Bespoke CNBC Appearance (1/11)

Bespoke Co-Founder Paul Hickey appeared on CNBC’s Power Lunch on Friday (1/11) to discuss markets and the next possible catalysts following the rally off the Christmas Eve lows. To view the segment, please click on the link or image below.

Bespoke CNBC Appearance (1/11)


This Week’s Economic Indicators – 1/14/19

Last week was pretty quiet for economic data with only 10 releases scattered throughout.  ISM Non-Manufacturing kicked off the week with a decline and a miss that was actually fairly benign on its own but added to the significant decline in the composite ISM index.  Tuesday saw small business optimism beat while the JOLTS report saw a modest pullback.  Consumer credit also released later that day lower than the previous period but above expectations.  The weekly mortgage applications data from the Mortgage Bankers Association was the sole release on Wednesday which showed a significant expansion.  Thursday was again a light day with just two weekly indicators (jobless claims and consumer comfort).  CPI capped off the week with a release in line with forecasts for both the headline and core numbers.

Turing to this week, activity picks back up with the heaviest week so far this year.  Granted, that is assuming the government reopens and allows all of these indicators to see the light of day.  If all goes as scheduled, there will be no releases today but tomorrow morning we will get Empire Manufacturing and further inflation data with PPI for December.  Despite weak ISM and regional Fed data recently, Empire Manufacturing is expecting an uptick.  Wednesday will be the busiest day of the week with 12 releases scheduled.  Retail sales will be a widely watched indicator to get a read on this year’s holiday sales; though this too will likely be delayed due to the government shutdown.  Continuing Wednesday’s slew of data will be import/export prices, the NAHB homebuilder sentiment, Fed’s Beige Book, and Treasury TIC flows.  Thursday we will get further housing data with housing starts and permits.  Whereas starts are expected to decline, permits are forecast to come in slightly higher from last month.  The Philly Fed’s Business Outlook will also release that morning, and much like Empire Manufacturing is expecting a slight increase in activity.  The week will end with industrial production data and preliminary University of Michigan sentiment; both looking to come in lower.

If you haven’t been able to tell yet, one of the areas the government shutdown has hit has been economic data. The current government shutdown is now the longest in history, and since it began on December 22nd, there have been 14 economic releases that have been delayed.  Below we list out all of the indicators that were scheduled to come out since the shutdown began but have been delayed due to a lack of funding for the agencies in charge of the release.  The shutdown of the Census Bureau has had the largest impact.  With the exception of the monthly budget statement, which comes out of the Treasury, all of the below indicators are products of the Census Bureau.

As we previously mentioned, the shutdown has reached historic lengths, and as a result, has now gone on long enough to affect both preliminary and final data points.  That is the case for trade balance, wholesale inventories, and factory orders/goods orders which were supposed to have their final versions released last week.  As for this week, retail sales, business inventories, TIC flows, housing starts, and permits could all have the potential to join this list.  Fortunately, government-independent agencies (such as the Fed and Bloomberg) along with some government organizations that have secured funding will continue to provide investors with data.  For example, the Bureau of Labor Statistics is funded through September—which is why we have seen inflation data—so government data is not completely absent for the time being.

Trend Analyzer – 1/14/19 – Still There

It has been a week now and most of the ETFs tracking the major indices in our Trend Analyzer have held in their neutral trading range.  Despite small declines Friday, last week saw solid gains for each of these ETFs.  Midcaps and Small Caps continued to outperform with the Russell 2000 (IWM) outperforming last week.  Along with the Core S&P Small-Cap ETF (IJR), all the mid-cap focused names saw gains of over 4% on the week.  This group is also very close to breaking out above their 50-DMAs; 6 of the 14 are within a percentage point of the moving average.  With futures lower this morning, bulls aren’t going to see a break above this resistance level at the open.  A breakout from these levels would certainly be a positive signal for these indices, but until that happens, the bears remain in control with long-term downtrends still solidly in place.

Morning Lineup – Weak Chinese Data Weighs on Markets

Weakness in overnight trade data out of China plus a number of tweets from the President over the weekend are weighing on sentiment to kick off the trading week.  Citigroup (C) kicked off earnings season on a sour note this morning as revenues came in light pushing the stock modestly lower. It’s a quiet day for data today, but things will pick up throughout the week, especially tomorrow when the British Parliament is scheduled to vote on PM Theresa May’s Brexit bill.  Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and commentary.

Bespoke Morning Lineup – 1/14/19

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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Bespoke Brunch Reads: 1/13/19

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.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2019 Annual Outlook special offer.

