Chart of the Day – Tighter Financial Conditions: Bullish or Bearish?
Bespoke’s Consumer Pulse Report — October 2023
Bespoke’s Consumer Pulse Report is an analysis of a huge consumer survey that we run each month. Our goal with this survey is to track trends across the economic and financial landscape in the US. Using the results from our proprietary monthly survey, we dissect and analyze all of the data and publish the Consumer Pulse Report, which we sell access to on a subscription basis. Sign up for a 30-day free trial to our Bespoke Consumer Pulse subscription service. With a trial, you’ll get coverage of consumer electronics, social media, streaming media, retail, autos, and much more. The report also has numerous proprietary US economic data points that are extremely timely and useful for investors.
We’ve just released our most recent monthly report to Pulse subscribers, and it’s definitely worth the read if you’re curious about the health of the consumer in the current market environment. Start a 30-day free trial for a full breakdown of all of our proprietary Pulse economic indicators.
Bespoke’s Morning Lineup – 10/5/23 – Energy Burns
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“The daily blips of the market are, in fact, noise — noise that is very difficult for most investors to tune out.” – Seth Klarman
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After a ‘rare’ rally yesterday, equity futures are lower again this morning even as crude oil and treasury yields are lower on the day. Treasury yields were lower, but jobless claims were just released and came in lower than expected on both an initial and continuing basis. The strength in initial jobless claims has been especially impressive as the four-week moving average has dropped to its lowest levels since February. With bonds looking for any excuse to sell off, the better-than-expected jobless claims report has sent yields higher.
The title of yesterday’s Morning Lineup post was “And Then There Were None”, and we discussed the fact that after the Energy sector’s decline to kick off the week, the ETF that tracks it (XLE) joined the ten other S&P 500 sector ETFs in trading below its 50-day moving average. That was the first time since October 3rd of last year that every sector was below their respective 50-DMAs, and while the Energy sector was only marginally below its 50-DMA, it quickly made up for lost time yesterday by falling more than 3% and into oversold territory. As shown in the chart below, after hovering just below its 50-DMA yesterday morning, by the close it was treading water just above its 200-DMA, and the uptrend line that had been in place since late June has been shattered. Moving forward, both the 50-DMA and the former uptrend line have the potential to act as resistance.
Along with the weakness in the Energy sector, crude oil has been on its heels as well. A week ago, WTI briefly traded above $95 per barrel after rallying more than 42% from its June lows. Anyone who knew anything was saying that crude was back on its way to a triple-digit price. In just a week, though, prices have slumped over 10%, and in yesterday’s swoon, prices broke below the uptrend line from June, the 50-day moving average, and the high from August – that’s a lot of broken support all at once! If crude continues to follow the recent path of the Energy sector, it could be a painful few days.
Regarding the recent moves in crude oil, it’s funny to think that less than two weeks ago the run-up in prices was attributed to a stronger economy. Now that prices have started to fall, the narrative has quickly shifted to an economy that’s slowing. Does the direction of the global economy really turn that fast? If you’re using day-to-day moves in a volatile commodity like crude oil as your gauge for the health of the global economy, you’re going to go deaf.
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The Closer – Technicals Too, Service PMIs, EIA – 10/4/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with an update on the GOP leadership race, UAW strikes, and an update of S&P 500 technicals (page 1). We then dive into the latest service PMI data (page 2). We finish with a rundown of the latest happenings in crude oil markets as front month WTI dropped over 5% today (page 3).
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Daily Sector Snapshot — 10/4/23
Fixed Income Weekly — 10/4/23
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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Chart of the Day: New Low in Net New Lows
Lower Daily Lows Becoming the Norm
While maybe not as relentless as the move higher in rates over the last two months, selling in equities has been pretty consistent. In the year-to-date chart of the S&P 500 tracking ETF (SPY) below, we show the last 50 trading days in gray to point out that there have been an extremely large number of days during this span where the day’s intraday low was lower than the prior day’s low. We highlighted this trend in a Chart of the Day last week, but it has remained pronounced since then. In total, 33 of the last 50 trading days have seen SPY make a lower low relative to the prior day’s intraday low, and if SPY falls below $420.18 today, it would be a record 34 days in a trailing 50-trading day period where the ETF made a lower low relative to the prior day’s low.
The chart below shows the number of days over a rolling 50-day period where SPY made lower lows, and at a level of 33, the current period is tied with three others (March 2022, October 2008, and March 2008) for the most since SPY’s inception in 1993. You don’t need us to tell you that none of these periods were positive for the market. What makes the current period unique is that the magnitude of the decline during this period has been relatively mild at less than 10%. During each of the three other periods, SPY was down at least 10% from a 52-week high and as much as 45% (October 2008).
Bespoke’s Morning Lineup – 10/4/23 – And Then There Were None
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Unlike most other days recently, futures have been rallying as we approach the opening bell. While the bounce started before the ADP employment report, it picked up steam after that release came in weaker than expected. Now, we just need to get through Factory Orders, Durable Goods, and most importantly, ISM Services at 10 AM.
After two months of steadily lower trending markets, the number of sector ETFs trading above their 50-day moving average (DMA) is finally down to zero as the Energy sector ETF (XLE) surrendered that level this week. While XLE is less than 0.1% below its 50-DMA, every other sector ETF is trading at least 2% below its 50-DMA (Communication Services), and Utilities and Real Estate are both more than 9% below their respective 50-DMAs.
So, when was the last time this happened? The chart below shows the running total number of sector ETFs above their 50-DMAs, and while it got close to zero in the spring, the last time it was zero was exactly a year ago yesterday (10/3/22), and before that, in the summer of 2022. In the entire post-COVID era, this current period is just the sixth time that a sell-off has resulted in every sector trading below its 50-DMA.
Looking at the longer-term 200-DMA, the only sectors currently trading above that level are Energy (4.2%), Consumer Discretionary (2.1%), Communication Services (8.6%), and Technology (5.7%). Like the 50-DMA, the last time every sector ETF was below their respective 200-DMA was briefly last fall and before that in the summer. In the post-COVID period, though, the only other period where every sector was below its 200-DMA was during the initial market crash when the virus first shut down the US economy. With two sectors still trading more than 5% above their 200-DMAs, it would take a considerable amount of more selling to get that reading back to zero. Something no one’s portfolio wants to see.
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The Closer – Speaker Vacancy, Utes Valuations, LMI – 10/3/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with commentary regarding the speaker vacancy (page 1) followed by a dive into Utilities valuations (page 2). We then look at the latest JOLTS report (page 3) and Logistics Managers Index data (pages 4-6). We finish with a look at farmer sentiment (page 7).
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