This Week’s Can’t-Miss Analysis — 6/14/24
We publish a lot of market-related content each week, and we want to make sure you don’t miss the most important topics. Below are some charts and tables we view as “can’t miss” from the last week.
Our first charts show the one-year trading ranges for the S&P 500 and the Technology sector, which has led the broader market. Both have maintained a strong upward trajectory, but they’re now trading at extreme overbought levels to a point where we’d expect to see some downside mean reversion soon.
The tech-heavy Nasdaq 100 ETF (QQQ) is up 16.5% YTD driven by a handful of mega-caps. However, the Nasdaq 100 Equal Weighted ETF (QQQE) is up just 4.1% YTD in comparison. The high-flying QQQ traded to new all-time highs and way more above its 50-DMA than QQQE which hasn’t made a higher high since late March.
To continue reading the rest of this week’s “Can’t-Miss” analysis, which includes another dozen or so important market-related topics, start a two-week trial to Bespoke Premium today! With a two-week trial, you’ll also receive our daily research in your inbox as it gets posted. Go ahead and give it a try by signing up at this link.
Have a great weekend!
Bespoke’s Morning Lineup – 6/14/24 – Low Yields
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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.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Jobless Claims Swing Higher
Economic data, including jobless claims, came in weaker than expected this morning,. For seasonally adjusted initial claims, there was a jump to 242K in the first week of June, the highest reading since last August.
Before seasonal adjustment, claims totaled 234.7K. As shown in the first chart below, that is still lower than the comparable week of last year and is also within the range of readings of other recent years save for the much more elevated levels observed in 2020 and 2021. For this point of the year, claims face seasonal headwinds. Historically, the current week of the year has seen claims rise close to three-quarters of the time with a median increase of 37K. That was right in line with the 38.5K uptick that was observed.
As we will detail further in tonight’s Closer, given the NSA number rose by as much as could be expected, it is peculiar that the seasonally adjusted number rose as significantly as it did.
Finally, we would note that continuing claims have also pressed higher, reaching 1.82 million. As shown below, that is the first reading above 1.8 million since the final week of March and the most elevated reading of any week since January 20th.
Bespoke’s Morning Lineup – 6/13/24 – More Weaker Than Expected Inflation Data
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“You have the right to remain silent. Anything you say can, and will, be used against you in a court of law.” – Every Episode of every Law & Order series
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Whether through firsthand knowledge or watching any TV show or movie involving an arrest, every American is familiar with Miranda rights. While it seems like a basic principle of US law enforcement, it wasn’t until this day in 1966 that the Supreme Court ruled that every person arrested in the United States must be informed of their basic right to remain silent and have an attorney before any police interrogation can take place. Now if only a lot of other people would exercise their right to remain silent.
Futures aren’t silent this morning, and they just got a pop higher as both jobless claims and PPI came in weaker than expected. Initial jobless claims surged to the highest level since last August. PPI came in weaker than expected at both the headline and core levels. On a y/y basis, they are up 2.2% and 2.3% respectively relative to expectations for a level of 2.5%. Based on this morning’s PPI and yesterday’s CPI, the Fed’s statement is less than 24 hours old, but it’s turning stale quickly.
With Apple’s (AAPL) move back near the top of the market cap leaderboard, we wanted to highlight the continued divide between the top three stocks in the S&P 500 and the rest. The snapshot below of our Trend Analyzer shows where each of the top three stocks in the S&P 500 – Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA) – as well as the S&P 500 Equalweight ETF (RSP) closed yesterday relative to their short-term trading ranges. While all three of the top three closed at ‘extreme’ overbought levels (2+ standard deviations above their 50-DMAs), RSP remains in neutral territory and is down slightly over the last five trading days. Besides that disparity, the YTD performance and 50-day moving average spreads of the top three stocks look nothing like the YTD performance and 50-DMA spread for RSP.
The charts of the top three also look much different than RSP (and it’s not just because we shaded RSP in gray). As shown below, all three of the largest stocks hit all-time highs yesterday while RSP has been stuck in a range since the peak in March.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
The Closer – CPI, FOMC, EIA – 6/12/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a dive into the latest CPI data (page 1) followed by a recap of the FOMC decision (page 2) as well as the market’s response to the decision (page 3). We then finish with a review of the historic trade numbers in the latest EIA data (page 4).
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Bespoke’s Morning Lineup – 6/12/24 – “Make Room For Me”
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“Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall.” – Ronald Reagan, 6/12/1987
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Today is the biggest day of the week for data, and the “first act” just hit the stage as CPI came in weaker than expected. At the headline level, CPI was unchanged while Core CPI increased 0.2% versus forecasts for a gain of 0.3%. Year/year Core CPI came in at 3.4%, the lowest level since April 2021. Futures have surged in reaction. It’s hard to believe that a week ago this morning, the market was all worried about stagflation with weaker economic data (Chicago PMI and ISM Manufacturing) and stubborn inflation. After last Wednesday’s ISM Services report, a strong headline employment report, and today’s CPI report, stagflation has been pushed off the stage as Goldilocks cries, “Make room for me!”
