The major indices are broadly lower in the past week with the exception of the Dow which has risen just over 1%. The Nasdaq on the other hand has been the worst performer falling almost 3%.  Even though the major indices are split in terms of performance, sentiment has gone the way of the Dow as bullish sentiment as measured through the AAII weekly survey rose 1.7 percentage points to 44.3%.  While not a particularly large increase, this week did mark the first time bullish sentiment has risen in a month.

With bullish sentiment higher, fewer respondents reported as bearish.  Only 23.1% of investors reported pessimistic sentiment; down 2.6 percentage points versus last week’s reading.  Just like bullish sentiment, that was not a particularly large change, and it leaves the reading in the middle of the past several weeks’ range.

The inverse moves in bullish and bearish sentiment resulted in the bull-bear spread climbing 4.3 points to 21.2.  While that is still at the high end of the past few years’ range, it is 11 points below where it stood only two weeks ago. Looking at another sentiment survey from Investors Intelligence which targets equity newsletter writers, the bull-bear spread also rose slightly week over week leaving the spread well below levels from only a couple of weeks ago.   In other words, sentiment has moderated recently, but it has not dramatically shaken a historically bullish tone.

Perhaps the most notable reading in this week’s AAII survey was the reading on neutral sentiment.  Up 0.7 percentage points from the prior week, it was not a particularly large gain especially compared to the 5 and 5.2 percentage point gains the previous two weeks. Regardless, moving higher once again neutral sentiment hit the highest level since the first week of March.  Other than that week and the current one, there has only been one other week in the past year (second to last week of 2020) in which neutral sentiment was as high as it is now.  Even though this week’s reading is elevated relative to the past year, compared to the rest of the history of the survey, it is pretty unremarkable.  On average over the life of the survey, neutral sentiment has averaged a reading just 0.9 percentage points lower than this week’s reading.

The NAAIM Exposure Index is yet one more sentiment reading that also has shown some moderation but remains at a generally bullish level.  This index reflects the average exposure to US equities of members of the National Association of Active Investment Managers. Readings of 200 would indicate they are leveraged long on average, 100 would be fully invested, 0 would be market neutral, -100 would be fully short, and -200 would be leveraged short. Last week saw this index tip above 100 for the first time since mid-February which also ranked in the top 2% of all readings going back to 2006. This week it fell 15.93 points. That stands in the bottom decile of weekly moves and was the largest drop since late March, but at 87.79, the index still points to historically bullish positioning among active managers. Click here to view Bespoke’s premium membership options for our best research available.

Last week’s number for seasonally adjusted initial jobless claims was revised higher by 37K. That means that while the original print of 553K was the lowest level of not only April but also of the entire pandemic, the revised reading actually changed that to make for the highest level of claims in three weeks. In spite of this, in the most recent week’s data, jobless claims dropped by 92K to 498K. That is the first reading below 500K of the pandemic era and is now down over 90% from the high in claims just over a year ago. This week’s reading is also for the first time less than double the reading from just before the massive upswing in claims in March of last year.

While there is the added factor of seasonal tailwinds—every week from the second week of April through the end of May has historically averaged a week over week decline in SA claims—on a non-seasonally adjusted basis, the data was just as positive.  Although claims did not take out the 500K level by this measure, they did fall over 100K to 504.7K which also marked a pandemic low.  PUA claims dropped around 20K to just above 100K. Again, that makes for the lowest level of claims both for this program and on a combined basis since the start of the pandemic.

Lagged an additional week to initial claims, continuing claims continue to look less positive. As we mentioned last week, though it doesn’t take away from the fact that there have been massive and consistent improvements in just a year’s time, continuing claims have experienced a significant deceleration in improvements over the past few months.  The past couple of weeks have been the pinnacle of this. Last week’s reading was revised lower by 7K meaning the print only saw a 1K increase WoW, but that still snapped a 14 week-long streak of consecutive sequential declines. Pair that with the 37K increase to 3.69 million this week, and continuing claims have experienced the first back-to-back increases since last May when jobless claims were rising by well above 1 million per week.