Ambition Restrained

Self-Driving Cars Will Always Be Limited. Even the Industry Leader Admits it. by Paris Marx (Medium)

During the mid-2010s, the breathless hype about the advent of self-driving cars was everywhere. We’ve taken a much more skeptical view of the prospects for the deployment of the new technology, for instance in our Industry Insight report (link). Now, self-driving car industry leaders are moderating the outlook. [Link]

Polaroid. Walkman. Palm Pilot. iPhone? by John D. Stoll (WSJ)

Cautionary talk about the outlook for the world’s most profitable electronics business, which will never see the risk of being replaced go away; the same also extends to other Silicon Valley businesses. [Link; paywall]

SoftBank to slash planned WeWork investment by Eric Platt and Arash Massoudi (FT)

The $100bn Vision Fund is getting cold feet about how much capital it should commit to office rental startup WeWork, cutting its planned $16bn investment to less than 15% of that number. [Link; paywall]

Emergency Powers

GOP in the dark as Trump weighs emergency declaration by Eliana Johnson, Burgess Everett, and Heather Caygle (Politico)

Members of Congress aren’t involved in the President’s plans to use emergency powers in order to construct a wall on the Southern border, under an extremely broad interpretation of the executive’s emergency powers. [Link]

It’s Not a National Emergency. It’s Also Not the Dawn of Dictatorship. by Matt Ford (The New Republic)

Calm and informed analysis of the long history surrounding the expansion of executive power, a trend in American political life that has been ascendant for nearly 100 years and is being thrown into starker relief by the recent proposal to use emergency powers in order to build a border wall. [Link]

Rents

The 30 Percent App Fees Are Too Damn High by Shira Ovide (Bloomberg)

The US Supreme Court recently heard arguments in a case alleging Apple is exercising a monopoly in its app store, a venue which takes a steep cut of all purchases inside apps. [Link; soft paywall]

How PhRMA finally lost: the inside story of the group’s biggest lobbying failure in years by Nicholas Florko (Stat News)

The story of a legislative surprise and the lobbying fight to stop it, a result that took the industry and its massive army of influence-peddlers completely by surprise. [Link]

Investing

What Amazon’s Rise to No. 1 Says About the Stock Market by Jason Zweig (WSJ)

A data-oriented review of Amazon’s rise to the top of the US market, and why what seems like a large degree of concentration in market value among a few stocks is quite the opposite. [Link]

National Mutual Life Assurance Society Company Meetings 1922-1937 (Google Drive)

A treasure-trove for investors: the comments economist and investor John Maynard Keynes’ on the economy and markets as the National Mutual Life chairman over the course of the Roaring 20s and Great Depression. [Link; 58 page PDF]

Tech Traps

The Subliminal Trick Netflix Uses to Get You to Watch Its Movies & Shows by Anthony Schneck (Thrillst)

Netflix’s algorithm isn’t just used to figure out what kind of movies you want to watch; it’s also being used to choose which thumbnail you’ll be most likely to click on when you’re browsing through the content library. [Link]

Older People Shared Fake News on Facebook More Than Others in 2016 Race, Study Says by Niraj Chokshi (NYT)

Whether by misunderstanding or malice, “news” stories that were total fiction found their biggest boosters in the ranks of senior citizens during the 2016 election. [Link; soft paywall]

Sports Analytics

You Called A Run On First Down. You’re Already Screwed. by Josh Hermsmeyer (FiveThirtyEight)

A statistical argument that the Seattle Seahawks’ obsession with establishing the run cost them wins in a year where those were in relatively short supply. [Link]

Science

Earth’s magnetic pole is on the move, fast. And we don’t know why by Jamie Seidel (news.com.au)

While the magnetic pole does tend to move but the recent pace of its shifts around the Arctic Circle have caught scientists by surprise. [Link]

How a Uruguayan town revolutionized the way we eat by Shafik Meghji (BBC)

One of the most ubiquitous ingredients in the history of home cooking was born on the banks of the Uruguay River, eventually becoming a global phenomenon from humble origins. [Link]

Incarceration

Where 518 Inmates Sleep in Space for 170, and Gangs Hold It Together by Aurora Almendral (NYT)

Jails in the Philippines’ have gotten so over-crowded that gangs behind bars are doing more to keep the piece than guards. [Link; soft paywall]

Mass Transit

Meme Weeding: Unions and Construction Costs by Alon Levy (Pedestrian Observations)

A deep dive on why transit in the United States costs so much to build, especially compared with other developed countries in similar environments. [Link]

Read Bespoke’s most actionable market research by joining Bespoke Premium today!  Get started here.

Have a happy New Year!