It’s not a Presidential election, but for the first time in four years, the Federal Reserve will announce an interest rate decision on the same day as a monthly CPI report. Since 1998, there have only been 17 other days where both events happened on the same day, and in the chart below, we show the S&P 500’s performance each time. Overall, returns have been positive with a median gain of 0.56% and gains just over three-quarters of the time. The best day for the S&P 500 on these days was in December 2008 when the S&P 500 rallied 5.14% while the worst performance was the most recent occurrence on 6/10/20 when the S&P 500 declined 0.53%. Ironically, the best day came in the middle of one of the deepest bear markets in a generation while the worst day was in the early stages of the post-Covid surge.
The table below shows the performance of the S&P 500 and all eleven sectors on each of the 17 prior days. We also show the Fed’s interest rate decision for each meeting. Of the 17 occurrences shown, the Fed cut rates twice, raised rates four times, and kept rates on hold eleven times. On the eleven days when the Fed left rates on hold, the S&P 500’s median gain was also 0.56% with gains just over 80% of the time. The two best-performing sectors on these days were Technology (1.10%) and Materials (1.01%) with gains of 91% and 82% of the time, respectively.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Small Business Bull Whips and Election Jitters
Earlier this morning, the National Federation of Independent Businesses, or NFIB, published its latest report on small business sentiment for May. The headline number continued its rebound off of the 11-year low of 88.5 set in March, rising to 90.5. While still historically muted, this month’s reading was the highest level of small business sentiment since last December.
Breadth in the report was decent with five inputs of the headline number moving higher, two going unchanged, and another three falling month over month. As with the main reading, most of these indices are historically low despite recent improvements. In fact, most of these categories currently sit in the bottom decile of their historical ranges with the few notable exceptions being a couple of labor-related indices. For example, plans to increase employment rose significantly to move back into the 63rd percentile while the percentage of respondents reporting job openings as hard to fill is still very high in the 93rd percentile. However, as we discussed in today’s Morning Lineup, the overall trends are not particularly favorable across all labor categories included in the report.
The report continues to show that there is an overwhelming share of businesses that hold a pessimistic view of the economy. Granted, that index picked up to -30 in May which matches last July for the joint highest readings since August 2021. Of course, that is still a very low reading ranking in the bottom 7% of readings historically, and as such, the percentage of businesses that view the current time as a good time to expand is low at 4%.
The NFIB breaks out reasons for businesses’ expansion outlook. As shown below, by far the most common reason for a negative expansion outlook is economic conditions albeit that has continued to trend lower over the past couple of years. The next biggest reason is the political climate (discussed further below) then financials and interest rates.
In addition to being the third most common reason for a negative expansion outlook, we would also note that the percentage of firms reporting financials and interest rates as their biggest issue has risen to a new high of 6%. While that is far from the most common problem (issues like labor costs and quality, government red tape, taxes, and inflation account for a massively larger portion of response), it is the highest amount since 2010.
The one index that stood out the most in this month’s report had to do with inventories. A net 6% of small businesses reported drawing down inventory levels over the past three months. While that does not set any new low for the series, it is another reading at the lower end of the historical range. As for the reason so many businesses are working down inventory levels, the net share of respondents reporting that current inventory levels are too low versus too high hit a record low. In other words, a record number of respondents reported that inventories are too high. Perhaps an example of the bullwhip effect, that comes 2.5 years after the index’s record high.
Finally, we would note that this month also saw a significant pickup in the NFIB’s Economic Policy Uncertainty Index. As we discussed in the Morning Lineup, one factor working against the usefulness of the NFIB survey is a sensitivity to politics. For example, looking at the aforementioned expansion outlook index, politics are a historically popular reason for negativity with readings that were much more elevated during Democratic administrations versus Republican administrations. As could be expected, the Economic Policy Uncertainty Index has not been immune to this trend.
As shown below, the uncertainty index tracking apprehension of small businesses towards economic policy typically rises in the 12 months before a presidential election and has seen particularly large jumps over the past few elections. This time around, though, the increase has been even larger than normal with a 20-point jump since November. Compared to the same months in prior election cycles, it has been a record increase, and assuming it follows the pattern of the past three election cycles, it would not be surprising to see it continue to rise through Election Day.
Bespoke’s Morning Lineup – 6/11/24 – Politics Weighs on Sentiment
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“Government has no wealth, and when a politician promises to give you something for nothing, he must first confiscate that wealth from you” – John Wayne
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 record highs for the S&P 500 and Nasdaq yesterday, there’s a negative bias this morning as European stocks are lower given the political uncertainties most notably in France where there were even rumors overnight that Macron would resign. The only economic report on the calendar today was small business sentiment from the NFIB which came in better than expected. However, given tomorrow’s CPI report and the Fed Decision in the afternoon, we wouldn’t expect too much conviction today.
Apple (AAPL) finally unveiled its AI strategy yesterday and judging by the stock’s reaction, investors weren’t impressed. While the stock was down marginally just before the conference started, it sold off even more once it started and more details started coming out. When the closing bell rang, the stock was near its lows and down just under 2% for the day.
