As equities have continued to trend higher in the past week, sentiment has modestly improved across various indicators. Overall, sentiment remains in favor of bulls but not to any sort of extreme. For starters, the most recent reading of the National Association of Active Investment Managers’ (NAAIM) Exposure Index rose to the highest level since mid-June. Meanwhile, the Investors Intelligence survey of equity newsletter writers saw bullish sentiment rise to 56.4%, the highest in a month, and bearish sentiment fall to 15.9%, the lowest in a month. The AAII’s weekly survey saw similar results. The reading on bullish sentiment rose 0.9 percentage points to 37% this week.  That is the highest level since the week of July 8th, but that is still a percentage point below the historical average and is also below most readings observed this year.

While bullish sentiment was higher, bearish sentiment was little changed falling just 0.2 percentage points to 31.5%.  Pulling back only slightly, bearish sentiment continues to be elevated relative to the past several months’ readings. It is currently ~1 percentage point above the historical average.

The moves in bullish and bearish sentiment mean the bull-bear spread rose slightly in favor of bulls.  The spread rose from 4.4 last week to 5.5 this week.

Neutral sentiment matched bearish sentiment at 31.5%.  That was down slightly from 32.2% last week and is right back in line with the historical average.  Click here to view Bespoke’s premium membership options.

Initial jobless claims matched expectations at 375K this week. That is a 12K decline from last week’s upwardly revised level of 387K (originally 385K) while also marking the third week in a row in which initial claims have fallen.  Additionally, that brings claims to the lowest level since the start of the pandemic.

Taking into account both unadjusted regular state and pandemic unemployment assistance (PUA) programs, claims were actually slightly higher this week.  Combined claims rose from 420.13K to 425.07K.  Albeit higher, that is still the second-lowest level of the pandemic period. The slight increase was entirely a result of PUA claims which rose by nearly 10K. Most of that increase was on account of a 6K increase in Michigan. Meanwhile, non-seasonally adjusted regular state claims continue to have seasonal tailwinds, falling by 5.2K.

Continuing claims showed further improvement falling to 2.866 million at the end of July versus 2.98 million the prior week.  With back-to-back declines, continuing claims are once again at pandemic lows.  Florida, Texas, and New Jersey were the states to report the largest declines.

Including all programs adds another week’s lag to continuing claims meaning the most recent print is through the week of July 23rd. Total combined claims fell to 12.07 million that week with sizable declines across programs.  Pandemic Emergency Unemployment Compensation (PEUC) saw the largest decline with claims falling 393.6K that week, and PUA and regular state claims were also not far behind with over 300K declines of their own. Those offset a 159.2K increase from the extended benefits program. Overall, while continuing claims broadly continue to trend lower, there are still 8.7 million claims between pandemic programs (PUA and PEUC) now with less than a month until the programs’ expiration.  Click here to view Bespoke’s premium membership options.

In today’s Morning Lineup, we noted the charts of the sector ETFs for Materials (XLB), Financials (XLF), and Industrials (XLI) and how each sector has begun to catch a bid this month. Of the eleven sectors, Financials are up the most in August with just under a 6% gain.  Utilities are actually the runner-up with a 3.09% gain in spite of the coincident uptick in rates this month.  Materials and Industrials are also up nicely with gains of 2.42% and 1.55%, respectively.  Shown another way, below are relative strength charts of each of these sectors from our Sector Snapshot. When these lines are rising, they indicate the sector is outperforming the broader market and vice versa when the line is trending lower.  Recently, each of these sectors have seen sharp turns higher after having been in downtrends for most of the spring and summer. In the case of Financials and Materials, those downtrends actually broke multi-month uptrends that had been in place since late 2020.  The bounce in the relative strength line of Industrials, on the other hand, comes as it tested the past year’s uptrend line.  Click here to view Bespoke’s premium membership options.