You Don’t See This Very Often

The chart below is one of several that are included on the second page of our Morning Lineup report each AM.  In it, we show where the S&P 500 is trading relative to its 50-day moving average in terms of standard deviations.  When the blue line is in the light shaded red (or green) area, it indicates that the S&P 500 is trading between one and two standard deviations above (or below) its 50-day moving average and is at levels that are traditionally considered overbought (or oversold).  When the blue line is in the dark red (or green) area, it indicates that the S&P 500 is trading more than two standard deviations above (or below) its 50-day moving average and is at levels that we generally consider to be extremely overbought (or oversold).  When the blue line gets above (or below) the dark red (or green) levels…well, that doesn’t happen very often.

As shown in the upper right portion of the chart below, the S&P 500’s current level of ‘overboughtness’ hasn’t happened at any point in the last year.  Prior to the current rally, the last time we saw similarly overbought levels for the S&P 500 based on this measure was all the way back in 2004!  In other words, kids born the last time the market was this overbought are almost teenagers today!  At this point, we were going to make some lame joke about what songs were popular the last time the S&P 500 was this overbought, but we honestly didn’t even recognize any of them.  Guess it wasn’t a very memorable time for music!

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As mentioned above, the last time the S&P 500 was more overbought than it is now was back in November 2004 following the re-election of George W. Bush.  So how did stocks do after hitting those extreme overbought levels?  Surely, it pulled back, right?  Well, not quite.  The chart below shows the S&P 500 during the year 2004.  In it, we have included red dots to indicate the two days where the S&P 500 closed at a more overbought level than it did yesterday.  While the pace of the advance slowed, the rally kept going through year-end, gaining another 3.9%.  Unlike extremely oversold markets, which tend to see imminent bounces, extreme overbought levels do not always result in an immediate pullback.

S&P 500 2004

 

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Fixed Income Weekly – 2/22/17

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.

In this week’s note, we take a look at the long trend in yields and what it could mean for bond portfolios if it breaks out to the upside…including a numerical example.

Sample

Our Fixed Income Weekly helps investors stay on top of fixed income markets and gain new perspective on the developments in interest rates.  You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes free for the next two weeks!

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ETF Trends: Hedge – 2/22/17

Natural gas continues to get absolutely demolished with UNG falling 10.5% over the last 5 sessions.Spot prices fell 37% from their October high to the November 11 post-election low. Prices then surged 85% to the mid-December high before once again plunging, down 33% over the last 3 months. Oil services, gold miners, and Russia are also down significantly in the past week. Coffee, solar stocks, and Brazil continue to lead the rally among the best performers.

Bespoke provides Bespoke Premium and Bespoke Institutional members with a daily ETF Trends report that highlights proprietary trend and timing scores for more than 200 widely followed ETFs across all asset classes.  If you’re an ETF investor, this daily report is perfect.  Sign up below to access today’s ETF Trends report.

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Bespoke CNBC Appearance (2/22)

Bespoke co-founder Paul Hickey appeared on CNBC’s Closing Bell on Tuesday to discuss the market outlook post earnings season. If you missed it, you can see the segment by clicking the image below.

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DJIA Eight Day Winning Streaks

With another day in the green yesterday, the Dow Jones Industrial Average (DJIA) saw its eighth straight day of gains, making the current streak the longest winning streak for the DJIA since last July’s post-Brexit rally, and just the sixth winning streak of this duration or longer during the current bull market (chart right).  Prior to last July’s nine-day streak, you had to go all the way back to 2013 to find another winning streak of eight or more trading days.

DJIA 8 Days

In today’s Chart of the Day (available to all clients), we took a look at prior eight-day winning streaks for the DJIA to see how the index performed going forward including the odds of the hike continuing to day nine.  The results may surprise you.  If you are interested in seeing the results, start a 14-day free trial below and check it out!

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Bespoke Morning Lineup

Highlights

Bespoke’s Morning Lineup is the top pre-market report on Wall Street.  We cover everything you need to know to get your trading day started, including international market moves and events, post-market and pre-market earnings news, upgrades and downgrades, dividends and splits, economic indicators and estimates, big stock movers, market internals and much more.  It’s all presented in the original and concise format that Bespoke is known for so you can digest lots of information quickly and efficiently.

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The Closer — Peso Intervention, State of Homeownership — 2/21/17

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Looking for deeper insight on global markets and economics?  In tonight’s Closer sent to Bespoke Institutional clients, we take a look at the large intervention announced today by Mexico’s central bank and review annual vacancy and homeownership rates by state.

Sample

The Closer is one of our most popular reports, and you can see it and everything else Bespoke publishes by starting a no-obligation 14-day free trial to our research!

Oil Volatility Plummets

Much has been said about the drop in volatility that we’ve seen for equities, but we’ve also seen a big drop in vol for oil.  You can see the tight sideways pattern that oil has formed over the last few months in the chart below:

oilteline

Over the last 50 trading days, oil has averaged an absolute daily change of +/-1.2%.  That’s significantly lower than where things stood last year at this time.  Below is a chart showing this reading on a rolling basis going back to 1983.  During oil’s big price collapse from late 2014 through early 2016, volatility spiked significantly.  In early 2016 when prices were about to bottom, oil had averaged a daily move of nearly +/-4% over the prior 50 trading days.

While the current reading of +/-1.2% is down sharply compared to a year ago, it’s still not close to the lows seen just prior to the peak for oil prices in late 2014.  Back then oil was seeing daily moves of just over half a percent.  Talk about a calm before the storm.

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US Bull Market Chugs Along

Below is an updated look at historical bull markets for the S&P 500 going back to its inception in 1928.  Remember, the standard definition of a “bull market” is a 20%+ rally that was preceded by a 20%+ decline.  We’ll leave the argument over what should or shouldn’t be considered a bull market for another day.  Here we’re only reporting the numbers.

As shown below, the current bull market that began on March 9th, 2009 has now lasted 2,906 days.  That makes the current bull the second longest on record by 299 days.  The only bull market that lasted longer was the one that ran from December 1987 through March 2000.  Remarkably, the S&P didn’t experience a decline of 20% on a closing basis over that entire 4,494-day period.

Another notable stat is that the current bull has now lasted more than 1,000 days longer than the previous bull that ran from July 2002 to October 2007.

In terms of strength, the current bull still ranks third best with a gain of 248.96%.  To move into second place, the gain will need to eclipse the 267% rally seen from June 1949 through August 1956.

In case you’re wondering, the shortest bull market on record lasted just 24 days — occurring all inside the month of June 1931.

spxbulls0221

 

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2017 Commodities Performance

Below is a look at the performance of major commodities so far in 2017.  As shown, silver is up the most at +12.5%, followed by platinum (10.4%), copper (10.0%), and coffee (9.4%).  On the downside, natural gas has been by far the biggest loser with a drop of 29%.  Orange juice is down the second most at -9.3%, and oil is just barely in the red with a decline of 0.9%.

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Below is a look at one-year price charts for oil, natural gas, gold, and silver.  As shown, oil is right in the middle of what has become a very tight range, while natural gas has moved into extreme oversold territory.  As of this morning, natural gas was trading more than two standard deviations below its 50-day moving average.  Both gold and silver have recently moved to the top of their trading ranges, having recently broken above the top of their multi-month downtrend channels.

commod

 

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