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.

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Social Statistics

The U.S. Housing Crisis Is Making Its Way to the Heartland by Jordan Yadoo and Noah Buhayar (Bloomberg Quint)

As home prices outpace the growth of economic activity in big swathes of the country and refugees of the coasts seek affordability, smaller and mid-sized cities are seeing affordability fade from the grasp of the middle class. [Link]

Life expectancy in the US rises for the first time in four years (New York Post/Associated Press)

After four years of declines that were driven by rising suicides and overdoses, declining death rates from cancer and lower rates of mortality related to drugs in 2018 helped push up overall life-expectancy for the first time in four years. [Link]

Bike Fatalities Are On The Rise by Phillip Reese (Kaiser Health News)

As more cyclists take to the roads and more drivers are distracted by their phones, the number of cyclists killed in accidents has trended steadily higher relative to the population both in California and across the rest of the country. [Link]

Screens

Collectors Are Spending Thousands on Video Games They Will Never Play by Jason M. Bailey (NYT)

Similar to other forms of artistic expression, video games are a collector’s dream even if they’ve never actually blown a cartridge off and slammed it into a console. [Link; soft paywall]

Modern Family: Average Parent Spends Just 5 Hours Face-To-Face With Their Kids Per Week! by Ben Renner (Study Finds)

A survey of UK households recently found that on average parents spend less than five hours per week in conversation with their kids, with a variety of strategies being pursued to reconnect including opting-in to kids’ activities including video games. [Link]

Big Tech

Facebook’s Relationship With Democrats Hits a Low Point by Deepa Seetharaman, Joshua Jamerson and Emily Glazer (WSJ)

In an effort to avoid the ire of the President, Mark Zuckerberg may have steered too far from Scylla and too close to Charybdis, as lawmakers see recent internal policy decisions as tipping the scales towards Republicans. [Link; paywall]

Sports

Race Is On to Cash In on Sports Betting by Katherine Sayre and Benjamin Mullin (WSJ)

A major gambling operator took a 36% stake in Barstool Sports, a blog best known for its irreverent and often misogynistic coverage of sports, in an effort to drive traffic to its gambling operations. [Link; paywall]

Cosmology

The Biggest Celestial Event of the Year Could Happen Tomorrow by Marina Koren (The Atlantic)

Given cosmic timelines, we’re never assured a view of the most spectacular events in the night sky, but the Betelgeuse supernova stands a real chance of taking place during our lifetimes. [Link]

Church Changes

German Bishops Rethink Catholic Teachings Amid Talk of ‘Schism’ by Francis X. Rocca (WSJ)

As European church officials push for a more modern church tradition, conservative American bishops are considering a revolt that could see a fresh schism in the church of St. Peter. [Link; paywall]

Scams

The Telephone Is A Lifeline For Prison Families. And Calls Are Outrageously Expensive by Bonita Tenneriello and Elizabeth Matos (WBUR)

With extreme price points for basic services, Massachusetts is considering laws that would prevent prisons from gouging the families of incarcerated persons. [Link]

Everything Old Is New Again: The Continuing Saga Of Bioscam Nanoviricides (Buyers Strike)

A stock that has long been known as a biotech fraud has come surging back in the wake of 2019-nCov’s surge across China. [Link]

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Have a great weekend!

The tone of the market sure did change over the last two weeks!  The image below is from our Trend Analyzer screen of US indices as of the close two weeks ago on 1/17.  Heading into that weekend, the major US averages were all at ‘Overbought’ or ‘Extreme Overbought’ levels, and while their Trend ratings were all positive, the Timing scores for nearly all of them was ‘Poor’.

Fast-forwarding to the present, it’s a completely different picture for the major US indices. Today, not a single one of the major US index ETFs headed into this weekend overbought at overbought levels, and a few of them are even oversold.  Here’s the silver lining, though; since all of their Trend ratings are still positive, their timing scores all rank as ‘Good’. While not what we would classify as a ‘Perfect’ set up right now, for investors who have been waiting for a pullback, the window is starting to open. Start a two-week free trial to Bespoke Institutional for full access to our Trend Analyzer tool, so you can track the key trends of major indices and individual stocks.

Please click the image below to view our February 2020 market calendar.  This calendar includes the S&P 500’s 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.  Start a two-week free trial to one of Bespoke’s three research levels.

