ln today’s Morning Lineup, we noted the inverse correlation between performance this week and market caps.  As shown in the major US Indices screen of our Trend Analyzer tool, the two best performers over the past five days have been Micro-Caps (IWC) followed by small caps like the Russell 2000 (IWM) and the Core S&P Small-Cap ETF (IJR).  Mid-cap ETFs are the next best performers with high 2% gains then most large cap indices have only risen around 1.5% this week with the exception of the Dow (DIA) which has not even gained 1%.  As for where these indices are trading relative to each one’s trading range, it is partially a mean reversion story.  Small caps were deeply oversold one week ago and are now sitting just below their 50-DMAs. While not to as extreme of a degree, mid-caps were similarly trading a full standard deviation below their 50-DMAs last week. Today, they are on the opposite side of their 50-DMAs and on the verge of overbought readings.

As previously mentioned, small caps like the Micro-Cap ETF (IWC) and Russell 2000 ETF (IWM) were oversold last week. From a charting perspective, each of these indices’ rallies this week are not only bounces from extreme oversold levels, but they also follow brief dips below their 200-DMAs. But whereas the past five days have seen solid gains, yesterday saw IWC and IWM reject their 50-DMAs and the high end of their ranges that have been in place since late July. In other words, even though small caps have led the market this week, they are not out of the woods yet.

Looking at the relative strength lines of small caps like IWC and IWM versus the large cap S&P 500 (SPY) over the past year, the past week’s outperformance again is a blip on the radar and has only put a small dent in the longer term trend of underperformance.

Where that is not necessarily the case is small market caps versus the smallest market caps.  As shown below, the relative strength line of the Micro-Cap ETF (IWC) versus the Russell 2000 (IWM) broke out of the past few months’ downtrend over the past few days.  Click here to view Bespoke’s premium membership options.

As the major indices have set more record highs in the past week, bullish sentiment has rebounded.  The American Association of Individual Investors’ (AAII) weekly reading on bullish sentiment rose 6.4 percentage points to 39.4% this week. That is the highest reading of optimism since the week of July 8th when bullish sentiment was a hair above 40%.  While recovered, that reading is still muted versus the past year’s range and is only 1.5 percentage points above their historical average. In other words, bullish sentiment has rebounded but is far from elevated.

While the AAII survey showed an increase in bullish sentiment, another survey of newsletter writers from Investors Intelligence saw the opposite result.  This survey’s reading on bullish sentiment dropped to just 50% this week which is the lowest level since May of last year.  Although this reading has now fallen out of the past year’s range, it is still slightly elevated versus the historical average of 45%.

Given the uptick in bullish sentiment, the AAII survey saw only a third of respondents report as bearish versus 35.1% last week. Like bullish sentiment, this reading remains outside of the range it has occupied for most of the past year although that current reading is also not far away from the historical average of 30.5%.

As we noted in last Thursday’s Chart of the Day, the bull-bear spread dipped into negative territory last week for the first time since late January and it was at the lowest level since October 2020.  With the inverse moves in bullish and bearish sentiment this week, the spread has moved back into positive territory to its highest level since the last week of July.

Not all of the gains to bullish sentiment came from the bearish camp.  Neutral sentiment saw an even larger decline of 4.2 percentage points.  That brings the reading down to 27.5% which is the lowest reading since April 15th when it stood at just 21.6%.  Click here to view Bespoke’s premium membership options.

For the first time in four weeks, seasonally adjusted jobless claims came in higher with claims ticking up to 353K. Additionally, last week’s reading was also revised 1K higher to 349K.  Albeit higher, this week’s print does remain at the low end of the range since the pandemic began and is less than 100K away from the March 13, 2020 level of 256K (the last print before claims rose into the millions).

It continues to be a point in the year that regular state claims have the benefit of seasonal tailwinds. The current week of the year has historically only seen claims rise week over week 16.7% of the time on a non-seasonally adjusted basis. This week, claims fell by 11.7K resulting in the first sub-300K print of the pandemic. While regular state claims were lower, PUA claims rose for a fourth week in a row even with the program’s expiration (September 5th) rapidly approaching.  This week’s 9.63K increase was the largest of the past few weeks bringing PUA claims up to 117.71K.  That is the highest level since the week of April 23rd.

Seasonally adjusted continuing claims were also disappointing this week. Last week’s print was revised higher by 45K to 2.865 million, and while this week’s number was lower at 2.862 million, it was worse than expectations for a decline to 2.72 million. Thanks to that higher revision, claims have now fallen for three weeks in a row and are once again at pandemic lows.

