Friday
Aug292008

Key ETF Performance

Below we highlight the performance of key ETFs across all asset classes over the last day, week, and month.  Have a look, and have a great Labor Day weekend.

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Etfperfaugust

Friday
Aug292008

Oil Goes Limp

One would think that oil would have had a great week since many are predicting a smaller scale replay of Hurricane Katrina in the Gulf early next week.  While oil did finish the week up nearly a dollar, the action in crude can hardly be considered healthy.  As shown in the intraday chart below, in four of the five trading days this week, crude oil gapped higher in the morning but failed to hold its early gains every time.

Oil_intraday

Friday
Aug292008

Percentage of Stocks Above 50-Day Moving Averages

Currently, 64% of stocks in the S&P 500 are trading above their 50-day moving averages.  As shown in the chart below, the reading has been creeping higher and higher since mid-July, and looks to be on its way to the 80%-85% levels seen twice over the last year.  Readings above 50% are signs of a healthy market, and it hasn't been above 50% for much of 2008. 

From a sector perspective, all of them except for Energy and Utilities have more than 50% of stocks trading above their 50-days.  While Utilities are just under 50% at 48%, Energy is extremely weak with a reading of 5%.  Telecom and Health Care are currently the most robust sectors at 89% and 85% respectively, followed by Consumer Discretionary (77%) and Industrials (75%).

Spx50day

Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day    

Friday
Aug292008

Bad Day For Prediction Markets

Contracts on Intrade.com for who will be the Republican VP nominee have shifted significantly this morning.  As of about 10 minutes ago, Romney's contract was trading well above 70, but fell dramatically as news broke on Drudge that he wouldn't be McCain's pick.  Alaska governor Sarah Palin's contract, on the other hand, was trading under 5, but spiked to 80.  Intrade is supposed to get it right because of the "wisdom of crowds" and people "putting their money where their mouth is," but this time the crowd has seemingly gotten it extremely wrong (although it's not a done deal yet).  Intrade, while still a useful tool for those wanting to trade various events, is proving to be more of a "follower's market" instead of a "prediction market."  If you want to see where people are currently putting the odds for an event to occur, Intrade is a good gauge of sentiment, but banking on it to get the eventual outcomes right is hit or miss.

Palinromney

Friday
Aug292008

Energy's Loss is the Financials Gain

Just as the stocks in the financial sector have stabilized while energy stocks have been weak, analyst sentiment on the sectors seem to be following a similar trend.  In the charts below, we track the percentage of stocks in each sector that have seen positive or negative estimate revisions over a rolling one-month period.  As shown in the shaded areas, estimate revisions for both the energy and financial sectors have had sharp reversals.  In mid-July, nearly 55% of stocks in the financial sector had seen their numbers cut in the prior month.  Today, the percentage has decreased to only 25%.  In the energy sector, in mid-July analysts had raised estimates on nearly 75% of the stocks in the index over the prior four weeks.  Currently, nearly 25% of the stocks in the sector have seen their numbers cut over the last four weeks.

Sector_eps_revisions_2 

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Thursday
Aug282008

Goldman: What Have You Done For Me Lately

Remember when Goldman Sachs (GS) was considered the cream of the crop in the Financial sector and could do no wrong?  After avoiding the subprime mortgage crisis, Goldman Sachs justifiably cemented its reputation on Wall Street that it was the most adept trading firm on the street.  But just like everything else on Wall Street, investors may have taken this line of thinking to extremes.  Suddenly, it seemed that any time Goldman Sachs put out a research report,  the call made headlines regardless of what the specific analyst's record was.  When one of their analysts said oil could hit $200 in the not too distant future, rather than question the analyst's thesis as to what besides a rising price justified the increase in his target (which had been $95 in December), investors just wanted to know when.

Recently, sentiment on Goldman Sachs (GS) has turned negative, as more and more analysts are questioning its King Midas reputation.  In our weekly look at analyst earnings estimate revisions for Bespoke Premium subscribers, Goldman Sachs showed up on the list of stocks with the most negative estimate revisions.  In fact, of all the stocks in the S&P 1500, the only two stocks with more negative earnings revisions than Goldman Sachs (GS) are retailers Abercrombie (ANF) and American Eagle (AEO).

Interestingly, just as analysts were the most bullish on Goldman when the Financials were at their worst, it seems they are now turning on Goldman just as their outlook on the rest of the sector starts to improve.  The red line in the chart below shows the net earnings revisions on a percentage basis for the Financial sector throughout 2008.  While analysts are still lowering estimates for more stocks than they are raising forecasts for, there has been a steady improvement over the last few weeks.

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Financial_sector_earnings_revisions

Thursday
Aug282008

Stocks with the Highest Short Interest

Below we highlight stocks in the S&P 1500 with the highest short interest as a percentage of float.  Investors like to look at these names to 1) find companies that investors are extremely negative on, and 2) find companies that could see big spikes on any hint of positive news due to short covering.  As shown, JOS A Bank (JOSB) is the most heavily shorted stock in the index, with 91.5% of its float sold short.  JOSB is followed by CORS, NTRI, LTM, HZO and NILE.  Sears Holdings is another name on the list of heavily shorted stocks, and even after a negative earnings report today, it is trading higher, most likely due to short covering.  There are some names on the list that have seen big gains this year.  These stocks have rallied in the face of bearish investor sentiment, and include TRLG, BWLD, BIG, WERN, ZLC, SYNA and ARO.