Even though continuing claims via the regular state programs have plateaued, that gives an incomplete picture.  Including all other programs helps to solve that, though it does create an additional week’s lag to the data meaning the most recent week is through April 16th.  Including all programs, the tone is more optimistic. Total claims across all programs fell by 404K to 16.185 million.  Barring the irregular drop in the first week of the year to 16.048 million when some plans had lapsed due to the timing of the signing of the spending bill, that makes for the lowest level of claims since the first week of last April. Considering the lack of improvements in regular state claims and the fact that the program accounts for a smaller share of total claims than earlier in the pandemic, the main drivers of the overall decline in total claims were significant drops in PUA claims and the Pandemic Emergency Unemployment Compensation (PEUC) program.  Click here to view Bespoke’s premium membership options for our best research available.

The CDC issued guidance this week on how cruise operators can run test cruises in order to move closer to returning to ‘normal’ cruising operations.  At the surface, one would assume that anything that moves the industry closer to returning back to business would be a positive for the sector, but when the cruise stocks have already bounced so much off their lows, a lot of the good news appears to be priced in.

A key sign of good news being priced into a stock happens when you start to see selling into strength, and that’s exactly what we’ve seen over the last several weeks in the cruise operators.  The charts below show the performance of Carnival (CCL), Norwegian Cruise Lines (NCLH), and Royal Caribbean (RCL).  In each chart, we have included red arrows over days when the stocks saw strong intraday gains only to reverse lower from their highs into the close.  Not only have we seen a number of these types of reversals in the last several weeks, but in most cases, each successive intraday high has been lower than the prior peak. The fact that investors are selling strength at progressively lower levels suggests a degree of eagerness to exit positions.  If you’re willing to sell something for $38 today that you were selling for $40 last week, you’re what they call a motivated seller.

While the selling into strength in these cruise stocks may be disheartening if you are long, at this point the cruise operators haven’t yet shown any meaningful signs of breaking down.  CCL still remains comfortably above its highs from last June and December, and each recent sell-off has been met with some buying at higher levels (motivated buyers) causing a series of higher lows.  For NCLH, it’s a similar story.  Of the three stocks, the only one that has been experiencing lower lows from each reversal has been RCL, but while it is currently modestly below its late 2020 high, it has yet to show a meaningful breakdown. Looking for full access to our research and market analysis? Sign up for a two-week trial today.

For a few quarters now we have seen extremely strong earnings reports relative to expectations.  Over the long-term going back to the early 2000s, roughly 60% of stocks have topped quarterly earnings estimates.  Over the last year, the beat rate has jumped up to 76%, and this earnings season we’ve seen an 81% beat rate.  Prior to the current bull market that began in March 2020, an earnings beat resulted in a one-day share price gain of 1.78% on average, but so far in 2021, stocks that have beaten earnings estimates have actually averaged a one-day decline of 0.01%.  This essentially means that an earnings beat is now viewed as par for the course; something that is a given.  This is likely something we’ll continue to see until earnings beat rates drop back down to more normal levels.

An earnings triple play is a term we coined back in the mid-2000s for a company that not only beats earnings estimates but also tops sales estimates and raises forward guidance.  Triple plays (beat EPS, beat sales, raise guidance) are the “cream of the crop” of earnings season, and stocks that report triple plays have historically reacted very positively to the news.

Along with an increase in the percentage of companies beating EPS estimates, we’ve also seen a sharp rise in earnings triple plays.  Over the last 10 years, 5.12% of the roughly 100,000 earnings reports in our Earnings Explorer database have been triple plays.  So far this earnings season, 15.21% of all earnings reports have been triple plays!

Given the sharp rise in the number of triple plays this earnings season, the normal share-price jump that usually accompanies the report has just not materialized.  Below is a snapshot we took using our Earnings Explorer that provides a summary of all earnings triple plays seen over the last ten years.  During this span, we’ve seen 5,159 earnings triple plays since May 2011, and these triple plays have averaged a one-day gain of 5.25% in reaction to the news.  A one-day gain of 5.25% is nothing to sneeze at, but it’s to be expected (normally) when a company reports a strong quarter and raises forward guidance.