Including all other programs adds another week of delay so the most recent read on continuing claims across all programs is through the week of August 6th.  Total claims rose to 12.02 million that week versus 11.84 million in the final week of July. Two of the largest programs, regular state and Pandemic Emergency Unemployment Compensation (PEUC), saw significantly lower claim counts that were offset by increases in PUA and extended benefit claims.  PUA claims rose back above 5 million due to a 104.71K increase erasing most of the decline from the second half of July.  Extended benefits remain particularly volatile, and this week saw another big move with claims rising 173.5K. At 351.4K, this program is at one of the highest levels since April.  While there are still several weeks until the data would catch up, through those most recent readings there are 8.8 million slated to lose benefits with the September 5th expiration for pandemic programs. Click here to view Bespoke’s premium membership options.

Earlier this week, we took a look at the decline in airline passenger traffic in recent weeks and noted that while some of the declines may be related to the Delta-variant, seasonality was likely a decent contributor to the slowdown.  With summer winding down and schools getting back into session, vacation season is winding down and diminishing the need for air travel. At the same time, business travel remains depressed and therefore isn’t there to pick up the slack.

It’s only one data point, but along these lines, we were surprised to see that subway ridership in New York City has seen little in the way of a negative impact on ridership in recent weeks. On a good day, the last place most people want to be is on the subway, and if you’re worried about catching COVID, it’s one of the first places you would avoid.  The chart below shows weekly turnstile traffic on NYC subways going back to 2015 with red dots marking comparable weeks to the most recent data.

The first thing that stands out on this chart is that subway traffic still has a long way to go before getting back anywhere close to normal levels.  From 2015 through 2019, subway traffic was gently drifting lower but was still pretty consistently above 30 million riders per week.  At the depths of the shutdowns, ridership plummeted down to 2.6 million riders and has slowly climbed higher ever since.  In the week ending 8/14, ridership totaled just under 12 million riders.  While that is up over 50% from the same week last year, it is still well below the average of 30 million for the same week of the year from 2015 through 2019. At this point, ridership would have to increase by 150% just to get back to pre-pandemic levels.

Looking a little closer at the ridership numbers, we found it interesting to see that while ridership usually declines in August (look at the line before the red dots in each of the years before 2020), this year we haven’t seen nearly as large of a drop. To put it in percentage terms, from 2015 through 2019, weekly ridership in the current week of the year dropped an average of 5.6% relative to its level from four weeks earlier.  This year, though, the decline has been close to half that at 3.3%.  In the grand scheme of things, this isn’t an enormous difference, but if the surge in COVID cases was causing more cautious behavior, we would have expected to see an even larger decline.  An alternative explanation for a smaller than normal decline in ridership levels could be due to the fact that many of the people riding the subway now have little in the way of alternative options for commuting and are in fields where summer vacations aren’t as typical as those in other occupations.  Ultimately, it’s probably a little of both, but seeing subway ridership levels hold up even as COVID cases surge is a trend we didn’t expect to see.  Click here to start a Bespoke Premium trial and receive access to all of our market analysis and commentary.

After trending lower for the last few months in what now looks like an anticipatory move in advance of the current COVID wave, travel & leisure stocks have bounced back in a big way over the last week.  Every one of the travel & leisure stocks in the snapshot below is up 5%+ over the last week, with MGM Resorts (MGM) up the most at +9%.  The three cruise stocks — Norwegian (NCLH), Royal Caribbean (RCL), and Carnival (CCL) — have bounced 7-8% over the last week, while the airlines are up between 5-6%.

A week ago, most of these travel & leisure stocks were trading in oversold territory, but they are all back in “neutral” territory now, meaning they’re between one standard deviation above and below their 50-DMAs.  The hotels and cruise stocks have largely crossed back above their 50-DMAs, while the airlines are still sitting below them.

As you can see, even though they’ve had a rough time over the last few months, all of these travel & leisure stocks are still in the green on a year-to-date basis, with MGM and American Airlines (AAL) up the most at 33.7% and 27.77%, respectively.

The underperformance of these names well ahead of the current COVID wave and their recent bounces in the midst of the wave serves as an important reminder that it’s often the case that the markets knew the headlines you’re reading today months ago.  Click here to start a Bespoke Premium trial and start building your own custom portfolios.

Bespoke members have the ability to build “custom portfolios” that allows them to easily track the stocks and ETFs they care about most.  One simple custom portfolio that we’ve created tracks the eight mega-cap Tech stocks.  Below is a snapshot of these eight stocks as they appear in our “Custom Portfolios” tool.  If you wanted to track your own stocks and ETFs in a similar fashion, simply start a Bespoke Premium trial and click on the “Custom Portfolios” page once you’re logged in.

As shown below, all eight of the “mega-caps” are up over the last five trading days, but NVIDIA (NVDA) is the clear standout with a massive gain of 16.66%.  The recent move higher for NVDA leaves it up 70% on the year and 12.4% above its 50-day moving average!  It also puts the stock in extreme overbought territory, which means it’s more than two standard deviations above its 50-DMA.