Sifloat

The list below highlights stocks that have seen the biggest increase in short interest over the last month.  For whatever reason, investors have taken a more bearish stance on these names.  (Note that some of these names could have an accelerated buyback going on.  This increases short interest because for the buyback to take place immediately, the bank involved in the buyback sells (shorts) the stock to the firm and then covers it over time.)  Notable names on the list include KFT, PCX, SNDK, GD, LLL and LMT.

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Siincrease 

Thursday
Aug282008

Natural Gas Inventories Continue to Rise

This week's release of the EIA's natural gas inventories showed that stockpiles of natural gas increased by 102 billion cubic feet.  As shown in the charts below, stockpiles have been following their normal seasonal trends with steady increases throughout the Summer.  However, the build in stockpiles has been larger than normal, putting the gap between current and average inventory levels at the widest margin since February. 

Natural_gas_inventories_0828

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Thursday
Aug282008

Declines From Peaks in Housing Show Big Disparity

Below we highlight the percentage difference between current median home prices and the max median home prices seen in each of the twenty cities that S&P/Case-Shiller tracks.  As shown, there is quite a big difference between the worst areas and the ones that have held up the best.  Phoenix, Las Vegas, Miami and San Diego have all seen a median home price decline of more than 30% from their peaks.  Los Angeles, Detroit, San Francisco and Tampa are in the second tier of declines between -25% and -30%. 

On the flip side, Charlotte, Dallas, Denver, Portland, Seattle and Atlanta are all down less than 10% from their peaks, while New York, Chicago and Boston are just over -10%.  While the composite indices are down about 20%, there is a pretty big discrepancy in price declines depending on what area of the country you look at.

Housingpeaks 

Wednesday
Aug272008

Retailers and Financials Up During the Bear Market

Financials and Retailers have been some of the worst performing stocks of the bear market that started last October.  There are some stocks in these groups that have managed gains in this market, however.  Below we highlight Retailers and Financials in the Russell 1,000 that are in the black since 10/9/07.  The relative strength of these names is worth noting. 

Retailersfinancials

Wednesday
Aug272008

June Case-Shiller Housing Numbers

Caseshillerjun_eFrom May to June, half of the cities that Case-Shiller tracks saw an increase in median home prices, while half saw declines.  The Composite 20-City index saw a month-over-month decline of 0.50% and a year-over-year decline of 15.92%.  This was the worst year-over-year reading yet.  As shown in the table at right, Denver saw the biggest month-over-month gains at 1.48%, followed by Boston (1.23%), Minneapolis (0.98%), Cleveland (0.73%) and Dallas (0.63%).  Atlanta, Charlotte, New York, Chicago and Detroit were the other cities posting May to June gains.  Phoenix saw the biggest month-over-month declines at -2.63%.  Phoenix was trailed by San Francisco (-1.76%), Miami (-1.72%), Las Vegas (-1.57%), and San Diego (-1.49%).  Basically, the problem areas of the West Coast and Florida were still the problem in June.

Below we highlight historical year-over-year changes in median home prices for the 20 cities and the two composite indices on a monthly basis.  If you look closely at the most recent points on the charts, you'll see that the year-over-year changes actually ticked up a little for most cities.  This indicates that while the declines are still bad, they've stopped getting worse in a lot of areas for the time being.

Case1

Case2

Case3

Case4

Wednesday
Aug272008

NYSE Short Interest Declines Again

For the second consecutive two-week period, short interest on the New York Stock exchange declined.  During the first two weeks of August, short positions in NYSE listed stocks fell by 2.8% to 17.8 billion shares.  While the late July figures showing a mere 1.5% decline in short interest seemed to show that the SEC's crackdown partial enforcement of existing laws on short selling had little impact, the larger decline in the most recent figures suggest that the SEC's actions might be affecting investors.

Short_interest_081508

Gone_fishing_2So what has the SEC done to continue enforcement of short selling rules?  They let the temporary order expire, and said a new set of rules would be coming in the "next few weeks."

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Tuesday
Aug262008

Credit Spreads Continue to Get Worse

FDIC Chairman Sheila Bair commented in a press conference this afternoon that she expects the credit markets to continue to worsen, and judging by the recent action in credit spreads, the market seems to agree.  According to Merrill Lynch data, interest rates on investment grade corporate bonds are currently not only at higher levels than they were at the Bear Stearns low, but they are also at their highest levels ever.  As of yesterday's close, investment grade corporate bonds were yielding 312 basis points more than Treasuries, which is a 118% increase over year ago levels.

Corporate_bond_spreads082608

Tuesday
Aug262008

High Growth Expectations for the S&P 500?

Year over year earnings for the S&P 500 declined by a little more than 23% in Q2 '08 versus Q2 '07.  Expectations at the start of earnings season based on cumulative analyst estimates were -11%, so actual numbers were more than twice as bad.  This brings us to earnings expectations for the next few quarters.  Currently, bottoms up estimates are looking for S&P 500 earnings to decline by 0.2% from Q3 '07 to Q3 '08.  Q4 '08 estimates are looking for growth of 43.6%, and Q1 '09 estimates are at 28.1%.  These high numbers are due to the extremely weak readings we got in Q4 '07 and Q1 of this year.  Only time will tell if these estimates are too lofty, but based on the last few quarters, they most likely are.

Spxepsgrowth

Tuesday
Aug262008

DNC Convention Bounce...For The GOP?

After the first night of the DNC, in which the Democratic party was widely expected to get a convention bounce, McCain has actually taken a 2 point lead in Gallup's Daily Election Poll.

Mccainobama826

Dncbounce

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