Heading into today’s session, the S&P 500 was little changed over the past week. But even if equity prices are not reflecting it, the decimation of the crude oil market has put a dent in investor sentiment.  In this week’s AAII survey, only 24.86% of investors responded as bullish.  That is the lowest level of bullish sentiment since the COVID-19 outbreak began! The last time the bullish reading was this low or lower was on October 10th when it was 20.31%.  The 10 percentage point decline from last week’s reading of 34.86% was also the largest weekly decline since February 27th.

Whereas bullish sentiment fell, bearish sentiment rose to 50%.  This is the first time since the final week of March that at least half of respondents reported as bearish, and it was the biggest jump in bullish sentiment since March 12th. The inverse moves of bullish and bearish sentiment this week has also sent the bull-bear spread to its widest level in favor of bears since last August. Today, the bull-bear spread is at -25.14. At its widest level back in early August is was slightly wider at -26.54. This week also marked the first time since April of 2013 that bearish sentiment doubled bullish sentiment.

Recently, neutral sentiment has been extremely muted. At its low in mid-March, neutral sentiment was only at 14.5%.  Every week since then, neutral sentiment has ground higher reaching over 25% this week for the first time since late February.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

A massive number of people continue to file jobless claims with another 4.427 million initial jobless claims coming in this week.  Similar to last week, the good news is that was less than forecasts of 4.5 million and the 4.427 million number is a drop from the 5.237 million last week. In fact, that 810K decline is the second largest on record behind last week’s 1.378 million drop. Additionally, this week was the lowest print since the first claims number above 1 million for the week of March 20th.  The bad news is that regardless of the somewhat slowed pace on initial jobless claims, the numbers remain at historically unprecedented levels.

Before seasonal adjustment, this week saw 4.267 million claims filed compared to 4.965 million last week.  Again, while that number is still extremely high, the past two weeks have marked a significant deceleration.

While the level of claims are off of their records from a few weeks ago, the moving average put in a new record high today.  The moving average has continued to grind higher reaching 5.786 million.  Granted, that 280K increase from last week was the smallest since the surge in claims began in late March.

As previously mentioned, the pace of initial jobless claims have slowed for the time being, but that does not take away from the massive number of people reporting as jobless.  In total, since the beginning of March, just under 27 million Americans, or roughly 8% of the population, have filed initial jobless claims (seasonally adjusted).  Although they are released with a one week lag to initial jobless claims, continuing claims this week printed at their highest level on record at 15.976 million.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

The US (S&P 500) has managed to quickly re-enter a bull market after the 33.92% decline from 2/19 to 3/23 that brought the post-Financial Crisis bull market to an end. Today, the S&P is now 17.45% below the 2/19 high after rallying nearly 25% since 3/23.  As shown in the table below, of the 23 countries in our Global Macro Dashboard, that is the third best rally off of its respective low. Only South Africa and South Korea have rallied more off of their 2020 low on 3/19; a few days before the US bottom.  Around half of these countries found a bottom on the same day as the US, 3/23, while the rest were a few days earlier.  Italy was the first to bottom on March 12th.  But as for the 2020 equity market highs, the US peaked alongside Canada and multiple European countries later than other global economies. For example, South Korea, South Africa, Taiwan, Korea, Russia, Japan, the UK, and Hong Kong all peaked back in January.

As for longer term trends, below we provide 10-year price charts (in local currency) of the major stock market indices for the countries listed in the table above.   The Covid market crash in the first quarter broke significant long term uptrend channels that were in place for the majority of countries.  The only countries that have managed to somewhat hold onto long-term uptrends are China, Hong Kong, Norway, and Switzerland.  For a handful of countries like Malaysia, Singapore, South Korea, and Spain, their equity markets fell to around the lowest levels of the past decade.

In terms of bounce backs, every country has rallied off of its lows, but Mexico is up the least at just 2.8%.  So far the bounce backs hardly register on the long-term price charts for most countries, but there are some where the bounce has moved price back inside the long-term uptrend channel that had been in place prior to the crash.  Norway, Russia, Sweden, Switzerland, and Taiwan are examples of countries where this is the case.  Start a two-week free trial to Bespoke Institutional to access our Global Macro Dashboard and much more.