While Amazon (AMZN) is up 3% over the last week, it’s still 4.8% below its 50-DMA and in oversold territory.  Apple (AAPL) is the only mega-cap that’s not overbought or oversold but rather neutral, meaning it’s trading within one standard deviation above or below its 50-DMA.  Facebook (FB), Alphabet (GOOG), Microsoft (MSFT), Netflix (NFLX), and Tesla (TSLA) are all overbought, but unlike NVDA, they’re not in extreme territory.

On a YTD basis, none of the mega-caps are in the red, but three are just barely positive.  Amazon (AMZN) is up 1.3% YTD, Netflix (NFLX) is up 1.27% YTD, and Tesla (TSLA) is up 0.78% YTD.  That’s about as close to flat as it gets, and we’re already nearly eight full months into the year already.  Behind NVDA’s 70% gain, Alphabet (GOOG) is up the second most in 2021 at +63.2%, followed by Microsoft (MSFT) at +36.67% and Facebook (FB) at +34.86%.  Apple (AAPL) is sitting on a YTD gain of just over 12.33%.  That’s a solid move, but it’s well behind the S&P 500’s YTD gain of 19%.

Bespoke members can also easily see price charts of all the stocks or ETFs in the custom portfolios that they create.  This is a helpful way to monitor technicals across baskets in an efficient manner.  Instead of having to look through price charts one by one, you can quickly see them all on the same page.  Looking at the price charts of the eight mega-caps, you can see that Apple (AAPL), Facebook (FB), Alphabet (GOOG), Microsoft (MSFT), and NVIDIA (NVDA) are all in long-term uptrend channels, while things have been much more choppy for Amazon (AMZN), Netflix (NFLX), and Tesla (TSLA).  Click here to start a Bespoke Premium trial and start building your own custom portfolios.

There were two earnings Triple Plays in the past 24 hours, with both coming out of the retail industry.  A triple play is when a company reports better than expected earnings and revenues and also raises guidance.  On Tuesday after the close, Nordstrom (JWN) reported EPS 19 cents above estimates and revenues of $3.657 billion compared to estimates of $3.329 billion. In spite of those strong results, the stock is not only down but it has also erased all of the gains of the past week dropping 16.5% as of this writing in today’s session.  The leaves the stock right around its lows from the end of last month which are also at a similar level to the consolidation that took place at the end of last year.

Meanwhile, another retailer, Dick’s Sporting Goods (DKS), is seeing the opposite reaction. The stock is up 15% today after reporting EPS of $5.08 ($2.82 expected) and sales that were $440 million above forecasts. While both companies reported triple plays, those inverse reactions are also resemblant of the longer-term trends in the stocks heading into the reports.  Since the start of the year, JWN has been making a series of lower lows and lower highs while DKS has been in a steady uptrend.

As for where the reactions stand relative to each stock’s respective history, JWN is on pace for its worst one-day reaction to any quarter since at least 2001 surpassing the 15% drop from its report in November 2015.

The stock price reaction for DKS is not at a record, but it is historic in its own right.  The move today is similar to that of last August when it surged 15.68% on earnings, although that quarter didn’t qualify as a triple play since the company didn’t raise guidance.  As such, the stock is on pace for its sixth (or fifth if it closes more than 15.68% higher) largest earnings move on record.

Adding to the irony of today’s reactions, historically Q2 has actually been the strongest quarter for stock price reactions to earnings for Nordstrom. On average, the stock has historically risen 2.26% the day after reporting Q2 results with a positive return 68.4% of the time.

Turning to the retail sector more broadly, the SPDR S&P Retail ETF (XRT) is higher by 15 bps today as the ETF hovers at the high end of the past several month’s range.  Given it is an equal-weight ETF, the inverse and volatile moves in JWN and DKS are essentially canceling one another out. Click here to view Bespoke’s premium membership options.

Last week’s releases of the Philly and New York Fed manufacturing surveys showed broad slowdowns in activity, and today’s release of the Richmond Fed’s reading only reaffirmed those findings.  The headline number went from a near-record high of 27 in July down 18 points to 9 in August.  That is the lowest reading since last July.  While that still indicates the region’s manufacturing economy is continuing to grow at a historically healthy clip, the massive decline month over month points to a historic slowdown.  In fact, the 18 point decline was the third largest one-month drop on record behind 22 and 49 point declines in February and April of last year, respectively.

