The Closer – Auto Wholesale Bloodbath, Existing Home Sales, Indeed Openings – 8/22/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we kick off with a look into wholesale used car prices and Toll Brothers (TOL) earnings (page 1). We then turn to the dearth in inventories per the latest existing home sales data (page 2) and weakness in home affordability (page 3). After an update of our Five Fed Manufacturing Composite (page 4) and an similar service sector reading (page 5), we finish with a review of the latest job openings data from Indeed.com (pages 6-9).
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Daily Sector Snapshot — 8/22/23
Bespoke Stock Scores — 8/22/23
Chart of the Day – Best Run For Stocks Versus Bonds…Ever?
Energy Holds The 100% Line
Each day in our Sector Snapshot, among a number of sector level internal metrics, we show the percentage of stocks trading above their 50-DMAs. Yesterday, that reading fell down to 33% for the S&P 500. While last Thursday saw a slightly lower reading and 33% is far from the worst in recent years (as shown in the first chart below), this month has seen a material decline in the percentage of stocks trading above their respective 50-DMAs. One sector has proved to be an exception, though; while just a third of the S&P 500 components are above their 50-days, 100% of stocks in the Energy sector are still above their 50-DMAs.
Going back to 1990, it has been rare to see such a small share of the broader market above their 50-DMA while all the components of an entire sector are above their respective 50-DMAs. In fact, it’s only happened six other times. In the table below, we show each of those previous periods as well as the S&P 500 and each sectors’ reading on the percentage of stocks above their 50-DMAs. As shown, since 2021 there have been multiple similar instances in which every stock in the Energy sector has bucked the general trend of the broader market. One notable difference this time around is some of the most heavily weighted sectors like Tech and Health Care have far stronger breadth readings. In other words, breadth is healthier (relatively speaking) for those more impactful groups.
Prior to the pandemic, 2006, 2014, and 2016 were the only other periods. In 2006 and again in 2016, Utilities was the sector with 100% of stocks above their 50-DMAs while around 30% of the S&P 500 was above. Then in 2014, Communication Services (when it was much smaller – about ten stocks- and before it was reconfigured to include stocks like Alphabet, Meta, etc.) was the sector with strong breath.
Bespoke’s Morning Lineup – 8/22/23 – Bond Buyers Striking Out
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“It’s a funny thing, the more I practice, the luckier I get.” – Nolan Ryan
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On this day 34 years ago, Nolan Ryan came out to the mound in the top of the fifth inning against the A’s, and up to the plate stepped Ricky Henderson. Everyone knows that Ricky was known for his ability to draw walks, but he wouldn’t this time. After working a full count, he struck out swinging giving Ryan his 5,000th strikeout and putting him alone in the 5,000-club of strikeouts. It’s been more than a generation since Ryan notched his 5,000 K, but to this day no other pitcher has reached that level in their career. Randy Johnson (4,875) and Roger Clemens (4.672) got close, but the closest active players aren’t even in the same ballpark. Forever is a long-time, but with 5,714 strikeouts in his career and the way pitchers are coddled now, Ryan’s record may just be unbreakable.
Holders of long-term US Treasuries probably feel just like any of the batters coming up to the plate with the “Ryan Express” on the mound. Earlier this month, we highlighted the fact that the iShares 20+ US Treasury ETF (TLT) traded to its most oversold level in its history when on 8/3 it closed 3.8 standard deviations below its 50-day moving average.
Looking at the price of TLT relative to its trading range over the last year, you can see that it has been in oversold territory all month. While the degree to which it is oversold is nowhere near as much as it was earlier this month, it remains deeply oversold.
As bad as the last month has been, this year hasn’t been nearly as bad for TLT as last year. So far this year, TLT has closed at oversold levels for 48 trading days, which would put it on pace for 75 this year or once about every three to four trading days. That’s high, but it’s still less than half of last year’s total of 158 oversold days, and relative to the 20 prior years of trading for TLT, there have been six other years where TLT notched more than 75 daily closes in oversold territory. So, it’s been bad, but maybe more Don Sutton bad (3,574 career strikeouts) than Nolan Ryan bad.
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The Closer – Labor Wins, Treasury Yield Highs, Semi Sales, US Energy Trade, CoT – 8/21/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with commentary regarding unionization efforts (page 1) followed by a dive into semi sales data (page 2) and the petroleum trade balance (page 3). Next, we preview this week’s Treasury auctions (page 4) before closing with a rundown of the latest positioning data (pages 5-7).
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Daily Sector Snapshot — 8/21/23
Chart of the Day – Real Yields At New Highs
Bespoke’s Morning Lineup – 8/21/23 – Stuck in a RUT
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“Learn to deal with the valleys and the hills will take care of themselves.” – Count Basie
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After a rough night in Asia as issues in China continue to weigh on growth prospects for the region (more on this in page five of today’s Morning Lineup), European stocks pivoted right at the opening bell and are now firmly in positive territory to start the week. US futures are following the European lead and currently point to a 0.5% gain at the opening bell. While the S&P 500 was down on Friday ending what was its third negative week in a row, we would note that stocks pretty much opened at their lows of the day and drifted higher throughout the trading session.
For all the drama in markets on a day-to-day basis, the moves in the small-cap Russell 2000, often abbreviated as the ‘RUT’, have primarily been noise as the index has been stuck in a trading range for the last year. The ‘valleys’ of each sell-off have found support right around the pre-COVID highs in the 1,650/1,700 range multiple times since last summer, but each ‘hill’ has run out of steam right around 2,000. After the latest rally that began to take hold in late May petered out at the end of July, the Russell has pulled back just over 7% and finds itself smack dab in the middle of the 12-month range.
Looking at the Russell on a shorter-term basis, the pullback off the latest failed rally has been relatively swift, but one encouraging aspect so far has been that Friday’s 1.5% rebound off the intraday low occurred right around the 50-day moving average and at support from the uptrend off the early May low. Let’s see if that bounce can hold in the days ahead and mark a higher valley for small caps and ultimately break the small cap index out of its rut.
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