With the major US indices pressing to new record highs, sentiment has picked up considerably in the past week.  Bullish sentiment measured in the AAII weekly sentiment survey came in the top 5% of all prior weekly readings after rising by 11.1 percentage points to 56.9%.  That makes for the largest one-week increase since the week of November 12th when bullish sentiment leaped 17.88 percentage points to 55.84%.  This week also surpassed that November reading to make for the highest level of bullish sentiment since the first week of 2018 when 59.75% of respondents reported as bullish.

Bearish sentiment was already low headed into this week, but the reading fell another 2.8 percentage points to 20.4%.  That is marginally lower than the reading of 20.6% from two weeks ago making for the lowest level of bearish sentiment since April 2019.

The big jump in bullish sentiment borrowed more heavily from the neutral camp.  The percentage of respondents reporting as neutral collapsed 8.3 percentage points to 22.7%.  Similar to bullish sentiment, that was the biggest single-week decline since November 12th and the lowest reading since that same week.

These moves mean sentiment now largely favors the bullish camp.  In fact, the bull-bear spread rose to 36.5 which is the highest level since the first week of 2018.

To see what these types of sentiment readings mean for equity market returns, make sure to log in.  If you aren’t currently a client, sign up for a free trial to one of Bespoke’s research offerings to view the rest of this report.

When it comes to the fixed income space, 2021 has been a rough year.  Just about every area of the sector you look at, YTD returns have been negative.  Below is a snapshot of a custom portfolio of fixed income-related ETFs from our Trend Analyzer.  Two things in the snapshot stand out.  First, the only ETF in the group above its 50-DMA is the High Yield Bond ETF (HYG).  Not only is it above its 50-DMA, but it’s also overbought!  Given the recent strength in HYG, it is also the only ETF in the group that is up YTD with a gain of just under 1%.  While short-term US Treasury related ETFs are down less than 1%, the TIPS ETF is down over 1% (TIP), total bond market ETFs are down over 3% (AGG and BND), the emerging market fixed income ETF is down close to 5%, while longer-term US Treasury ETFs are down over 10%!

Also noteworthy about the high yield bond market is the fact that the B of A High Yield Master Index just made a new all-time high on a total return basis, taking out its mid-February high.  Apropos to its name, high yield has been a high point of the fixed income sector.  Click here to view Bespoke’s premium membership options for our best research available.

Initial jobless claims were expected to fall to 680K this week, which would have been just 22K above the pandemic low set two weeks ago.  Instead, claims ticked higher for a second week in a row to 744K. Additionally, last week’s print of 719K was revised higher to 728K.

On a non-seasonally adjusted basis, the current week of the year (14th week) typically sees a higher reading in jobless claims. In fact, since 1967 when the data begins, the current week of the year has seen a week over week increase in initial claims 88.9% of the time. Of all weeks of the year, it is the third most consistent in experiencing higher claims.  Given this seasonality, unadjusted claims rose 18.2K from last week. Although higher sequentially, that is still at the lower end of the past year’s range.  Pandemic Unemployment Assistance (PUA) made up for that weakness, though.  PUA claims fell by over 85K to a new pandemic low of 151.75K.  That meant on a combined basis (regular state claims plus PUA claims), initial jobless claims were just slightly above the past year’s low from two weeks ago.

Continuing claims were also better this week falling to a new low of 3.734 million. While that marked the twelfth week in a row that claims have fallen and any new low is certainly welcome, we would note that the pace of improvement has decelerated.  As shown below, continuing claims have been flattening out recently with this week’s 16K decline in seasonally adjusted continuing claims a prime example.  That 16K improvement actually marked the smallest decline of the past year.

The most recent data factoring in all other unemployment programs is through the week of March 19th. Total claims were somewhat flat for that week with only a small decline from 18.249 million to 18.196 million.  Big declines in regular state claims (-134.5K) and the Extended Benefits program (-230.78K) were largely offset by sizeable increases in PUA claims (+203.29K) and Pandemic Emergency Unemployment Compensation (+117.11K). In other words, the picture can be painted as improving or more of the same depending upon which program you are looking at.

In the past, we have noted the changing composition of continuing jobless claims with extension-based programs like Extended Benefits and PEUC taking up an increased share of total claims. For the most recent week, that picture is a bit mixed up.  While the 230.78K decline for the Extended Benefits program meant these claims fell to the lowest since early December at 787K, PEUC claims (which is also a larger program with 5.6 million claims) were higher and in the middle of the past several weeks’ range. Together, these two extension programs’ share of total claims has peaked for the time being but still account for over 35% of total continuing claims. Click here to view Bespoke’s premium membership options for our best research available.

The earnings calendar has been quiet, and it will remain that way until the second half of the month when the Q1 earnings season really kicks into gear. When it comes to earnings, the 3 month rolling EPS beat rate and guidance spread have pulled back significantly over the past few months. Granted, both of these as well as the sales beat rate remain at levels well above typical levels. As such, there have been a huge number of triple plays over the past three months, 268 of the total 2048 reporting companies to be exact.  A triple play is when a company reports better than expected sales and earnings while also raising guidance.  Typically, this can be viewed as a sign of fundamental strength for a company.

