Bespoke’s Morning Lineup – 9/15/20 – Two For Tuesday
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
The light at the end of the tunnel is just the light of an oncoming train.” – Robert Lowell
After a nice rally to start the week, US stocks are looking to rally again today. There’s a decent amount of economic data on the calendar today, and it kicked off with a stronger than expected Empire Manufacturing report for September (17.0 vs 5.5). Besides a reading of 17.2 from July, the was the highest level in the index since the start of 2019.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, economic data in China, trends related to the COVID-19 outbreak, and much more.
While much of the market has been experiencing a bit of a pullback this month, the Dow Transports have bucked the trend and remain right near 52-week highs after a rally of over 75% from the index’s March lows. An example of the index’s strength is the fact that of the eleven S&P 500 stocks that hit 52-week highs on Monday, five of them were from the Transports. A continued move above its recent highs would likely mark the beginning of a longer-term breakout.
On a relative strength basis, the recent strength in the Transports has also broken a downtrend that has been in place for upwards of two years now. What makes the relative strength of the index even more impressive is the fact that of the 20 stocks in the index, six are airlines, and they haven’t contributed much of anything to the index’s rally…yet.
B.I.G. Tips – Triple Plays Striking Out
Daily Sector Snapshot — 9/14/20
Chart of the Day: One Nasdaq 100 Streak Ends, Another One Begins?
Gold and Bitcoin Bounce Off Support
With all the liquidity that has been put into the system, the number of Americans concerned about the dollar’s purchasing power has seen a great deal of inflation. Just last week, legendary investor Stanley Druckenmiller became the latest person to publicly worry about the possibility of double-digit inflation in the coming years. With those types of concerns becoming increasingly mainstream, it’s no wonder that the price of gold remains right near record highs. Despite the recent 5% pullback in prices, gold remains just under $2,000 per ounce after bouncing off support just above $1,900 which is a level that also coincides with its 50-day moving average. Since its high in early August, each bounce off the $1,900 level has been met with a lower high, so until this consolidation phase either breaks above $2,000 or below $1,900, it’s probably best to just sit tight.
Bitcoin has also been trading in somewhat of a consolidation pattern after breaking above resistance at $10,000 in late July. While bitcoin’s price rallied above $12,000 just as gold was peaking, its price pulled back in early September as risk assets corrected. However, just as $10,000 provided stiff resistance on the way up for the past year, the first test of $10,000 to the downside has held up so far. Investors increasingly view bitcoin as the digital version of gold, so by that logic, any bullish argument for gold should apply to bitcoin as well. Like what you see? Make sure to sign up for a free trial to unlock all of Bespoke’s analysis and interactive tools.
No New Highs For High Yield
The S&P 500 may have broken out above its February highs back in late August and still remains above February’s highs after today’s advance, but performance in the high yield market hasn’t been quite as strong. The chart below shows the B of A High Yield Master Index on a total return basis over the last 12 months. The index saw its peak back on 2/20 just a day after the S&P 500’s first-half high. Those gains quickly turned into a decline of nearly 20% before the markets started to recover. On September 2nd, just as the S&P 500 was getting off to a strong September start, the total return of the High Yield Master Index came just shy of topping its 2/20 high, but as markets started to swoon, the high yield market also suffered and prices pulled back.
While total return levels in the high yield market are important to track, spreads in high yield debt relative to treasuries provide a more useful barometer. In this respect, the high yield market has still come up short. The chart below compares spreads in the high yield market relative to treasuries over the last year. Remember, high yield spreads tend to move in the opposite direction as equities. When stocks rise, spreads tend to fall and vice versa. Back in January, high yield spreads bottomed out at 339 basis points (bps) nearly a full month before the S&P 500 peaked. They subsequently widened out to 1,087 bps on 3/23 which was the same day the S&P 500 bottomed. Since then, spreads have been more than cut in half to the current level of 521 bps. That’s an impressive move, but spreads are still nowhere near their prior lows. Like what you see? Make sure to sign up for a free trial to unlock all of Bespoke’s analysis and interactive tools.
Bespoke’s Morning Lineup – 9/14/20 – Second Half Comeback?
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Teachers Open The Doors, But You Must Enter By Yourself.” – Chinese Proverb
The only things many teachers are opening this school year are Zoom sessions as a number of physical schools around the country remain closed. In these situations, there is an even added responsibility for students to take the initiative to ‘enter’ the learning process. If nothing else, it promises to be a major social experiment in the country’s education process as well as in the lives of parents who can’t return to work because their children remain stuck at home.
Equities are in a decent mood to kick off the week as futures are higher on deal news in the tech and health care space. Over in Europe, major benchmarks are on either side of the flatline this morning as ECB officials say they are at the ready to use all means available to increase inflation which in their estimation remains stubbornly low. In Germany, economic forecasters also noted that they don’t expect to see growth return to pre-crisis levels until 2022.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, industrial production in Europe, trends related to the COVID-19 outbreak, and much more.
