Russell 2000 2% Spreads Between Intraday Highs and Lows
The Russell 2000 tracking ETF (IWM) has been particularly volatile as of late, and as of yesterday’s close, there have been seven straight trading days in which there was a 2% spread between the intraday high and low. A streak of seven had not been reached since July 2020 (7/2), and the current streak is tied for the longest since 6/22/2020. During the COVID correction, this streak of 2% intraday ranges actually reached 41 days, which was then followed by two streaks of nine trading days in the spring and summer. While the Russell 2000 is up sharply again today, because it gapped higher, the streak is likely to end at seven trading days unless IWM trades below $221.45 or above $226.64.
IWM has only had a streak of 41 or more three times since IWM began trading in late May of 2000. The longest streak came during the financial crisis from late 2008 through early 2009 when 67 consecutive trading days saw at least a 2% spread between IWM’s intraday highs and lows. Although the market currently appears quite volatile, it is hardy unprecedented, and IWM has experienced periods where it has undergone significant volatility for much longer periods than the current streak. Click here to view Bespoke’s premium membership options.
Bespoke’s Morning Lineup – 12/7/21 – Strong Start With Nasdaq in the Lead
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“I would say that financial markets are very inefficient, and capable of extremes of being completely dysfunctional.” – Jeremy Grantham
Forget about a ‘turnaround’ for now, this Tuesday is looking more like a terrific one as US futures, led by the Nasdaq, are sharply higher following through on Monday’s rally. The opening bell hasn’t even rung yet, though, so there’s plenty of time left in the day. That said, early indications are pointing higher with risk assets all trading higher, although long-term Treasury yields are moving much less higher than you would expect given the move in equity futures. Crypto assets are also in rally mode this morning as bitcoin is back above $50K, and ether is back above its 50-day moving average.
In economic data, the revision to Non-Farm Productivity was lower than expected (-5.2% vs -4.7%) while Unit Labor Costs increased more than expected (9.6% vs 8.3%).
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 Russell is indicated to open more than 1.5% higher this morning continuing what has been a volatile run for the small-cap benchmark index. So far during this sell-off from a false breakout, IWM has managed to stay within its prior trading range after falling below both its 50 and 200-day moving averages. In addition to the consistency of much higher than average volume during the last seven trading days, IWM has also had an intraday trading range of more than 2% and averaging more than 3.3% during that span. The last time IWM experienced a run of 2%+ intraday ranges for seven consecutive trading days was back in July 2020.
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Daily Sector Snapshot — 12/6/21
El Salvador Hurt By Bitcoin
On 6/5, El Salvador passed a bill that made Bitcoin legal tender in the nation effective 9/17. Since passing the bill, the country hosted a Bitcoin Week, which generated excitement from the crypto community in which he and political/industry leaders spoke about the logistics and benefits of legalizing Bitcoin as a legal tender. During Bitcoin week, El Salvador’s leadership unveiled its plans for ‘Bitcoin City’, which will be funded by issuing a $1 billion Bitcoin Bond. The city (and the Bitcoin mining inside of it) will be powered by geothermal power generated from a nearby Volcano.
Over the weekend, El Salvador’s President, Nayib Bukele took to Twitter, stating that “El Salvador bought the dip” and added that he trades cryptocurrency for his country through his phone. Although Bitcoin enthusiasts view this adoption as revolutionary, the investing community has taken a different view. Since the country officially announced that Bitcoin would become legal tender, its bonds have declined in value. As one example, the price of the country’s 7.65% bonds maturing in June 2035 has plummeted by 37.5%. Investors are wary of the idea of tying a country’s assets and balance of payments to an extremely volatile asset, and that has caused the yield on the bond shown below to rise nearly over 600 bps from under 8% to over 14% now.
The cost of insuring against default for El Salvador’s debt (credit default swaps) has risen significantly since the nation legalized Bitcoin as legal tender, and CDS spreads have more than doubled over the period. Will this dissuade other countries from using cryptocurrencies as legal tender? Click here to view Bespoke’s premium membership options.
