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The Bull Thread

Discussion in 'Stock Market Today' started by bigbear0083, Apr 1, 2016.

  1. bigbear0083

    bigbear0083 Content Manager
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    September Small-Cap Rally Underway
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    Prior to Labor Day we noted the tendency of small-cap stocks to outperform large-cap stocks beginning at the end of August and lasting until around mid-September. This small-cap advantage typically begins on or around the 18th trading day in August and lasts until around the 12th trading day in September. On average the Russell 2000 has outperformed the Russell 1000 by 0.7% during this time span with the Russell 2000 outperforming 70% of the time over the last 40 years. As of today’s close Russell 2000 is up 4.5% since the close of August 26 while Russell 1000 is up 3.3%. As a reminder, small-cap outperformance in September usually does not last much beyond the 12th trading day (September 18th, this year).
     
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  2. bigbear0083

    bigbear0083 Content Manager
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    Resistance Is Futile
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    At the end of last month we laid out the technical picture for the S&P 500. At the time, the market had settled into a range between 2815 and 2945 on the S&P 500. The S&P 2815 support level we have been tracking for a while (that sits at the intraday high back on November 7, 2018 where the market failed last fall before the 20% correction ran its course to the Christmas Eve low) held up rather well – unlike the ~2700 level last fall.

    Since then S&P has cleared the 2945 level, which was the intraday high on Friday August 2 that was the beginning of two back-to-back Down Friday/Down Mondays, which has a negative indication if not quickly reclaimed. We have been looking for the market to drift higher into mid-September with a struggle to break above 2945-2955 on the S&P, which is right at the 50-day moving average (DMA).

    Now that S&P has clear that level and with today’s late-day rally pierced the last line of resistance at the July 3 high/close of 2996, it looks like we will able make a run at the highs before turning lower the last week of September. October could likely see a retest of 2815 with the 2725 support level that was held in June also being in play. So we are sticking to our drill and will wait for our Best Six Months Seasonal MACD Buy Signal before jumping back in with both feet.

    NASDAQ’s similar resistance and support levels are shown below for perspective….

    [​IMG]
     
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  3. bigbear0083

    bigbear0083 Content Manager
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    Small Cap Surge
    Thu, Sep 12, 2019

    Small caps have been serial underperformers versus the large-cap S&P 500 over the last 12+ months, but they're having their day in the sun this week. Not only has the small-cap Russell 2,000 risen more than 1% for three consecutive trading days to start the week, but the index has also outperformed the S&P 500 by more than one percentage point on each of the last three days.

    If this is the start of a longer-term small cap resurgence, there is certainly a lot of runway left. Below is a chart of the ratio between the S&P 500 and the Russell 2,000 over the last 15 years. When the line is rising, the S&P is outperforming the Russell. When the line is falling, the Russell is outperforming the S&P.

    As you can see in the chart, the S&P has been outperforming the Russell for the last year, and the ratio got extended to the very top of its 15-year range at the start of September. Since peaking earlier this month, however, the ratio has fallen dramatically as small caps have started to outperform. Even after the recent small-cap outperformance, the ratio remains well above its long-term average.

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  4. bigbear0083

    bigbear0083 Content Manager
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    Lowest Jobless Claims Since the 60's
    Thu, Sep 12, 2019

    After Friday's weaker than expected Nonfarm Payrolls report, today's initial jobless claims release is setting a different tone for labor data. Initial jobless claims were expected to see a modest decline to 215K this week after rising for two straight weeks. Instead, claims came in well below estimates falling to 204K. Not only was this well below last week's upwardly revised 219K (the largest week-over-week decline since May 10th's 16K decline) and forecasts, but it was also the lowest print since April's 193K. Important to note, those April lows were the lowest readings in around 50 years. Although that low from only a few months ago was not taken out, jobless claims still appear healthy with this week's data bringing it back below the past few months' range. The overall claims reading is also now more within tangible reach of those aforementioned 50-year lows. Furthermore, SA jobless claims have now spent 236 consecutive weeks at or below 300K and 101 weeks at or below 250K; both the longest streaks on record.