If we only look at earnings triple plays so far this earnings season, however, we see that they’re hardly gaining at all in reaction to the strong report.  The 148 triple plays seen so far this season since April 12th have averaged a one-day gain of just 1.61%.  That’s less than a third of the usual gain seen for triple plays.  Similar to the commentary above around earnings beats, until we see the number of triple plays drop back down to more normal levels, investors will likely continue to shrug at them.  Our Earnings Explorer is an excellent resource that’s available with a Bespoke Institutional membership.  You can start using it today with a two-week trial.

Glancing across the ETFs tracking the stock markets of the 23 countries in our Global Macro Dashboard, broadly there has been some downside mean reversion in the past week.  Whereas all but three countries were over one standard deviation above their 50-DMAs last week, today that number has been roughly cut in half with only 11 countries still overbought. Many of those today are even sitting on the cusp of falling out of overbought territory. The top-performing country in the month of April was Taiwan (EWT), but over the past five days, it has been the worst performer of the group resulting in one of the biggest moves within respective trading ranges.  EWT is now in neutral territory compared to extreme overbought levels last week.  Another APAC country to have seen a massive move in its trading range was Malaysia (EWM). EWM fell from overbought levels all the way through its 50-DMA to oversold territory.

Elsewhere in the region, two other notable countries are India (INDA) and Japan (EWJ). As we noted in last week’s Bespoke Report,  there were very few losers across asset classes in April, but two exceptions were India and Japan which fell 2.75% and 1.61%, respectively.  As such, these were the two worst-performing country ETFs in April.  While INDA was the worst performer last month, in the past week it is outperforming the rest of the world with a 30 bps gain.  That compares to a 1.14% average loss across all 23 countries.  That is also far better than the 1.48% average decline for emerging market countries.

The major factor in the weakness in Indian equities recently has been the deteriorated COVID situation in the country. As shown below, new COVID cases per day per million bottomed in mid-February but have grown exponentially ever since.  Currently, new cases per day per million people are running at a pandemic high of 276.2. Interestingly, that upswing in cases coincided with the equity market stalling out and entering a short-term downtrend. Recently, case counts continue to grow albeit that growth rate has slowed a bit.  Hand in hand with that slowdown, INDA has begun to turn higher and has broken the downtrend that has been in place since the March 11th 52-week high. Today, it is trading 1.76% higher and is even testing its 50-DMA from below.  In both cases, those small reversals in trends are welcome signs but there is still plenty of room left for improvement.  Click here to view Bespoke’s premium membership options for our best research available.

Thematic ETFs like those centered around clean energy and IPOs were some of the biggest winners in the ETF space in 2020, but 2021 has been the polar opposite for these same names. From the start to finish of 2020 the Invesco Solar ETF (TAN) rallied 233.64% while the broader iShares Global Clean Energy ETF (ICLN) also gained an impressive 140%. This year, though, both have been under pressure falling 25.3% and 22.1%, respectively. The worst of those declines happened in February whereas most of the time since early March has seen them stuck in a bit of consolidation.  At the end of April, there were unsuccessful attempts to break back out above their 50-DMAs, and the subsequent legs lower off of those moving averages has led to breaks below the longer-term 200-DMAs this week.

While not in the clean energy space, the Renaissance IPO ETF (IPO) has traded similarly. After more than doubling in 2020, IPO has dropped 9.13% year to date and is also moving below its 200-DMA today.  Cathie Wood’s popular ARK Innovation ETF (ARKK) has fallen a similar 9.31% this year after rallying almost 150% last year.  While it hasn’t closed below it yet, it too is testing its 200-DMA in the wake of a recent failed attempt at moving back above its 50-DMA.  For each of these ETFs, this week is marking the first close below or meaningful tests of their 200-DMAs in almost a year.  Click here to view Bespoke’s premium membership options for our best research available.