Chart of the Day – Disrupted Software
Bespoke’s Morning Lineup – 12/6/21 – Nasdaq Lags
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“I would say that financial markets are very inefficient, and capable of extremes of being completely dysfunctional.” – Jeremy Grantham
US equity futures are tentatively higher this morning with leadership in the Dow while the Nasdaq continues to lag. The economic calendar is empty today, but investors already have an eye out for Friday’s CPI report. Omicron continues to be a concern, and while there’s still a lot more we don’t know than we do know about the latest strain, reports continue to suggest that despite the higher transmissibility, its impact has not been nearly as harsh. In the crypto space, bitcoin has been relatively stable since Sunday following a sharp decline Friday night into Saturday morning.
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.
While companies valued at high multiples to revenues have been hit hard since the emergence of the omicron variant and the FOMC’s hawkish pivot just after Thanksgiving, there’s been a decent amount of disparity in performance among international markets with developed markets falling in the last week while emerging markets actually eked out gains. As shown below in the snapshot of international regional ETFs from our Trend Analyzer, the worst-performing ETF of the group was the MSCI All Country World (ACWI) which fell just over 1%. Moving down the list, at the bottom, the lone ETFs that were positive on the week were related to Emerging Markets. US equities were also a drag on performance last week. While the ACWI was down just over 1%, CWI, which is the MSCI All Country World ex-US Index was only down -0.07% on the week.
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Bespoke Brunch Reads: 12/5/21
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Crime
A Michigan woman tried to hire an assassin online at RentAHitman.com. Now, she’s going to prison. by Jonathan Edwards (WaPo)
A website run by a North Carolina man has served as a honeypot for those with murderous intentions for over a decade, with a Michigan woman angry at her ex-husband the latest would-be killer to be ensnared by law enforcement after requesting information from the site. [Link; soft paywall]
Hiding in plain sight: How one of the country’s most-wanted fugitives led a quiet life in Lynnfield by Emily Sweeney (Boston Globe)
A 1969 bank robbery was never solved after a teller walked out with the equivalent of $1.6mm in today’s dollars, slipping into obscurity as a resident of a Boston suburb. [Link; soft paywall]
Metaverse Madness
A plot of virtual land that went for $4.3 million in The Sandbox is the most expensive metaverse property sale ever by Carla Mozée (Business Insider)
Republic Realm, a firm focused on the purchase and development of digital real estate and assets, purchased space in the Sandbox metaverse for $4.3mm this week. We wish we knew what that meant, exactly. [Link]
Metaverse Real Estate Piles Up Record Sales in Sandbox and Other Virtual Realms by Konrad Putzier (WSJ)
This explainer on the process of digital land sales offers some further explanation as to what exactly is going on with the process, but we still have many questions, not least of which being how the supply of land is constrained. [Link; paywall]
Macy’s Turns Thanksgiving Day Parade Balloons Into NFTs by Joseph Pisani (WSJ)
Just about everything is being turned into an NFT these days, with the iconic balloons floating above Manhattan the latest unique items being assigned an arbitrary value and slapped on the blockchain. [Link; paywall]
History
America’s First Banned Book Really Ticked Off the Plymouth Puritans by Matthew Taub (Atlas Obscura/Pocket)
One of the country’s first banned books was a jeremiad against the leadership of Puritan New England’s early colonial management. The 1637 tome wasn’t the only thing its author did to enrage the other colonists. [Link]
Autos
Ford teases a new cable capable of charging electric cars in 5 minutes by Mark Wilson (Fast Company)
Ford (F) is researching a new cable that would allow a massive dump of electricity into a vehicle battery and turn a charging stop into the same layover time as a gas station visit in an ICE vehicle. [Link]
Auto chip shortage shows new sign of easing as inventories rise by Ryosuke Eguchi (Nikkei Asia)
Semiconductors which find their way into new cars are finally becoming easier to lay hands on as major suppliers reported higher inventories for the first time in at least 9 months during the month of September. [Link]
Extreme Biology
Microsoft Makes Breakthrough in the Quest to Use DNA as Data Storage by Phillip Tracy (Gizmodo)
DNA is a remarkably dense storage medium, with every movie ever made able to fit in a volume the size of a sugar cube. It’ll be some time before DNA-based memory storage is viable commercially but researchers are getting closer to that holy grail of cheap data warehousing. [Link]
