the steepness of the trend hasn’t accelerated it has retained its steady ascent.
For a closer look at how the market performed following prior moves like we saw yesterday, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Feb 23, 2024
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“I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.” – Warren Buffett
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 rose more than 2% yesterday to close at a new all-time high, and as shown below, yesterday’s move pushed most areas of the US equity market up into extreme overbought territory.
Similar to the Nasdaq 100, yesterday was also the first time the S&P 500 had a one-day gain of at least 2% to close at a new all-time high since March 21st, 2000!
The green dots below show the 21 prior times the S&P had a 2%+ gain and closed at an all-time high since 1952. Yep, there have only been 21 prior occurrences over the last 70+ years.
For a closer look at how the market performed following prior moves like we saw yesterday, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