The United States Oil Fund (USO) has had a rough few weeks. With oil at the front of the WTI curve collapsing as far as massively negative prices on Wednesday, the ETF’s asset values decline as it sells near-term crude to purchase out-month crude. This “contango” in the crude curve is one reason that USO has so persistently returned less than the actual spot price of oil; when the curve is in contango as it has been for the last few years, it has persistently cost money to own oil exposure via USO. In order to avoid negative prices, the ETF’s issuer has spread out purchases across the front few months of the crude curve, which should help if June contracts trade negative at some point like May’s did this week. But investors are still paying a cost for direct crude exposure because the whole crude curve is in contango. That hasn’t stopped individual investors from trying, though: as shown below the last week has seen by far and away the biggest inflows into USO on record!

We should also note that the closing price of the ETF yesterday was more than 30% above the value of the futures it holds. Because price has dropped while flows surge, the fund’s assets have surged and share count has exploded, requiring an expanded authorization for new shares. That takes time to register, and as a result yesterday USO had to suspend creation of new shares. As a result, shares closed more than 35% above the value of the assets in the fund!

That’s bad news for the billions of new dollars of capital investors have thrown at USO in recent days. As shown below, as-of the flows yesterday, the prior five days of flows (assuming net purchases paid roughly the volume-weighted average price for the day) are now sitting on losses of more than $600mm. When combined with the huge net asset value premium which can be expected to eventually compress, we cannot strongly enough urge investors take caution when investing in this particular oil market vehicle.  Start a two-week free trial to Bespoke Institutional to access our Chart Scanner, custom screens, and much more.

The collapse in oil prices has sent ETFs like the United States Oil Fund (USO) scrambling to quickly adapt as the ETF plummets to record lows.  While these ETFs have plummetted, inverse ETFs in the space have been doing great.  Products like the DB Crude Oil Double Short ETN (DTO) and ProShares UltraShort Crude Oil ETF (SCO)—which are more short term focused and track the inverse performance of crude oil (when crude is down, these products move higher and vice versa)—have soared this year.  As shown in the charts below, the past month’s volatility has made the charts of DTO and SCO fairly messy, but both had their best days ever on Tuesday gaining 50.1% and 52.2%, respectively. Volumes were also huge at well over 300% of their 50-day averages for both. For DTO, which is the more thinly traded of the two, yesterday and Monday’s rise were a clear and massive break above the prior highs from mid to late March. Meanwhile, even though yesterday’s close was a new high, SCO actually saw higher intraday highs back on March 18th.

Obviously, given their nature of seeking to double the volatility of crude oil moves, these inverse ETFs will see much larger performance numbers, whether those be positive or negative than the more vanilla USO. Regardless, given the novelty of the current situation around oil, performance numbers all around are huge. For example, in terms of YTD performance in 2020, DTO is up nearly 500% as of today. At yesterday’s close, it was up even more at 527%! As for the more popular SCO, the ETF is up over 300% YTD. Meanwhile, the main crude oil ETF (USO) has been cut by more than three quarters since the start of the year. Start a two-week free trial to Bespoke Institutional to access our interactive tools including a screen of inverse and leveraged ETFs.

While consumers staying home have not had much of a chance to enjoy the decline in gas prices, the decline has been relentless.  The last time the national average price of a gallon of gas increased was on February 22nd.  That’s 59 days ago.  The chart below shows historical streaks where the national average price of gasoline did not show a day/day increase.  At 59 days, the current streak is the fourth-longest on record dating back to 2005.  The longest streak ended at 123 days in January 2015, while the next two ended at just under 90 days.

With the current streak of days without an increase at just 59 days, it sure doesn’t seem extreme relative to those other periods.  So what gives?  Even though the current streak is much shorter than the three longest streaks, this one is perhaps even more extreme given the time of year when it is occurring.  Looking at the chart above, each of the three longest streaks on record all ended in December and January. The blue line in the chart below shows the seasonality of gas prices throughout the year, and the weakest time of year is typically from the beginning of December through year-end.  Therefore, it shouldn’t be too much of a surprise that the three longest streaks on record took place during that time of year.  The current streak, however, has occurred during a time of year where prices at the pump are normally at their strongest.  In fact, this is the first time since 2005 that gas prices have ever been down on a YTD basis at this time of year.  In other words, this current streak of declines is rather extraordinary.  Start a two-week free trial to Bespoke Premium to access our full range of research and interactive tools.