Looking over those triple plays, the average stock that has reported a triple play over the past three months rose over 3% on its earnings reaction day with 64% finishing the day in the green. That positive performance has tended to continue in the weeks after earnings although there have been some that have recently been consolidating. In the charts below, we show a handful of these.  Some like Abbott Labs (ABT) and Perficient (PRFT) have been in short-term downtrends that have brought them back down to support around their 50-DMAs. Others like Analog Devices (ADI), Broadcom (AVGO), and Crocs (CROX) have been stuck under resistance over the past several weeks but have made attempts to break out in the past few days.  For all of these, there has yet to be a decided move either to the up or downside.

While the names above have yet to break out of their consolidation ranges, there are a number of recent triple-plays that have successfully managed to break out to the upside.  For a recap of those names, make sure to log in.  If you aren’t currently a client, sign up for a free trial to one of Bespoke’s research offerings.

Every day in our Morning Lineup, we provide a technical snapshot of the market looking at various metrics.  One chart we show is the relative strength of stocks (S&P 500) versus bonds (US Treasury Long Bond Future) over the trailing 12 months (chart below).  Whenever the line is in the green area, it indicates that stocks are outperforming bonds relative to the start date, while readings in the red zone indicate bonds outperforming stocks.  What stood out about the chart in this morning’s report was the fact that relative to one year ago (4/1 close), stocks have been outperforming bonds every day since.  Sure, there have been periods in between where bonds outperformed stocks (falling line), but from a longer-term perspective, it has been about as perfect a year for stocks relative to bonds as you could imagine.

The chart below shows the performance of both asset classes individually over the last year.  If you think the divide between political parties in the US has ripped wider, it has nothing on the growing divide between stocks and bonds.  While the S&P 500 is up over 50%, the US Treasury Long Bond Future is down 14%.  If we had to bet on which divide will start to narrow sooner, is there anything closer to a sure thing than taking the stock vs bond divide over the Democrat vs Republican divide?  Click here to view Bespoke’s premium membership options for our best research available.

After a strong run in the first months of the pandemic, gold (GLD) has been in a downtrend since the summer erasing most of the past year’s move higher.  While GLD is far from breaking its longer-term downtrend, the past few weeks have at least seen a bit more constructive price action with a potential double bottom forming.  After trading deep into oversold territory in early March, GLD found at least a temporary bottom right around the lows of last sping’s range.  Last Tuesday, there was another successful retest of those same support levels. Since then, GLD has pressed higher and is getting close to breaking out of the past few weeks’ consolidation range.

Elsewhere in the precious metals space, silver (SLV) has generally fared better over the past several months.  While it hasn’t been pressing higher either, SLV has more or less been trending sideways since last summer’s high.  Since late February, SLV had been heading back to the bottom end of its range, but like GLD, it recently found some support. SLV took a brief dip below its 200-DMA one week ago which snapped a streak of 217 consecutive closes above its long-term moving average; the third-longest on record since SLV began trading in 2006 as shown in the second chart below. That drop below did not last long though as SLV has since moved back above its 200-day. Now, it is sandwiched between its 200-DMA and 50-DMA; which it had previously failed to move above last month. Additionally, the move higher today is breaking the short-term downtrend that has been in place for most of 2021. Like gold, the overall longer-term picture for silver has a lot of room for improvement, but at least in the near term, there are some positives developing in the past week. Click here to view Bespoke’s premium membership options for our best research available.

It seems to happen every month these days, so it shouldn’t come as much of a surprise that FBI background checks for the purchase of firearms hit a new record in March, rising by more than a million to 4,691,738.  It used to be that background checks followed a relatively steady saw-tooth seasonal pattern where, as shown in the chart below, they would fall throughout the first half of the year, bottom out in mid-Summer, and then steadily rise throughout the second half of the year.  That seasonal trend became less consistent in the early part of the last decade and has completely broken down in the last two years.  Now, it seems that the monthly number of background checks goes in one direction – up!

Despite rising to new record highs, the pace of growth in background checks has started to slow down a bit.  March’s growth rate was 25.4%, and while that is still an extremely rapid rate of increase, it’s at the low end of the range from the last year where the y/y change in checks peaked out at 79.2% last July in the midst of the nationwide protests around the country.  Click here to view Bespoke’s premium membership options for our best research available.

Just as the stock market and the economy don’t always move in lockstep with each other, the stocks of gun manufacturers don’t necessarily follow the path of gun background checks/sales.  The charts below show the performance of the two largest publicly traded gun manufacturers over the last year – Sturm Ruger (RGR) and Smith and Wesson (SWBI).  While background checks are at all-time highs, the prices of both stocks have corrected significantly from their highs last summer.  After declines of 30%+ from peak to trough for both stocks, they have essentially been rangebound now for six months.  However, while both stocks have been dead money, they haven’t broken down.  In both cases, they have repeatedly bounced at support (~$60 for RGR and ~$15 for SWBI).  As long as those levels continue to hold, they may be loaded with more than just blanks.