World’s vast networks of underground fungi to be mapped for first time by Fiona Harvey (The Guardian)
Huge networks of underground plants in the same family as mushrooms are a critical support for biological systems like forests. A new initiative seeks to understand and map the networks around the world. [Link]
Labor Markets
The US is facing an unlikely shortage: Santas. by Sarah Al-Arshani (Business Insider)
Lots of people are looking for Santa, with inquiries to hiresanta.com surging 121% this year compared to the last two years. At the same time, many Santas are retiring, and others are worried about the pandemic; still more have passed away thanks to COVID. [Link]
North Carolina’s Furniture Hub Is Booming. What Comes Next? by Jeanna Smialek (NYT)
The surge in demand for furniture fueled by the pandemic is proving a temporary boon for furniture makers in North Carolina, but factories fear orders will drop off and as a result are hesitant to ramp up hiring and capacity expansion. [Link]
Numbers
Today’s date is rare: It reads the same way forward, backward and upside down by Jay Cannon (USAToday)
Not only was the 2nd of December a palindrome, reading the date also reads the same upside down. Another such palindrome date is due until March 2nd of 2030. [Link]
Mining Bitcoin with pencil and paper: 0.67 hashes per day by Ken Shirriff (Righto)
There is some very complicated math underpinning cryptocurrencies like Bitcoin, but that doesn’t mean it can’t still be done by hand. [Link]
Easy Marks
Notable Bets: November among worst months ever for betting public by David Purdum (ESPN)
Amidst an explosion of gambling legalization and betting apps, 60% of November NFL games had seen underdogs cover the spread, leading to a historic route among bettors. [Link]
Stock Funds Took in More Cash in 2021 Than Two Decades Combined by Ksenia Glouchko (Bloomberg)
Nearly $1trn has followed into ETF and mutual funds this year, more than each of the last 19 years…combined! [Link; soft paywall]
COVID
Do childhood colds help the body respond to COVID? by Rachel Brazil (Nature)
Children who are exposed to a given strain of flu are better at fighting that strain off the rest of their lives. It’s an open question whether the same process will play out with COVID. [Link]
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Have a great weekend!
Stocks Down 2%+ Every Day This Week
This week was particularly volatile for the stock market with the S&P 500 seeing 1%+ moves every trading day from Monday through Thursday and then a decline of close to 1% on Friday. We came across Etsy (ETSY) on Friday when it was down 7% on the day, and then we noticed that the stock had been down 2% or more on every trading day this week. In wondering how many other stocks were down 2%+ every day this week, we found a total of 12, and they’re all listed below. Along with Etsy, the other notable losers include Affirm (AFRM), Oatly (OTLY), and Clear Secure (YOU). Affirm’s worst day was Wednesday when it fell 8%, but it fell another 5.7% on Friday to close the week down 21.7%. Oatly began the week down 3.7% on Monday and down 3.9% Tuesday before falling 6.1% on Wednesday. Smaller declines of 2% on Thursday and 2.8% on Friday left OTLY only down 17.3% for the week. That’s relatively good compared to Kirkland’s (KIRK), which fell 39.1% on the week after losing a quarter of its value on Thursday and then another 8.5% on Friday.
The Bespoke Report Newsletter – 12/3/21
This week’s Bespoke Report newsletter is now available for members.
Man The Barricades! There’s been a revolution in markets and policy since mid-November as policymakers decide to institute regime change with respect to their view of inflation. As a result, markets are diving for cover as bullets (falling commodity prices), bricks (a flattening yield curve), and bats (hawkish talk about the policy outlook) fly. Equities this week broadly reflected this sentiment: stocks rightly plunged on the news from Powell and suffered a number of sharp drops throughout the trading week. Overall the S&P 500 was down 1.2% after a 2.2% drop last week but did so with huge selling across stocks that are most sensitive to a hawkish Fed: hypergrowth, high valuation, recent IPO or SPAC, and related names got hammered as we will discuss later. Commodities markets also buckled as the Bloomberg Commodities Index fell for a third week running; oil and copper are now below their 200-DMA, natural gas posted its worst 4 day run in a quarter century, and grains lurched 4% lower in two sessions earlier this week. Even larger warning signals are coming from the bond market, where yields reacted to a pretty good (if messy) jobs report by plunging 10 bps at the 10y point of the curve; the 2s10s yield curve is now trading at the lowest levels since last December and suffered its biggest four session flattening move in a decade. We discuss all of this and more in this week’s Bespoke Report.
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