Given the headline number dropped by such a large degree, many of the sub-indices of the report similarly saw declines that rank in the bottom few percentiles of each one’s respective history of month over month changes. Just like the composite reading, if there is a silver lining to be had, most indices are again coming off of near-record levels meaning those large declines only leave them in the middle of their historical ranges at worst as is the case for New Orders and Shipments.  Additionally, current readings mostly remain positive indicating that there is still growth across components, but at a more modest pace. The only negative indices are Local Business Conditions, the two indices covering inventories, and Availability of Skills. While some good can be reasoned with negative readings in inventories and availability of skills—for instance, those negative readings can mean firms will need to increase production with strong demand and there is a tight labor market—the drop in local business conditions is more concerning and likely a result of rising COVID cases.

As previously noted, the indices for New Orders and Shipments remain at solid levels consistent with growth in spite of the massive declines month over month. As such, Order Backlogs remain fairly elevated in the 88th percentile.  While the growth of backlogs slowed dramatically alongside new orders, supply chains continue to look abnormal.  Even though the index for Vendor Lead Times has fallen four points from the record high set back in May, the current reading remains well above any historical precedent.

Given lead times are long and backlogs are still elevated, inventories are also historically low.  That is the case for both raw and finished goods. Each of these indices remains negative in the bottom 1% of all readings, but they did see sizable bounces in August. In other words, the region’s firms continue to report that they are drawing upon inventories at a historic rate while vendor lead times are likely not allowing those inventories to be replenished at a more desirable rate.

Prices paid finally got some relief, albeit it was not much.  Prices paid rose at a 11.05% annualized pace versus a record high of 11.16% in July. Conversely, Prices Received continue to make parabolic moves rising 9.25% annualized.

Not only are prices paid and received near/at record highs, but wages also set the record bar even high.  While wages are rising, actual hiring saw a substantial pullback from a record high as more firms reported a lack of workers with necessary skills.   Click here to view Bespoke’s premium membership options.

It won’t be official until the close, but with the Nasdaq crossing 15,000 for the first time today, it’s on pace to cross its third 1,000 point threshold this year and the sixth since the pandemic began in early 2020.  The table below lists each 1,000 point threshold that the Nasdaq has crossed over time along with the first day that it crossed that threshold, the number of days since the prior cross, what percentage that 1,000 point consists of relative to the prior threshold, and then how many upside and downside crosses the Nasdaq has had around that level on a closing basis.

Of all the 1,000 point thresholds the Nasdaq has crossed over time, the only one that it never traded back below after crossing it was 6,000 back in April 2017.  Besides 1,000, that was also the 1,000 point threshold that took the longest to cross above.  After first crossing 5,000 back in March 2000, it took 6,256 days for the Nasdaq to top 6,000.  Since then, though, the Nasdaq has been making quick work of 1,000 point thresholds.  With the exception of the 486-day gap between 8K and 9K, every other 1,000-point threshold since 6,000 has taken less than a year to cross.  Even in the midst of a global pandemic, it took the Nasdaq less than six months to get from 9,000 to 10,000.

The long-term chart of the Nasdaq below includes red dots to show each time the Nasdaq first crossed a 1,000 point threshold along with the number of days for each one.

Looking at the chart above may give you a feeling of lightheadedness given the seemingly parabolic nature of the last few years. An important thing to keep in mind, though, is that as a percentage of the index’s price level, every 1,000 point threshold represents a smaller move in percentage terms.  While the move from 9K to 10K represented a move of over 11%, the move from 14K to 15K represents only a little more than 7%.  Looking at this chart on a log scale where each label on the y-axis represents a doubling of the index shows how modest the recent 1,000 point thresholds have been relative to earlier ones.  Think about it this way, in the less than two years between when the Nasdaq first crossed 2K to when it crossed 5K for the first time (four different 1,000 point thresholds), it rallied 150%.  Over the last four years, though, the Nasdaq has crossed 10 different 1,000-point thresholds, but the gain has also only been 150%. Click here to view Bespoke’s premium membership options.

On Friday, we highlighted how a growing number of stocks were falling below their 200 and 50-DMAs recently, but there was a noticeable difference between those readings within large, mid, and small caps. Taking a more granular look, in the table below we show the percentage of stocks currently above their moving averages for each market cap bracket—large- (S&P 500), mid- (S&P 400), and small-caps (S&P 600)—by industry group.

For the most part, each industry group shows the same dynamic in which large caps generally have a stronger reading in the share of stocks trading above their moving averages, but there are a few industries where that is not necessarily the case. For example, mid-caps actually have the strongest readings for industries like Consumer Services and Energy, and Telecommunication Services has the strongest readings for small caps.

As for which industry groups currently have the healthiest readings in the number of stocks above their moving averages, Insurance tops the chart with around 90% of S&P 500 and 400 stocks in the industry above their 50-days. Of course, for small caps, there is a steep drop off though. On the other hand, Diversified Financials and Utilities also have some of the strongest readings in the number of stocks above their moving averages, and that is especially the case with regards to their longer-term 200-DMAs.    Click here to view Bespoke’s premium membership options.