2% Days Few and Far Between

Although the last two trading days have seen exceptionally narrow daily ranges, today we wanted to take a quick look at the S&P 500’s frequency of 2% daily moves (either up or down) in the post-WWII period.  The chart below breaks out the frequency of 2% days by year, and years with more than 25 one-day moves of 2% are notated accordingly.

Overall, there have been an average of 11 daily 2% moves in a given year.  After five straight years from 2007 to 2011 where we saw an above-average number of 2% days, the last seven years have only seen one year with an above-average number of occurrences (2018, 21).  Remember, in 2017 there wasn’t one single trading day that saw the S&P move up or down 2%!

So far this year, there have only been four 2% days, but with the most volatile part of the year on tap, we are likely to see that number increase in the months ahead.  Don’t expect the relative calm that we have seen in the last few trading days to last forever.  Volatility is unpredictable and usually comes up and surprises you when you least expect it!  Start a two-week free trial to Bespoke Institutional to access our premium content and interactive tools.

Trend Analyzer – 7/16/19 – Growth Outpacing Value

After starting at extreme overbought territory yesterday, the Dow (DIA) has come back a little bit within its trading range despite closing slightly higher in yesterday’s session. That brings the sum of overbought major index ETFs to eleven while the three small caps remain neutral.  The Micro-Cap (IWC) and Core S&P Small-Cap (IJR) both have fallen in the past five days—the only major index ETFs to have done so—while the Russell 2000 (IWM) has moved only 6 bps higher.  Even with the large-cap indices like the S&P 500 (SPY) reaching new all-time highs, the small-caps are sitting in sideways trends over the past six months. Given this, they also have risen the least year-to-date.  Conversely, the Nasdaq (QQQ) has risen over 26% in 2019, the best of these ETFs by a solid margin.

Even with the various style ETFs, small-cap underperformance is evident as the four worst performing ETFs of the group are all small-cap focused. In addition to the underperformance of small-caps, value has also been underperforming growth recently.  Across the ETFs in the US Styles screen of our Trend Analyzer, not a single value ETF is doing better than its growth counterpart for the major indices. The Growth ETF (VUG), Russell 1000 Growth (IWF), and Russell Mid-Cap Growth (IWP) have been the top performers of these.  Additionally, the S&P Mid-Cap 400 Value (IJJ), S&P Small-Cap 600 (IJS), and Russell 2000 Value (IWN) have all declined in the past week. Start a two-week free trial to Bespoke Institutional to access our interactive Trend Analyzer and much more.

Modest Bounce in Homebuilder Sentiment

Homebuilder sentiment for July saw a modest bounce, rising from 64 up to 65 compared to expectations for a reading of 64.  While sentiment has seen a nice improvement from its late 2018 low, builders are nowhere near as optimistic right now as they were right before the GOP tax bill — which limited mortgage deductions and SALT deductions — was signed into law.

Present and Futures Sales, as well as Traffic, saw equal and modest gains in July, but sentiment on a regional basis was bifurcated.  Both the Midwest and Northeast saw declines in sentiment while sentiment in the West was up sharply and sentiment in the South saw a modest bounce. Like the headline index, most regional indices of sentiment are still well off their cycle highs, but the Northeast is an exception as it just hit a cycle high in the prior month. Start a two-week free trial to Bespoke Institutional to access our premium economic indicator analysis and everything else we have to offer.

Bespoke’s Morning Lineup – Ten for Ten

As of this writing, ten companies have reported earnings this morning and all ten have exceeded bottom-line forecasts, so that’s encouraging.  As far as revenues are concerned, the results haven’t been as positive with only six companies exceeding top-line forecasts.  The biggest winner so far this morning is Goldman Sachs (GS), which is up over 1% after crushing forecasts.  On the downside, Domino’s (DPZ) is having a rough morning with a loss of 5% after revenues came up short of forecasts.

In economic news, Import and Export Prices both saw larger than expected declines, while Retail Sales came in stronger than expected.  Futures, which had reversed earlier losses remain positive after the report.

