Please click the image below to view our December 2022 market calendar.  This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month.  It also includes market holidays and options expiration dates plus the dates of key economic indicator releases.  Click here to view Bespoke’s premium membership options.

Front-month lumber has fallen through critical levels of support at the past few months lows. In the first year of the pandemic, lumber had a brief time in the limelight as the thinly traded commodity posted massive gains from mid-2020 to mid-2021 on tight supplies amidst strong housing demand. After peaking in the spring of 2021, it has erased all of its pandemic gains.  So far in December alone, it has fallen over 8% with current levels (red dotted line) down to the lowest since June 2020.

Lumber’s shaky technical picture has poor sentiment data to boot. Recent data from the Commitments of Traders report from the CFTC has shown an overwhelming share of open interest is positioned bearishly in lumber futures.  As shown below, a net 48.29% of open interest is short, slightly off the lows last month but still down around some of the most pessimistic levels on record.

As we do each Monday, in tonight’s Closer, we will provide a more complete rundown of the positioning in other assets per the CFTC data.

Given it is a key input for construction, the decline in lumber prices has largely been a result of weakness in the housing sector (which we discussed in aggregate in last week’s Matrix of Economic Indicators).  Like lumber, the charts of various construction/housing-related areas leave something to be desired.  For example, front-month copper is running up to and failing to take out the past year’s downtrend line while Weyerhaeuser (WY)—a publicly traded American timberland company—does the same.  Meanwhile, stocks in the S&P 1500’s homebuilder and building and products industries have both run into resistance at their summer highs. Click here to learn more about Bespoke’s premium stock market research service.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

While you’re here, join Bespoke Premium with a 30-day trial!

Compulsion

I’m Scared of My Baby Monitor by Damon Beres (The Atlantic)

Many of the products billed as reducing stress or keeping us safe are better thought of as acute vectors for stress and anxiety that we otherwise wouldn’t have. [Link; soft paywall]

Britain Opened the Door to Online Gambling. Now It’s Living With the Consequences by Gavin Finch, Harry Wilson and Ann Choi (Bloomberg)

Long before online sports gambling platforms proliferated in the US, Britain unleashed the industry on its citizens at scale. The results have been brutal including hundreds of suicides. [Link; soft paywall]

Sports Excess

When V.I.P. Isn’t Exclusive Enough: Welcome to V.V.I.P. by Sarah Lyall and Christina Goldbaum (NYT)

Rules don’t apply to the highest-paying guests at the FIFA World Cup in Qatar, but there is always an additional level of extreme luxury and exclusivity to achieve. [Link; soft paywall]

This Florida Home’s Memorabilia Collection Gives the Baseball Hall of Fame a Run for Its Money by John Sandman (WSJ)

A former health care executive has built a monumental shrine to baseball in a sprawling six bedroom, twelve bathroom house with more square footage than 15 starter homes. [Link; paywall]

Subterranean Situations

What Are Manhattan’s Street Chimneys? by Taku Ward (The Nib)

A fascinating infographic explaining why Manhattan is filled with odd, orange-and-white temporary “street chimneys” belching steam throughout the year. [Link]

Elon Musk’s Boring Company Ghosts Cities Across America by Tedd Mann and Julie Bykowicz (WSJ)

Big promises that never turn into anything are the hallmark of Elon Musk’s Boring Company, a venture that is incapable of actually delivering on anything it commits to in wave of vaporware glitz and glam. [Link; paywall]

Health Care

Google Health strikes deal with iCAD to commercialize mammography AI by Heather Landi (Fierce Healthcare)

Google Health is using artificial intelligence models to better-diagnose breast cancer, and its latest step towards commercialization is a deal that will improve models’ accuracy. [Link]

How diabetes med Ozempic became a fad weight-loss drug by Yasmin Gagne (Fast Company)

Multiple forms of the same bioactive drug (semaglutide) are proving wildly popular…but may be leading to weight loss seekers taking doses from patience that have greater medical need. [Link]

Real Estate

Where tighter monetary policy hits homeowners hardest by Neil Irwin and Courtenay Brown (Axios)

Not all housing markets have the same degree of exposure to changes in short-term interest rates, though of course exposure to short-term rate changes can be a very sharp double-edged sword. [Link]

U.S. Government to Backstop Mortgages Above $1 Million in High-Cost Areas by Andrew Ackerman (WSJ)

A few very pricey markets will see homes worth $1mm qualify for status as a conforming loan that can be backed by Fannie Mae and Freddie Mac starting next year. [Link; paywall]

Electric Vehicles

BEVs: Not Just in California Anymore by John Howard (Wards Auto)

Battery electric vehicle (BEV) adoption is surging across the country, with some of the fastest adoption coming in some unlikely places including Oklahoma City, Dallas, Houston, and Tampa. [Link]

Tesla’s Lithium Lead at Risk as Rivals Make Supply Deals by David Stringer, Yvonne Yue Li, and Gabrielle Coppola (Bloomberg)