The chart below shows the performance of AAPL on the first day of its WWDC conference each day since 2007 when the iPhone was first launched. Yesterday’s 1.9% decline ranks as tied for the third-worst performance on the first day of the WWDC conference during that span. The only two years where the first-day performance was worse was in 2007 (3.5%) and 2008 (-2.1%). While that ranking sounds ominous, we would also note that the stock has almost always traded lower on the first day of its WWDC conference (just four positive days in the last 18 years). Longer-term, from the close on the first day of the conference through year-end, the stock has been higher 70% of the time, and from the close on the first day of the conference to the start of the next year’s conference, AAPL stock has been higher more than 75% of the time. In other words, first impressions of the WWDC conference haven’t usually been correct.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Apple’s “Golden” Moment
For over a year now, shares of Apple (AAPL) have been stuck between the low $160s and the high $190s as the market impatiently waits for the company to outline its AI strategy. In just the last seven weeks, though, the stock has tested both ends of the range, and ahead of today’s Worldwide Developers Conference, shares of AAPL are modestly pulling back from the top end of the range. In case you missed it, in last week’s Bespoke Report, we discussed the stock’s performance leading up to, during, and after prior conferences including its performance when it rallied in the weeks leading up to the conference. If you missed that on Friday, make sure to check it out.
As the stock has rallied from its lows in the last several weeks, AAPL is on the verge of completing a golden cross formation, which technical analysts consider a bullish pattern. A golden cross occurs when a stock’s shorter-term moving average (in this the 50-DMA) crosses up through a longer-term moving average (in this case the 200-DMA) as both are rising. Conversely, the opposite of a golden cross is an iron cross which occurs when the short-term moving average crosses down through a longer-term moving average as both are falling.
As recently as May 1st, AAPL’s 50-DMA was more than 5% below its 200-DMA, but that spread has narrowed quickly in the last six weeks to less than 1% today. The gap is also continuing to narrow fast, and barring an absolute plunge in the stock, it’s likely that the 50-DMA will cross up through the 200-DMA within a week or so.
While golden crosses are a positive technical formation in theory, they don’t necessarily play out that way in practice. The table below summarizes the performance of AAPL after each prior golden cross and iron cross in the post-iPod era (since 2001).
After the four golden crosses, AAPL traded down over the next week three out of four times, and one and three months later, it was only up half the time. Six and twelve months later, AAPL’s stock was higher three out of four times with the lone exception being its performance after the golden cross in May 2008 just ahead of the financial crisis.
In the post-iPod era, AAPL has experienced five iron crosses with the most recent being in March 2024. Performance following these prior occurrences was similarly weak over the short term, but six and twelve months later, median returns were stronger than after golden crosses.
What stands out concerning performance following both golden and iron crosses, though, is the fact that the median returns for both golden and iron crosses are weaker than the average for all periods.
Bespoke’s Morning Lineup – 6/10/24 – The Day You’ve All Been Waiting For
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.
“Being the richest man in the cemetery doesn’t matter to me. Going to bed at night saying we’ve done something wonderful… that’s what matters to me.” – Steve Jobs
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Today’s the day Apple (AAPL) investors have been waiting for as the company will finally announce a detailed AI strategy. The company has been criticized for being slow to the game, but, as has been widely pointed out by analysts for months now, it has a reputation for being late to the game regarding new technologies. Where they succeed is by watching everyone’s first bets at a technology and then raising the stakes.
Futures are lower to kick off the week, and the economic calendar is sparse today with the NY Fed’s Survey of Consumer Expectations the only report on the calendar. The weak tone in futures originated in Europe, where EU election results showed significant gains for the populist far-right parties. Between the elections in Mexico and India last week and the EU elections over the weekend, politics has been making its way to the headlines lately. Thankfully, we won’t have to deal with that here in the US this year…
Last week was tough for commodities as just about all of the commodity-related ETFs in our Trend Analyzer declined at least 1% and in many cases much more. The one notable exception was the US Natural Gas Fund (UNG) which surged nearly 15% making it the only ETF in the group that finished the week at oversold levels. Before we all go getting on the UNG bandwagon, though, even after last week’s gain, it is still one of just two ETFs in the group that’s down on the year.
Over the last year, UNG has been a long painful ride lower. A year ago, the ETF was trading in the high 20s/early 30s, and earlier this year it was in the low teens before rallying back to $20 on Friday. Even after that gain, though, the ETF remains stuck below its 200-DMA which is a boundary line that it has been comfortably residing for the last year.
Over the last year, there have only been six trading days where the ETF has closed above the 200-DMA. As shown in the chart below, this is a very low level, but it’s hardly unprecedented. There have been multiple times where the ETF spent years below its 200-day moving average.
From a long-term perspective, UNG has been burning money for 15 years. On a reverse split-adjusted basis (there have been two 1-4 reverse splits since 2017), the ETF was above $3000 versus $20 today- a decline of more than 99%!
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.