The weekly AAII survey released this morning showed the first downtick in bullish sentiment (41.28% down to 35.09%) in three weeks. Given the weakness in the broader equity market, the move lower in bullish sentiment is completely understandable.
As equity prices have fallen over the past week, bearish sentiment rose to 35.96%. This week’s bearish reading is right around what we saw for most of October, so much like bullish sentiment, it is right within it recent range.
Neutral sentiment moved only slightly higher this week, as shown in the chart below.
This week’s report on jobless claims was slightly higher than expected coming in at a level of 216K versus estimates for 214K, but what has been pretty remarkable is how consistent claims have been over the last four weeks. On 10/19, claims came in at 216K, the next week they were 215K, the week after they fell another 1K to 214K, and now this week they are back at 216K. It’s also important to keep in mind that even though claims were higher than expected, they remain low on a historical basis with a record 193 straight weeks at or below 300K, 58 straight weeks at or below 250K, and 19 straight weeks at or below 225K.
With claims barely budging over the last month, the four-week moving average came in right at 215.25K, which is 9.25K above the cycle low of 206K we saw back in mid-September.
On a non-seasonally adjusted (NSA) basis, jobless claims came in at 230.6K. While this is more than 120K below the average of 353.4K for the current week of the year dating back to 2000, in this same week two years ago, claims were actually lower.
Following further declines yesterday, every major US Index ETF in our Trend Analyzer tool is once again oversold. The Micro-Cap ETF (IWC) and the Nasdaq (QQQ) have led the way down over the past week, falling 5.67% and 5.91%, respectively. Ironically, looking at YTD returns, the similarities vanish. IWC is now down the most YTD at 3.51% versus QQQ which is the leader YTD up 6.66%. Regardless, this is still way off of the Nasdaq’s double-digit YTD returns earlier this fall.
In other words, it is harder to keep an optimistic outlook for longer-term trends anymore and this is reflected in the Bespoke Trend scores section of the tool. Currently, only the Dow (DIA) has managed to keep an uptrend through all of the market turmoil. Every other name has left uptrends and is now trending sideways; with IWC and the Russell 2000 (IWM) actually in downtrends.
It’s been one of the busier days in quite some time for economic data, and relative to expectations, it has been a mixed bag. Jobless Claims came in slightly higher than expected, Empire manufacturing was better than expected while Philly missed, Retail Sales were stronger than expected at the headline level, but a bit weaker underneath the surface, and Import and Export Prices both came in higher than expected. All in all, there was nothing here to put in doubt FOMC Chair Powell’s view Wednesday evening that the US economy remains on solid ground.
In terms of individual stock news, Walmart (WMT) concluded earnings season with an earnings beat and is trading higher, while JC Penney (JCP) had disappointing results and is down nearly 10%. Homebuilders are down across the board this morning after KB Home (KBH) lowered guidance last night and is trading down over 10% and dragging the rest of the group lower in the process.
If it feels lately like the market does nothing but go down, well, that’s basically because it’s true. As noted in last night’s Closer report, over the 8 weeks ending October 29th, the percentage of open-close declines was the joint-highest for any period since 1984, with the start and finish of the 2000s bear market and the near depths of the financial crisis the only other periods when stocks declined intraday so frequently. Unfortunately, there’s not a lot to take away from the prior periods in terms of forward returns; one occurred early in a bear market, the other towards the end, and the third right in the middle. What this chart does confirm, though, is how lousy the recent market environment has been for anyone holding equities.
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Every Thursday, Bespoke publishes its “Bespoke 50” list of top growth stocks in the Russell 3,000. Our “Bespoke 50” portfolio is made up of the 50 stocks that fit a proprietary growth screen that we created a number of years ago. Since inception in early 2012, the “Bespoke 50” has beaten the S&P 500 by 77.3 percentage points. Through today, the “Bespoke 50” is up 173.5% since inception versus the S&P 500’s gain of 96.2%. Always remember, though, that past performance is no guarantee of future returns.
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Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
After crude oil’s rough run of late, this week we take a look at how high yield energy spreads have reacted.
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It’s been a long 2018 for bitcoin, but because the price ran up so much towards the end of 2017 and into January, up until this point it stayed off the new low list even after losing more than two-thirds of its value. Partly because of lower numbers falling off and a 10% breakdown in prices today, bitcoin made its first 52-week low of 2018 today. What’s pretty amazing about the chart of bitcoin is how prior to today support at the $6K level was so strong. Once that support failed, though, prices fell fast.
Below is an updated look at our trading range charts for the S&P 500 and its major sectors (Real Estate not included). In each chart, the light blue shading represents the sector’s “normal” trading range, which is one standard deviation above and below the 50-day moving average (white line). The red zone represents overbought territory, which is between one and two standard deviations above the 50-DMA, while the green zone represents oversold territory.
As major indices have switched from trending higher to trending lower over the last two months, stocks are spending a lot more time in oversold territory. For the S&P 500, the index is back into oversold territory after failing right at resistance at its 50-day moving average. The technical set-up for the S&P is not good right now.
The only sectors with positive technicals right now are the two defensive sectors — Consumer Staples and Utilities. That should tell you something. The market is trading like we’re headed for an economic slowdown.