It may sound hard to believe, but one month from today marks the Saturday of Memorial Day Weekend.  Memorial Day weekend typically marks the start to the summer driving season, so it is a time of year where gas prices increasingly become an area of focus.  If you are planning to do much driving this year, though, you are in for a pleasant surprise at the pump when you go to fill up.  Looking at the YTD change in gas prices so far this year, prices are only up 2.4%, which is the most anemic price increase at this point in the year we have seen going back to at least 2005.  Since then, there have only been three other years where the YTD change through 4/26 was less than a double-digit percentage gain, and the average YTD change at this point in the year is 17.8% (median: 17.5%), so 2.9% is nothing!

While prices could certainly go up from here, if they follow anything close to the seasonal pattern, the window for price increases is rapidly coming to a close.  The chart below compares the current YTD change in gas prices to a composite of the YTD change in prices for all years since 2005.  As shown, prices typically rise in the first half of the year, peak in early June, move sideways for the summer, and then rapidly decline from Labor Day through year end.  Therefore, if prices don’t increase much between now and early June, barring a major hurricane in the Gulf or a geopolitical shock, they are unlikely to get much of a lift in the summer.

As far as the inflationary impact of gas prices in concerned, any upward pressure is likely to be contained going forward.  The chart below shows the y/y change in gas prices since 2006.  The surge in the y/y change that we saw towards the end of 2016 was similar to increases that we saw in other commodities and was a big contributor to the upward pressure in CPI.  However, now that the base effects that contributed to the upward move in the CPI are running off, the pace of increase in y/y readings is quickly declining.  After peaking out at a 34.55% y/y change in late February, gas prices are now up a relatively modest 11.7% y/y.

After dropping to its lowest level since the election, bullish sentiment on the part of individual investors surged by the most this week since the week after the election.  According to the weekly survey from the American Association of Individual Investors (AAII), after just one-quarter of individual investors considered themselves bullish last week, more than 38% now put themselves in the bullish camp.  So was it the French election that individual investors were so worried about (kidding)?  Even with this week’s increase, a little perspective for this poll is in order, as it has now been 121 straight weeks since bulls were in the majority.

What we will be watching in this poll next week is what happens with bearish sentiment.  In this week’s survey, bears decline from 38.7% down to 31.71%.  Even after this week’s decline, the uptrend in bearish sentiment that has been in place since late last year remains in place (chart below).  If that uptrend breaks, it could be a precursor for a move to a majority in the bullish camp.

After three solid reports, jobless claims for the latest week saw a relatively large jump, rising from 243K up to 257K.  That’s considerably higher than economist estimates for a decline to 242K.  As shown in the chart below, claims are now once again bumping up against the downtrend line that has been in place for some time now.  Obviously, claims can’t go down forever, but this is a reading to watch closely in the next few weeks.  Anything sideways would be fine, but a significant run higher would be bad news for bulls.  This week’s report also covered the Easter holiday, so there’s also the possibility that the numbers were distorted by the holiday.

Even with the relatively large jump in claims, the four-week moving average actually declined from 242.75K down to 242.25K.  That provides some consolation from the jump in the weekly reading, but a good number this week would have brought the four-week moving average to a new low (below 239.75K).

On a non-seasonally adjusted basis, jobless claims came in at 241.5K which was just under 100K below its historical average for the current week of the year since 2000.

The charts below are part of our semi-monthly update on short interest for stocks in the S&P 1500.  To gain access to these charts for every sector and group in the S&P 1500, start a 14-day free trial to Bespoke’s research today!

Short interest figures for the middle of April were released after the close on Tuesday, and in what has become a consistent trend over the last several months, traders continue to pile into the Death By Amazon trade.  The chart below compares the price of the S&P 1500 Retailing Index (left axis) to the average level of short interest (as a percentage of float) for stocks in the group (right axis).  After hitting its lows for the bull market in mid-2013, the average level of short interest started trending higher and the pace really began to accelerate to the upside in early 2015.  Since then, the pace of increase has only accelerated and currently stands at 13.15%.  That’s the highest reading for the group since December 2008!  Looking at the chart, it would appear as though investors who are shorting the group are getting taken out to the woodshed as the group’s price is right near bull market highs.  This chart is quite misleading, though, as stocks like Amazon.com (AMZN) and Home Depot (HD) mask the overall trend.  Underneath the surface, there is a lot of weakness in individual names.

Another group that has seen a rather steady but unnoticed increase in its average level of short interest is the Transportation group.  While short interest in these stocks is nowhere near as high as it is in the Retailing group, at a level of 6.56%, the group’s average short interest as a percentage of float is the highest it has been since November 2010.