Read today’s Morning Lineup to get caught up on news and stock-specific events ahead of the trading day and a further discussion of overnight events including an analysis of the latest ZEW Sentiment Surveys.

Bespoke Morning Lineup – 7/16/19

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Yesterday, we mentioned that there had been a modest expansion in new highs among S&P 500 stocks as over 13% of stocks in the index hit 52-week highs even as the S&P 500 was flat all day.  That reading exceeded the sub-10% levels that we saw on much stronger days last Thursday and Friday.

In going through the charts of the large and mid-cap stocks hitting new highs yesterday, one trend that stood out is that many of them are very extended and probably due for some sort of pullback or at least a pause.  This morning, though, we wanted to highlight some of those stocks that made new highs that aren’t as extended (relatively speaking) and are attempting to break out of short to intermediate-term trading ranges.  The six names highlighted below are part of a custom portfolio we created highlighting 20 names that fit these criteria.  To view the entire portfolio, make sure you are logged in to the site and then click here or on the image below.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started. 

The Closer – VIX Low Into Earnings, Empire Not OK, Cass, Brazil – 7/15/19

Log-in here if you’re a member with access to the Closer.

Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, with this week marking the start of earnings season, we show S&P 500 performance given the levels on the VIX. We also take a look at the rally in EM credit and OEM auto stocks. We then go over some of the details in today’s Empire Manufacturing report that were weaker than the headline number would lead on. After reviewing Cass Transportation Indices, which showed some alleviation to their weakening trend, we finish with a rundown on the economic conditions in Brazil.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

Mutual Fund Flush

Our weekly Bespoke Report newsletter is one of the most popular reports included as part of the Bespoke research offering.  Each week, we provide a comprehensive rundown of the week’s events and our analysis of where the market is headed next.  If you haven’t done so before, sign up for a free trial to see for yourself.  You won’t be disappointed!  In last week’s Bespoke Report, we looked at various measures of investor sentiment including flows into and out of equity mutual funds.  The table below provides a summary of mutual fund flows through the latest reporting period last week showing actual flows on the left and how those flows rank relative to history on the right.  With the stock market breaking out of its range to new all-time highs, you would expect flows into equity mutual funds to be surging, and while there has been a surge in mutual fund flows, the direction has been out of as opposed to into stocks.

In the latest week, equity mutual funds saw nearly $17 billion in outflows, bringing the four-week total of outflows to just under $44 bln. On a percentile basis, those total outflows rank below the 2nd percentile relative to all prior one-week periods in the last decade and below the 3rd percentile relative to all other four-week periods.  Not only has there been an exodus out of equity mutual funds, but the declines have been broad-based across domestic and global funds.

The fact that outflows have been so large just as the S&P 500 is hitting new all-time highs is unique, to say the least.  The chart below shows the rolling four-week total of fund flows going back to the start of 2007.  During that time, there have only been eight other periods where the magnitude of outflows from equity mutual funds has been more than $40 billion (as it is now).  If you look at the dates of each of those occurrences, more often than not they were during periods of elevated volatility during a market decline rather than in unison with an all-time high in the equity market.

B.I.G. Tips – 20%+ YTD

The S&P 500 came into the new trading week up 20.22% year-to-date, which is the biggest gain at this point in the year since 1998.  This year’s gain is the 9th strongest move at this point in the year in the S&P’s history dating back to 1928.  It’s also just the 9th time the index has been up 20%+ at this point in the year.  (Keep in mind that the S&P fell 19.8% from its high point to low point in Q4 2018, so while this year’s move has been impressive, the index is not all that far above its 2018 highs.)

Below is a look at all years that the S&P 500 has been up 20%+ at this point in the year (133 trading days).  For each year, we show how the index performed over the next month, three months, and through the rest of the year.

To continue reading this report and see how the S&P 500 performed in prior years that saw 20%+ gains through mid-July, start a two-week free trial to Bespoke Premium!

Empire Index Moves Back to Growth

After threats of tariffs on Mexican imports sent sentiment in the Empire Manufacturing Index plunging in June, things bounced back a bit in July as the headline index moved back above zero and surpassed consensus expectations.  While economists were forecasting the headline index to rise up to 2.0 from last month’s reading of -8.6, the actual reading came in slightly stronger at 4.3.  Expectations for six-months from now improved by a smaller margin, but they also never fell as much.

