After two weeks of increases, jobless claims saw their largest one-week decline since April this week, falling from 232K down to 214K.  At 214K, initial claims are just 5K above their cycle low of 209K back on 4/20, but more importantly, claims have now been below 300K for a record 175 straight weeks and at or below 250K for 40 weeks.  If that’s not impressive, what is?

Even with this week’s decline, though, the four-week moving average barely budged lower, falling from 224.75K down to 223K.  That’s 9.5K above the cycle low of 213.5K on 5/11. With a print of 218K falling off the count next week, it’s going to be hard to make much downside headway in this reading.

The most impressive aspect of the report this week was the non-seasonally adjusted numbers.  At a level of 264.5K, NSA claims were more than 130K below the average for the current week of the year dating back to 2000, and going all the way back to the late 1960s when the series starts, there has never been a lower reading for the current week of the year.

Bulls are not only running on the streets of Pamplona this week, but they’re on Wall St. as well.  Even with yesterday’s trade-induced decline, individual investors seized on the S&P 500’s four-day win streak and turned considerably more optimistic on equities.  According to the weekly sentiment survey from AAII, bullish sentiment surged from 27.9% up to 43.1%.  That 15.2 percentage point increase represents the largest one week increase in optimism since the week after the November 2016 election of President Trump.

Not surprisingly, most of the increase in bullish sentiment came from the bearish camp, where the percentage dropped from 39.3% down to 29.2%.

Neutral sentiment also saw a sizable decline this week as investors became a little bit more decisive in their views.  This week’s reading of 27.8% is the lowest level of neutral sentiment since the start of February.

One thing we’ll be watching closely this earnings season is whether companies can keep up the extraordinarily high beat rates seen over the past two quarters.

Over the past two earnings seasons, even though analysts had to up their estimates quite a bit due to the Trump corporate tax cuts, companies were easily able to beat expectations.  Since 1999, 62.1% of earnings reports have reported EPS that were greater than consensus expectations.  As shown below, though, the last two quarters saw much higher than average beat rates.

Not only have bottom line EPS beat rates been strong, but top-line revenue beat rates have been strong as well.  Revenue beat rates over the last two earnings seasons were higher than any quarter since Q4 2004.

The chart below takes the average of each quarter’s earnings and revenue beat rate.  When looking at the strength of both the top and bottom line beat rate each earnings season, the only other two-quarter period that showed stronger beat rates than the last two quarters was back in Q4 2003 and Q1 2004.

Needless to say, investors have gotten used to stronger than expected earnings reports over the last six months.  If companies aren’t able to keep up the pace this season, we think the market will struggle.

Our recently launched Chart Scanner has become an incredibly popular and useful tool for clients as it gives a user the ability to quickly scan through hundreds of charts in order to find the most attractive (or unattractive) patterns.  Included with the tool are a number of pre-defined screens that allow users to see stocks that hit 52-week highs or lows in the previous session, experienced “death” or “golden” crosses, as well as charts which we view as having bullish or bearish patterns.  Each of these screens can be found using the drop-down box at the top of the page (as illustrated in the image below). To unlock our Chart Scanner tool, simply sign up for a two-week free trial to Bespoke Premium.  You won’t be disappointed!

One stock that showed up on our Golden Cross screen today was Exxon Mobil (XOM).  After a rough first quarter for the stock, shares of XOM came roaring back in the second quarter and just yesterday completed the formation.  For anyone who is unfamiliar with the term, a Golden Cross occurs when a stock’s upwardly sloping 50-day moving average (DMA) crosses above its 200-DMA, which also has to be rising.  Conversely, a Death Cross occurs when a downwardly sloping 50-DMA crosses below the 200-DMA, which also has to be moving lower. Technicians consider Golden Cross formations to be a positive signal, while a Death Cross is considered to be negative.  In practice, however, that is not always the case.

The chart below shows the performance of XOM over the last ten years, and we have included arrows to show occurrences of each Golden Cross for the stock. Prior to yesterday’s formation, XOM had seen five other Golden Crosses over the last ten years with the most recent occurring back in December 2013.

We mentioned above that Golden Crosses haven’t always been bullish for future stock returns in practice, but in the case of XOM, prior occurrences have, for the most part, been positive for the stock.  Even in this case, though, it hasn’t been overwhelmingly bullish.  The table below lists the one week, one month, and three month returns for the stock following each prior Golden Cross.  In the week that followed the five prior occurrences, XOM averaged a gain of 0.63% (median: 0.23%) with positive returns just three out of five times.  One month later the stock saw an average gain of 2.10% (median: 2.10%) with gains four out of five times, while the average three-month return was a gain of 3.18% (median: 1.77%) with gains three out of five times.