B.I.G. Tips – Charts We’re Watching – Year-End 2021
Bespoke’s Morning Lineup – 12/30/21 – Almost There
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Time sometimes passes quite quickly.” – Jimmy Page
Futures are higher but not rising as fast as the number of daily Omicron cases in the United States which has now reached the parabolic stage. Given the light volumes, it’s hard to read too much into this morning’s market moves, so we won’t try to force any narrative to what’s behind the strength. Initial jobless claims came in both below 200K and consensus expectations while continuing claims also experienced a large drop falling to 1.716 mln which is consistent with levels prior to Covid. The last economic release of the year will be the Chicago PMI at 9:45.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
When it comes to small-cap stocks, not all indices tracking the sector are created equal. The chart below compares the performance of the ETFs that track the Russell 2000 (IWM) and the S&P Small Cap 600 (IJR). Early on in 2021, both indices tracked each other very closely, but late in the first quarter, the two ETFs started to diverge and have continued to do so throughout the year. Through yesterday’s close, IJR was up 25.3% YTD while IWM was up just 13.9%. One lesson from 2021, therefore, is that sometimes even picking the right asset class isn’t enough. You also have to pick the right vehicle to put that investment thesis into place.
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Daily Sector Snapshot — 12/29/21
Battered BRICS Breaking Down
In the table below, we show a breakdown of US-listed ETFs for the equity markets of the 23 major global economies that we track in our Global Macro Dashboard. In 2021, the United States’ S&P 500 (SPY) is headed out on top of the world with a year-to-date gain of 27.57%. December alone has been a solid month with a 4.7% gain as SPY reached a 52-week high only a few days ago. That being said, SPY’s MTD gain pales in comparison to Mexico (EWW) which has rallied double digits in December for the 21st best month on record in its history dating back to March 1996. But that has not brought it to a new high. In fact, in addition to the US, only Taiwan (EWT) and Switzerland (EWL) have also hit 52-week highs this month and these two countries also rank as the runner-up and fourth-best performing country ETFs in 2021. At the moment, SPY and EWL are also the most overbought with EWL currently over 2 standard deviations above its 50-DMA. Panning across its peers, most country ETFs are below their own 50-DMAs with many down by at least a full standard deviation, though most have also been rallying this month.
The BRIC countries have been a particular area of weakness for US investors lately. The Brazil (EWZ) and China (MCHI) ETFs have had a rough year with each being cut by around 25%. December in particular has seen sizable declines of 6.67% for MCHI and 5.52% for EWZ, which leaves it at a new 52-week low today. Russia (RSX) has been hit even harder though having declined over 7% month to date. India (INDA) too is lower, granted, it remains up double digits year to date. Click here to view Bespoke’s premium membership options.
Chart of the Day: Limping Towards the Finish Line
IPO Death Cross
The past two years have seen an explosion in new equity issuance in terms of the number of deals, and especially in terms of the dollar value of those deals. According to Bloomberg data, US average monthly issuance has been $23.83 billion over the past year. That is well above any point in the past few decades including the late 1990s. The actual number of stocks hitting the market has also set records this year, surpassing the 1990s peak.
While there has been a huge slug of new issuance, the performance of these names have been lackluster. The Renaissance IPO ETF (IPO) does not necessarily track every new name to hit the market, but it does act as a reasonably good proxy for the space. IPO reached an all-time high early in the year in February, but since then it has generally been rangebound fluctuating around its moving averages. Since the fall, and particularly in the past month and a half, the ETF has taken a significant leg lower. IPO has now fallen over 18% since the October 25th closing high, taking out its moving averages in the process. Today, IPO is setting up for what is typically viewed as a negative technical pattern: the death cross (when a downward sloping 50-DMA falls below a downward sloping 200-DMA).
IPO does not have an extremely extensive history only going back to October 2013, and as such, there is only a small handful of prior examples of other death crosses without another instance in the prior three months. In the table below, we show those past instances. Albeit there is a small sample size, contrary to the name and pattern’s reputation, prior death crosses have generally been followed by decent performance going forward. Click here to view Bespoke’s premium membership options.
Bespoke’s Morning Lineup – 12/29/21 – Quiet Wednesday
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Coaches have to watch for what they don’t want to see and listen to what they don’t want to hear.” – John Madden
After trading with a positive bias overnight, US equity futures have turned lower and are now indicated to open flat to slightly lower. Given the light flow of news and data that is typical of year-end, there isn’t much of a catalyst driving the reversal, although Samsung did announce that it would be adjusting production schedules in China due to an outbreak of the Omicron virus in Xi’an. Any indications of further disruptions to the supply chain because of rising COVID cases would be viewed negatively at the margin by the market even if they are only temporary.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
The S&P 500 is up just under 5% over the last five trading days, and the rally has been led by Consumer Discretionary (thanks mostly to Tesla) and Technology which are both up over 6%. Other sectors that have outperformed the broader market include Energy (+5.75%), Materials (+5.25%), and Industrials (+5.11%). On the downside, four sectors are up less than 4% over the last five trading days, and ironically enough, they are also the only sectors trading more than two standard deviations above their 50-day moving averages as they outperformed the market during the weakness that preceded this latest rally. Even after the big Christmas rally and the fact that the S&P 500 is right near record highs, two sectors – Energy and Financials – are still below their 50-day moving averages while Communication Services is just barely above its 50-day.
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