Although the S&P 500 has risen 3.25% in the past week, sentiment has seen little in the way of recovery from the substantial increase in bearish sentiment earlier this month. The AAII’s weekly sentiment survey saw bullish sentiment rise just 0.8 percentage points week over week to 33.1%. While that is a few percentage points below the historical average of 37.5%, bullish sentiment is above the consistently weak range of readings observed from early 2022 through this past spring.

Bearish sentiment, on the other hand, was slightly lower falling to 34.5% this week.  Like bullish sentiment, that is a few percentage points off the historical average of 31%.

The inverse moves to bullish and bearish sentiment means the bull-bear spread was modestly higher this week. However, that increase was not enough to lift it back into positive territory meaning bears outnumbered bulls in back to back weeks for the first time since the end of May and first week of June.

Factoring other sentiment surveys echo the recent turn toward bearish sentiment. In the chart below, in addition to the AAII survey we have added the Investors Intelligence and NAAIM Exposure Index readings to create a sentiment composite.  This index plummeted in August as increasingly bearish readings were observed across all three surveys.  Last week, that bearishness hit a low point of -0.45. Although it has bounced back this week, it is still in negative territory (meaning sentiment is more bearish than what has been the historical average). Just like the bull-bear spread for the AAII survey, that is the first back to back negative readings since May/June.

Ahead of tomorrow’s nonfarm payrolls report (which is expected to show a deceleration in jobs growth), initial jobless claims have been reversing lower in the past few weeks and are back down to the low end of the past several months’ range.  At 228K, the seasonally adjusted number came in well below expectations which were anticipated to rise to 235K.  Overall, claims continue to indicate a historically healthy labor market albeit with almost a year in the rearview since the absolute best levels.

On a non-seasonally adjusted basis, claims came in below 200K for a second week in a row. At 192.5K, claims are near similar levels to the comparable weeks of last year and 2017 through 2019.  From a seasonal perspective, this week or next is likely to mark the annual low for claims before drifting higher through year end.

Unlike initial claims, continuing claims were higher this week rising to 1.725 million which was a much larger increase than was forecasted.  Regardless, claims remain at healthy levels even after rounding out a bottom and beginning to trend higher more recently.

Earnings season is well past its peak, but one important report to watch this week (Thursday afternoon) will come from Broadcom (AVGO).  While it doesn’t attract nearly the type of publicity that many other stocks in the Technology sector get, AVGO is in the middle of two very impressive streaks.

First, as shown in the snapshot from our Earnings Explorer tool below, the company has reported twelve Earnings Triple Plays (better than expected earnings, better than expected revenues, and raised guidance) in a row.  Earnings Triple Plays are relatively uncommon already (just 6% of all earnings reports over the last ten years), but to report twelve in a row is practically unheard of.  In fact, using our earnings database which dates back to 2001, the only other stock to report 12 Earnings Triple Plays in a row was AMN Healthcare Services (AMN).  That streak actually ended earlier this month when the company reported better than expected EPS and sales but lowered guidance. When AMN’s streak ended with its report after the close on 8/3, the stock sold off sharply falling more than 11% on its earnings reaction day (8/4).

Almost as impressive as the streak of twelve straight Earnings Triple Plays, shares of AVGO have reacted positively on its earnings reaction day for ten straight quarters. There are actually 120 other instances dating back to 2001 in our database of companies reacting positively to earnings for at least ten quarters.  The record actually belongs to Assured Guaranty (AGO) which, if you have a good memory, you’ll recall lost over 90% of its value during the Financial Crisis due to its credit market exposure.  Coming out of the Financial Crisis, though, the company had 21 straight quarters from May 2012 through May 2017 where the stock’s one-day reaction to earnings was positive.

Given AVGO’s impressive streaks of Earnings Triple Plays and positive reactions to earnings, it should come as no surprise that it has performed admirably over the last three years.  With a gain of 153%, the stock has been the 30th best performer in the S&P 500 during that span.  Of the 29 stocks that have outperformed AVGO, thirteen are from the Energy sector, while the remaining sixteen span the Technology (7), Industrials (4), Materials (3), and Health Care (2) sectors.

Hurricane Idalia currently has maximum sustained winds of just 75 miles per hour (MPH), but the storm is forecast to intensify as it barrels closer towards land, and by the time of the expected landfall on Wednesday morning, it is expected to have maximum sustained winds of 125 MPH making it a category-3 ‘major’ hurricane. Idalia is the 9th named storm of the 2023 hurricane season which still doesn’t reach its peak for another two weeks.

If Idalia does strengthen to a category-3 storm before making landfall, it will be the 19th major Atlantic hurricane to make a US landfall. The table below was created using information from Wikipedia and lists each of those prior storms with the most recent being Ian last September.  Major hurricanes making landfall in the US have tended be sporadic over the last 30+ year.  While there have been seven in the last six years, from late 2005 through August 2017, there was a nearly 12-year stretch without a single major hurricane making landfall.

Most hurricanes, even major ones, have an insignificant impact on the broader US economy.  While Katrina, Harvey, and Ian had major impacts, a third of the 18 storms listed above didn’t even cause $10 billion in damages.  We’d also note that for this analysis, we only looked at major hurricanes, so Super Storm Sandy didn’t make the cut even though it caused nearly $70 billion in damage. Even if they don’t ultimately have much of a lasting impact on the economy, we were curious to see if there were any trends related to market performance, so in the charts below we show the performance of the S&P 500 in the day and week after each of the prior hurricanes made landfall.

It may sound hard to believe, but the S&P 500 has tended to rally in the short-term following prior landfalls of major hurricanes on the US coast.  In the day after the 18 prior landfalls, the S&P 500’s median gain was 0.32% with positive returns 72% of the time.  One week later, performance was even stronger at 1.22% with gains 83% of the time.  This could all be coincidence more than anything else, but given the preparations that go into storms like these, the costs involved can have a short-term stimulatory impact.

Bitcoin is surging today as news hit the tape that a judge ruled in favor of Grayscale over the SEC in an appeal to convert its Bitcoin Trust (GBTC) into an ETF.  As a result, the Grayscale Bitcoin Trust (GBTC) is currently trading higher by over 16% on the day. After trading below its 50-DMA since 8/17, today’s jump has sent it back above that moving average and up to the high end of the range it has occupied since the spring.

Perhaps more impressive, the nearly 17% gain as of this writing puts GBTC on pace for its largest single day gain since July 26, 2021. Back then it had risen 24.27% in response to rumors (which never came to fruition) that Amazon would begin to accept bitcoin as a form of payment.  Looking back further, only a handful of days since the start of 2020 have seen larger moves as today ranks as the 26th biggest single day gain in the trust’s history.

Again, it has been over two years since the last time GBTC rose over 15% in a single session. While not to say GBTC (and bitcoin more broadly) has not had its share of rollercoaster swings in that time, the 526 trading day gap between 15% one-day rallies is the largest streak without a 15% move in GBTC’s history dating back to 2015.

In the chart below, we show the daily volume (as well as volumes on a 50-day rolling average) over the past five years. As hopes for crypto have been tarnished by a number of negative catalysts, the past two and a half years have seen activity in GBTC fall dramatically versus the early 2021 peak.  However, the surge in activity today has already seen over 14 million shares trade as of this writing. With a few hours still left to go in the trading day, it is shaping up to at least be GBTC’s busiest day since last November when FTX collapsed.  Although the swing higher on strong volume has been impressive, and today’s news does provide some hope for crypto on the regulatory front, one day does not make a trend.