International ETFs Back Above 50-DMAs

The snapshots below are pulled from our popular Trend Analyzer tool that allows investors to easily monitor baskets of stocks and ETFs for long-term trend shifts as well as overbought/oversold levels.  In the first snapshot, we show US index ETFs.  On the right side of the snapshot is our trading range section.  The dot represents where each ETF sits within its long-term trading range.  The tail end is where it was trading a week ago, while the black vertical line represents the ETF’s 50-day moving average.  As shown, while all of these US index ETFs have bounced, none have gotten back above their 50-day moving averages.

The picture looks a lot different for international equity market ETFs.  As you can see, they have all rallied significantly over the last week, and most have already moved back above their 50-day moving averages.  This places them in a more bullish light than US ETFs (that are still below their 50-DMAs) from a technical perspective.

Key Earnings Reports Next Week

Earnings season begins next week with the big banks kicking things off starting Monday.  As shown in the chart below, the big reporting days don’t hit until late January/early February when 100+ companies are set to report each day for a number of weeks.

Below is a list of the key earnings reports to watch next week.  For each stock, we show its historical earnings and sales beat rate along with its average one-day price change on its earnings reaction day.  The beat rate is simply the percentage of the time the company has beaten consensus estimates, while the average 1-day % change is the stock’s average move on the first trading day following its quarterly release.

On Monday, Citigroup (C) kicks things off with earnings before the open.  While the stock has beaten EPS estimates 74% of the time, it has averaged a one-day decline of 0.35% on its earnings reaction days.

JP Morgan (JPM) and Wells Fargo (WFC) report Tuesday morning along with United Health (UNH) and two airlines — Delta (DAL) and United Continental (UAL).  UNH beats EPS 91% of the time, which is the strongest beat rate of any company on the list.

On Wednesday morning it’s all Financials on the calendar — Bank of America (BAC), BNY Mellon (BK), BlackRock (BLK), Goldman Sachs (GS), PNC, Charles Schwab (SCHW), and US Bancorp (USB).  Wednesday evening we’ll hear from Alcoa (AA), CSX, and Kinder Morgan (KMI).

Thursday morning will be led by Morgan Stanley (MS), while American Express (AXP) and Netflix (NFLX) will report Thursday after the close.  NFLX is projected to earn 35 cents/share, and the stock has beaten EPS estimates 85% of the time throughout its history.

Schlumberger (SLB) and VF Corp (VFC) will close out the week with reports on Friday morning.

Subscribe to Bespoke Institutional for complete coverage of earnings season.

Trend Analyzer – 1/11/19 – So Close

The major index ETFs have now spent a full week in a neutral range; a welcome change from the extremely oversold levels we saw to finish 2018.  That is a major change from where they were at the end of last week when they all still sat firmly in oversold territory.  As we close out the first full week of the year, the YTD gains are yet another nice change when compared to how we finished last year.  The trend of the current rally has further solidified that investors are rotating more heavily into small-caps.  These ETFs are leading their larger peers by a wide margin as the Microcap ETF (IWC) and the Russell 2000 (IWM) are still the best performers.  Over this past week, the IWM has been the better of the two with a gain of 8.61%.  That strong performance is shared by IJH, IJR, and MDY which also each have edged out gains of over 8%.  In contrast, while by no means are they doing poorly, the large-cap Dow (DIA) and S&P 100 (OEF) are doing the worst as the aforementioned small caps have seen over twice the gains on a YTD basis.

Morning Lineup – Manic Breadth

Futures are indicated a bit lower this morning after five straight days of gains.  The only economic indicator on the calendar today was CPI for December which came in right inline with expectations at both the headline (-0.1%) and core levels (0.2%).  Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and commentary.

Bespoke Morning Lineup – 1/11/19

Similar to the swings in the equity market from the sharp leg lower in late December to the massive rally to kick off this year, breadth has also swung from one extreme to another in the last two weeks.  Take the S&P 500’s 10-day A/D line, for example. On Christmas Eve, it clocked in at -2,440, which was the most negative reading in this indicator since 8/8/11 and the fourth most negative reading going all the way back to 1990!  Ten days later, the 10-day A/D line totally reversed to a positive reading of 1,938, which was the most positive reading since July 2016 and the ninth strongest since 1990.  That kind of a reversal from one of the most negative readings in 30 years to one of the most positive is pretty much insane!

With the 10-day A/D line shifting from -2,440 on 12/24 to +1,938 on Wednesday, it was the biggest 10-day change in the indicator on record, and it wasn’t even really close.  The next closest reading to the upside was on 12/5/08 when it had a 10-day change of 3,755.

 

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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