It was just a week ago that the Philadelphia Semiconductor Index (SOX) gapped sharply higher to record highs on the back of strong earnings from Intel (INTC).  So much for that rally.  By the end of the day last Friday, the SOX was actually down over 1%, and outside of a rally this past Tuesday, it has traded down every day since.  From record highs on Friday morning, the SOX is closing out this week down more than 8% from last Friday’s highs and below its 50-day moving average (DMA) for the first time since October. For the last several months, the 50-DMA has acted as support for the SOX, so we’ll be watching closely to see how the index holds up in the days ahead.  We’ve repeatedly discussed the importance of the semis as a barometer of the health of the broader market, so it will be important for the group to find its footing soon.

In terms of the SOX’s individual components, the weakness has been broad-based.  Since its closing high on 1/23, every member of the SOX besides INTC is down, and INTC is barely up!  The average performance of the index’s components since 1/23 has been a decline of nearly 9%, and a third of the components are down by double-digit percentages. Semis had been a leadership group for the market as recently as last week, but after the declines over the last five trading days, the average 2020 performance of stocks in the index is a decline of 3.5% and only eight components are up. Even for the semis, this has been a quick reversal.  Start a two-week free trial to Bespoke Institutional for full access to our research and market views.

Although there have not been any major clusters outside of China, the spread of the coronavirus has investors understandably worried. Price action has been choppy in response as the story continues to develop, but investor sentiment is moving lower. The weekly reading on bearish sentiment from AAII fell from 45.6% down to 31.98% this week. That 13.62 percentage point decline is the largest one week drop in bullish sentiment since early August when it dropped 16.78 percentage points.  At that time bullish sentiment had fallen to an even lower 21.66%.

The loss in bullish sentiment was picked up by the bears as bearish sentiment rose 12.09 percentage points to 36.86%. As with bullish sentiment, this was the largest one-week buildup in negative sentiment since early August, although it was only about half the size of the 24.14 percentage point rise in the summer. Additionally, sentiment has not become extended in any major way either for bears or bulls which are both now in the middle of their ranges.

The shifts in bullish and bearish sentiment have also led the bull-bear spread to tick back into negative territory meaning a larger share of respondents to the AAII survey are reporting bearish sentiment. This snapped a 15 week-long streak with a positive bull-bear spread, and in the history of the survey dating back to 1987, there have only been 16 other streaks that have reached 15 weeks or more.  Only a handful, though, have occurred within the past decade. This most recent streak tied the one that came to a close in March of 2018 but was only half the size of the streak ending at 31 weeks in March of 2015.

Last week, neutral sentiment fell below 30% for the first time since the first week of 2019 and the week before that it snapped a 22 week-long streak above its historical average.  Although it is still below its average, neutral sentiment picked up a bit this week rising back above 30% to 31.17%. Only slightly higher, it is still at the low end of the past year’s range.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

This week’s initial jobless claims came in at 216K which was slightly above expectations of 215K.  That leaves claims basically in the middle of the past year’s range although it is an improvement from last week’s revised number of 223K.

Given they remain in a range, the revision to last week’s print was one of the more notable aspects of this week’s data. Originally, last week’s seasonally adjusted number was much stronger at 211K, but that was revised 12K higher to 223K. While that does not leave claims significantly higher than any of the past year’s readings—it was the highest since the last week of December’s equivalent reading—the size of the revision was very large.  The chart below shows the difference between the first revision and the first release of jobless claims over the past 20 years. Last week’s 12K revision was the joint largest revision since the 12K upwards revisions in December and November of 2012. Before that, you would have to go back to March of 2012 to find a larger revision (16K). While those are big, there were multiple revisions that were ever larger like the 27K revision in January of 2012, 26K revision in September of 2005, 33K revision in March of 2002, and 26K revision in December of 2000.

Despite that upward revision, the four-week moving average has fallen for a fourth consecutive week. Now at 214.5K, it is at its lowest level since early October when the moving average was 213.75K.

In terms of the non-seasonally adjusted data, claims are continuing to work off of their seasonal peak, falling to 228.4K this week from 282.1K last week.  Given that the data is non-seasonally adjusted those week to week comparisons do not mean much and a better look is through the year-over-year change. By this measure, claims fell 22.4K YoY.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.