Original equipment manufacturers (OEMs) that don’t have large BEV businesses already are setting up supply chains for their rapidly scaling battery lineups, in a process that could leave Tesla with less supply. [Link; soft paywall]

Artificial “Intelligence”

OpenAI invites everyone to test new AI-powered chatbot—with amusing results by Benj Edwards (Ars Technica)

Basic text prompts ar enough for ChatGPT to spew out an impressive range of responses that read remarkably close to human-written language. [Link]

This AI Chatbot Is a Shockingly Competent Macro Pundit by Joe Weisenthal (Bloomberg)

If you want bland, consensus commentary on macroeconomics and financial markets, the OpenAI model is surprisingly effective. [Link; paywall]

Disinformation

On TikTok, Chinese State Media Pushes Divisive Videos About U.S. Politicians by Emily Baker-White and Iain Marin (Forbes)

Chinese government accounts are editorializing US politics at epic scale, generating millions of follows and views; none were disclosed as productions of the Chinese government’s propaganda system. [Link; soft paywall]

Flight In Luxury

Alibaba founder Jack Ma living in Tokyo since China’s tech crackdown by Kana Inagaki and Leo Lewis (FT)

After the Chinese government cracked down on the companies controlled by China’s richest man, he has surfaced living a low profile existence near Tokyo that also includes jaunts to Israel and the US. [Link; paywall]

Credit Dries Up

Cash-Hungry Companies Get Creative Raising Capital by Corrie Driebusch (WSJ)

Low stock prices and pressure to preserve cash are forcing companies to place equity through private funding rounds that offer investors preferred stakes with lower risk than common stock in the same companies. [Link; paywall]

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Have a great weekend!

For most major global equity markets, at some point this Fall a 52-week low has been put in place, with significant rallies since then.  As shown below, of the 22 ETFs tracking key country stock markets in our Global Macro Dashboard, the average gain off the low is now 22%. The largest of these rallies have come from Germany (EWG), Italy (EWI), and China (MCHI), which have all risen over 30%.  For China, that gain has come in the shortest span of time with October 31st being its low, whereas Italy and Germany’s lows were a few weeks further back.  One other interesting note regarding China is currently it trades only slightly above its 50-DMA whereas a majority of other country ETFs are in or at least near overbought territory. On the other end of the spectrum, the US (SPY) has experienced the most modest rally having only risen 13.82%.  India (INDA) is close behind with a 13.89% gain, although it bottomed before the rest of the world with its 52-week low being back on June 17th.

While much of the rest of the world has experienced a larger rebound off the lows, year to date performance between the US (SPY) and global equities excluding the US—proxied by the MSCI All World ex. US ETF (CWI)—is now very similar.  The US is marginally in the lead with a -14.12% YTD total return versus a 14.45% drop for CWI.  At the lows at the end of Q3, international markets were underperforming the US by more than 5 percentage points, but that gap has been closed during the current rally.  Click here to learn more about Bespoke’s premium stock market research service.  As always, past performance is no guarantee of future results.

Although the S&P 500 has had some positive technical developments like taking out the 200-DMA on the backs of a lack of hawkish Fedspeak, sentiment has been headed lower over the past couple of weeks. Per the latest survey data from AAII, only 24.5% of investors reported as bullish this week; down from 28.9% last week and a recent high of 33.5% the week before that. That nine percentage point decline in the past couple of weeks is not a particularly large drop and only brings the reading into the middle of this year’s range, however, it marks a distinct turnaround from what had been one of the most optimistic readings of the year only two weeks ago.

As bullish sentiment has been on the move, bearish sentiment has gone into hibernation and done a whole lot of nothing.  After being unchanged at 40.2% last week, bearish sentiment rose modestly to 40.4%.

In the history of the survey, that is the tightest three-week range on record and there have only been another dozen times in which bearish sentiment readings were even within a 1% range over a three-week span.  The most recent of those was last May, and there was another right around the time of the COVID Crash lows.  We would note that with bears little changed around 40%, the current instance marks the second highest bearish sentiment reading of these instances behind that March 2020 occurrence.

In terms of what it means for the S&P 500 when bearish sentiment moves so little as it has recently, near-term performance does not tend to be particularly favorable. One week out has averaged a 0.6% decline and one and three-month returns have been positive only half the time. As for longer-term performance though, the S&P 500 has tended to trade higher six months to one year out very consistently with gains over 90% of the time. Those gains are also slightly larger than the norm for all periods.

With sentiment taking negative tones, the bull-bear spread has reversed lower after some of the highest readings of the year last month.  Given the spread remains negative, the streak of below-zero readings has grown to a record 35 weeks in a row, surpassing the 2020 streak.

Given bears have not picked up the losses to bulls, nearly all of the difference has gone to neutral sentiment.  Neutral sentiment has risen to 35.1% which is 1.4 percentage points below the high from the first week of November. Click here to learn more about Bespoke’s premium stock market research service.