While the headline index bounced back pretty significantly in July, breadth among the components wasn’t particularly strong as just four showed m/m increases compared to five declines.  On the upside, the biggest gains were in Unfilled Orders and New Orders, while the largest decline was in Number of Employees.  In terms of expectations, breadth was much stronger as the only two components showing declines were Number of Employees and Average Workweek.  Plans for both Cap-Ex and Technology Spending both increased.

As mentioned above, the Number of Employees index saw the largest decline this month and at its current level of -9.6, this component is not far from its lowest levels since the end of the last recession.  The only period we saw a weaker reading was right in the midst of the late 2015/early 2016 oil-induced slowdown.  Employment has been a bright spot for the US economy, but this data point is negative.  Going forward, it will be important to watch the other regional FOMC indices for signs of confirmation. Start a two-week free trial to Bespoke Institutional to access our Economic Indicator Database and other interactive tools.

 

Trend Analyzer – 7/15/19 – Small Caps Sitting Out New Highs

Large-cap indices rallied into the end of the week to finish at all-time highs.  The Nasdaq 100 (QQQ) surged 1.3% in the past five days, and QQQ has now risen the most of any of the major index ETFs in 2019. Meanwhile, the Dow (DIA), which is the worst-performing large-cap index YTD, received a boost from UnitedHealth (UNH) and finished as the best performing major index ETF last week with a gain of 1.53%.  This not only sent the index above the 27,000 milestone, but also brought it up to extremely overbought levels.  DIA is currently the only major index ETF at extreme overbought levels, although ten others are also overbought and approaching extreme levels.  Small caps, on the other hand, all remain neutral with further declines last week.  Mid-caps shared in these losses but to a lesser extent.

Small and mid-caps have continued to lag their large-cap peers and last week’s break out to new all-time highs for the likes of the Dow (DIA) and S&P 500 (SPY) has made this lag even more evident in the charts. The DIA, QQQ, S&P 500 (SPY & VOO), Core S&P 500 (IVV), Russell 1000 (IWB), S&P 100 (OEF), and Total Stock Market ETF (VTI) are now all in uncharted waters as they have broken out to new all-time highs.  As we mentioned in Friday’s Bespoke Report, while the Dow and S&P 500 breakout was more clear cut, QQQ’s was a bit less convincing.  Similarly, small and mid-caps—except for the Russell Mid-Cap (IWR)—all sit firmly below their prior highs from late last year. While they have made some higher highs earlier this year, they have still sat in consolidation and continue to move sideways rather than distinctively higher. Start a two-week free trial to Bespoke Institutional to access our interactive Trend Analyzer, Chart Scanner, and much more.

Bespoke’s Morning Lineup – Earnings Season Kicks Off and More Fed

Happy earnings season!  Citigroup (C) kicked things off this morning with a better than expected report, and the stock is trading up modestly on the news.  The pace of earnings reports will be slow today, but things will pick up as the week goes on.  While last week was an extremely busy one for Fed speakers, this morning we will also hear from NY Fed President Williams, and then tomorrow will be another busy day with Bostic, Bowman, Kaplan, Powell, and Evans all scheduled to speak. In US economic news, the Empire Manufacturing report for July came in better than expected at 4.3 and up from June’s reading of -8.6.

Read today’s Morning Lineup to get caught up on news and stock-specific events ahead of the trading day and a further discussion of overnight events including the latest round of economic data from China.

Bespoke Morning Lineup – 7/15/19

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The US Dollar Index is on pace for its fourth straight day of declines today, and while that kind of trend would normally benefit the stocks of US multinationals, in recent days that hasn’t been the case. As noted in last Friday’s Bespoke Report, last week it was the Domestics that outperformed and propelled the market to new highs.  Sure, it’s just a couple of days, but for now, at least, investors in the stock market don’t seem to be convinced that the recent dollar weakness will be long-lasting.

Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started. 

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