After a strong first two days to start off the month, September has been pretty much of a straight line lower as the S&P 500 is down over 4% month to date. Weakness in September shouldn’t come as a surprise given the month’s historical record as the worst of the year. What is a bit surprising, though, is that the weakness has come in the first half of the month.
The charts below show the S&P 500’s historical intraday pattern throughout September both going back to 1983 and over the last ten years. In both time periods, the first half of September typically sees gains. Going back to 1983, the S&P 500 has been up marginally through the first half of September while in just the last ten years, the first half of the month has seen an average gain of over 1.5%. It isn’t until the second half when September usually lives up to its reputation. Hopefully, in 2020 September is getting it all out of its system early.
Bespoke Brunch Reads: 9/13/20
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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Pandemic Payoffs
Golf sees huge upswing with women and young adults: ‘You can take your bag full of White Claws’ by Melody Hahm (Yahoo! Finance)
Left for dead by shifting demographics and no taste for the links among younger folks, golf is suddenly getting a massive boon from COVID, with low disease risk and spare capacity for folks to head out and hit some balls. [Link; auto-playing video]
Locked Down in the Ritz-Carlton: Winning the Quarantine Hotel Lottery by Chong Koh Ping (WSJ)
Folks arriving in Singapore must pass a mandatory 14 day quarantine, but the hotel they spend their time at is assigned by lottery. For some, that lottery is a big payoff. [Link; paywall]
Battery Power
Pandemic e-commerce surge spurs race for ‘Tesla-like’ electric delivery vans by Nick Carey (Reuters)
In addition to targeting zero-emissions, last mile logistics companies are also looking for capabilities like autonomous driving and analytics which are already a part of basic Tesla capabilities. [Link]
Why Tesla’s Battery Day Will Actually Live Up to the Hype by Steve LeVine (Medium)
In a couple of weeks, Tesla will host a live webcast “battery day” alongside the company’s shareholders meeting; reading the tea leaves, it’s possible that CEO Elon Musk will announce its battery technology efficiency has improved to cost-parity with gasoline cars. [Link]
Alternative Approaches
To Manage Wildfire, California Looks To What Tribes Have Known All Along by Lauren Sommer (NPR)
Historically, Indigenous people around North America actively used wildfires as a way to manage the biosphere; returning to managed burns could reduce the scale and intensity of fires which have wracked California in recent summers. [Link]
Call police for a woman who is changing clothes in an alley? A new program in Denver sends mental health professionals instead. by Elise Schmelzer (The Denver Post)
A pilot program in Denver that focuses on mental health and social service intervention instead of police presence has led to a successful series of de-escalations rather than arrests and confrontation. [Link]
A $12 Billion Trust Fund Is About to Crack Open for U.K. Teens by Edward Robinson (Bloomberg)
15 years ago the Blair government created a trust fund that included government contributions, market gains, and family contributions to accounts. The first generation of recipients is set to start receiving the money this year, providing a firmer financial footing for all UK young adults. [Link]
Doomed Enterprises
Those boats in Texas paraded at the wrong speed by Brendan Greeley (FTAV)
You might think a boat parade would be a pretty straightforward enterprise, but the physics can get very complicated and very dangerous in a hurry, as was the case in Texas this week. [Link; registration required]
A Gender-Reveal Celebration Is Blamed for a Wildfire. It Isn’t the First Time. by Christina Morales and Allyson Waller (NYT)
A “smoke-generating pyrotechnic device” designed to spew the gender of a baby ignited a fire that consumed thousands of acres near Los Angeles, one of a number of similar incidents in recent years as the trend of over-the-top gender reveals and extreme wildfire conditions have coalesced. [Link; soft paywall]
Social Media
WeChat and TikTok Taking China Censorship Global, Study Says by Jamie Tarabay (Bloomberg)
Chinese social media apps used in the US often censor content deemed sensitive by the Chinese government, one among many reasons that Chinese tech is decoupling from the rest of the world. [Link; soft paywall]
Trading
NYSE Exchanges to Prepare for Potential Move From New Jersey by Stacie Sherman (Bloomberg)
In response to New Jersey’s discussion of a financial transaction tax, NYSE is preparing to move its digital infrastructure across state lines to dodge the tax. [Link; soft paywall]
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Have a great weekend!
The Bespoke Report — Momentum Matters Most
It was a rough week to own stocks as the Nasdaq 100 dragged down the broader US equity market. While the failure to introduce a new bill to continue easing fiscal policy has been ignored by markets for the most part, the breakdown of upward momentum coupled with that policy flop clouds the outlook…even as the economy is improving and the spread of COVID also eases. Broken moving averages and weak technical set-ups don’t mean markets are poised to crash, but the backdrop has gotten worse over the past week. We discuss all these items in detail along with economic data in the US and around the world, low rates in the US, and how the COVID pandemic has impacted Americans in this week’s Bespoke Report.
This week’s Bespoke Report newsletter is now available for members.
To read the report and access everything else Bespoke’s research platform has to offer, start a two-week free trial to one of our three membership levels. You won’t be disappointed!
