In the past three weeks, sentiment has taken a big hit with the percentage of respondents to the AAII survey reporting as bullish falling 21.3 percentage points.  That is the biggest three-week decline since March 2018 when bullish sentiment fell a slightly larger 22.12 percentage points. With 26.7% of respondents bullish, market optimism is at the lowest level since the first week of October when 25.5% of respondents reported as bullish.

That big drop in bullish sentiment also means bearish sentiment has rocketed higher to 42.4%.  That is the highest reading in bearish sentiment since the first week of October of last year.  Similar to bullish sentiment, since the recent low of 24% three weeks ago, the 18.4 percentage point increase was the largest three-week uptick since March 2020.

Due to the big inverse moves in bullish and bearish sentiment, the bull-bear spread has also collapsed from double-digit positive readings only two weeks ago down to the bottom decile of its historical range.  At -15.7, the bull-bear spread is now at the lowest level since September 16th.

Even though bullish and bearish sentiments have seen big shifts, the percentage of respondents reporting as neutral has gone little changed. There was only a half percentage point increase this week up to 31% which leaves neutral sentiment roughly in line with its historical average (31.43%).

The AAII readings were not the only sentiment indicators that have collapsed.  The NAAIM Exposure index has fallen to 87.87 this week; the first sub-100 reading in five weeks.  Meanwhile, the Investors Intelligence (II) survey saw the highest reading in bearish sentiment since May 2020. Combined with a decline in bullish sentiment, the bull-bear spread has hit the lowest level since October 20th.  In the chart below, we have created a sentiment composite taking the z-scores of the current readings across each of these three surveys (AAII and II bull-bear spreads and the NAAIM index).  This shows that sentiment readings have gone from a historically elevated reading that is a full standard deviation above the historical norm all the way back to zero in three weeks’ time.  In other words, sentiment has made a sharp pessimistic turn in the past few weeks, but current readings are overall not exactly bearish to any extreme degree. Click here to view Bespoke’s premium membership options.

Last week saw the first sub-200K seasonally adjusted initial jobless claims print in over 50 years. This week, that number was revised even lower to 194K. While that reading sets a historic low, the most recent data for the week ending November 27th, however, saw claims rise by 28K to 222K.  Although that marks the biggest one-week uptick in claims since July, the level of claims remains handily below pandemic levels and below the level of 256K from right before the COVID surge that took claims into the millions.

Last week, seasonal adjustments gave a significant boost to jobless claims as NSA claims actually came in at 253.5K versus the 194K adjusted reading.  This week, NSA claims were the lower of the two coming in at 211.9K which is the lowest level since the first week of March 2020. With claims declining further, they continue to buck the seasonal trend.  As shown below, the current week of the year has consistently seen a lower reading in NSA claims than the prior week as was the case in the most recent print.  Currently, claims are at a new low for the year whereas historically they have been on the rise for several weeks now.

Lagged one week to initial claims, continuing claims also hit a pandemic low for the first sub-2 million print since March 2020. The 107K decline from last week’s revised number was the biggest one-week decline since October 22nd.

Including all programs delays the data by another week making the most recent reading through the week of November 12th. That week saw a slight uptick in claims led by gains in regular state programs.  Pandemic era programs are largely unwound by now, but there is still a significant presence with over 300K claims coming from the PUA and PEUC programs. Click here to view Bespoke’s premium membership options.

One theme popping in and out of recent price action has been the underperformance of stocks with higher valuations. That was once again apparent today.  In the chart below, we break down the Russell 3,000 into equal-sized deciles (10 groups) based on their price to sales ratios (sorted from those with the lowest ratio to the highest). As shown, the stocks with the highest P/S ratios significantly underperformed today with the decile of the most elevated ratios falling over 4% on average.  The ninth decile similarly experienced outsized declines of 2.85% compared to the average stock in the index which fell 1.6% today.

Turning to another common valuation metric, the P/E ratio, the dynamic is just as evident.  In the chart below we again broke the Russell 3,000 into equal-sized deciles except we separated out all stocks with negative earnings as well.  Nearly a third of the index has a negative P/E ratio at this point!  As shown, the stocks with negative earnings (no P/E ratio) got absolutely crushed today with an average drop of 3.36%. Click here to view Bespoke’s premium membership options.