    [​IMG]

    As we mentioned in a note last week, today's release was likely to see a move lower in the four-week moving average because a recent high of 221K from early August would be rolling off the count. Between that and the exceptionally low number this week, the four-week moving average experienced a 4.25K decline which was its largest decline since mid-July (-5.5K). We would caution though that one week does not necessarily make a trend. The average now sits at 212.5K, which is an improvement from August, but it is also not yet any sort of dramatic new low as with other reads on this indicator. The moving average is now back to where it was only in late-July/early August. Additionally, the moving average is actually 0.75K higher than it was for the current week last year.

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    We have mentioned in recent weeks that due to seasonal effects we usually see the yearly low in NSA claims at this time of year. As a result, this would give a good read on how this year's lows stack up to prior years. The NSA number did not disappoint, dropping to 159.3K. Not only was this 3.3K lower than the comparable week last year, but was also the lowest reading for any given week of the current cycle. Even more impressive, this was the lowest reading for the NSA data in just under 50 years. The last time NSA initial jobless claims were at or below 159.3K was back on October 18th, 1969 when the number was 155K. That was also only a month after the indicator's all-time low of 133K.

    [​IMG]
     
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  5. bigbear0083

    bigbear0083 Content Manager
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    Superstitious or not, Friday 13th in September is historically bullish
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    Since 1930, the S&P 500 has traded a grand total of 150 Friday 13th across all twelve months. The overall track record is 81 up days and 69 down days with a bearish average loss of 0.04% on all Friday 13th. The worst Friday 13th loss was 6.12% in October 1989. This day is often referred to as “Black Friday.” Digging deeper into the data reveals that this upcoming September Friday 13th has been up 8 times, down four times with an average gain of 0.07%. Depending on which metric chosen, November is either the worst or in a virtual tie for worst month for Friday 13th. October has a similar average loss, but with two additional up days. June is the best month for Friday 13th, up 11 times in 13 with an average gain of 0.55%.

    [​IMG]
     
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  6. bigbear0083

    bigbear0083 Content Manager
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    Investors Keep Thinking Positive
    Thu, Sep 12, 2019

    As the S&P 500 broke and held above its August range in the past week, sentiment has shifted more positive. The percentage of investors reporting as bullish in AAII's weekly survey rose from 28.64% last week up to 33.13%. That is the highest since August 1st when 38.44% reported bullish sentiment. With two consecutive weeks of improvements, bullish sentiment is now well off of its lows from the second week of August (21.66%) and is back within a normal range relative to its historical average, but is also still below that average of 38.11%. This week marks the sixth straight week with below average bullish sentiment.

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    Inverse to bullish sentiment, bearish sentiment is now the lowest that it has been since the first week of August. It has also been above its historical average of 30.36% for six straight weeks now. From mid-May to early July there was actually a longer streak of above-average bearish sentiment that lasted for 8 consecutive weeks. With bearish sentiment falling 8.26 percentage points this week to 31.25%. This was the largest drop since June 13th's 8.38 percentage point decline.

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    Although most of the loss in bearish sentiment went to bulls, a predominant share of investors remain neutral. Ticking up to 35.63% this week, neutral sentiment remains above its historical average (31.52%) as it has for five weeks in a row and 31 of the total 36 weeks this year. This was also the first time that neutral sentiment has outweighed both bulls and bears since the end of July.

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  7. bigbear0083

    bigbear0083 Content Manager
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    Copper Unconsolidated
    Fri, Sep 13, 2019

    In last night's Closer, we noted the recent price action of copper. Over the past several months, copper had been consistently moving lower in a solid downtrend, but that downtrend has been broken this week. Finishing up about 1% in yesterday's session, copper had its first close above resistance which would suggest a further move higher. We're seeing additional gains today as the commodity continues to break out. Over the next few weeks, copper bulls will look for a series of higher highs and higher lows that would eventually form a new uptrend.

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  8. bigbear0083

    bigbear0083 Content Manager
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    Betting Markets and the Election
    Fri, Sep 13, 2019

    One way to keep track of the evolving Presidential primaries and general election news is the website electionbettingodds.com which shows what the betting market is predicting for upcoming election outcomes. In the charts below, we show the current probabilities of a primary and general election win for each of the various candidates (officially announced and otherwise) with a 1% or higher chance of winning. Elizabeth Warren now has a commanding lead in the Democrats' primary with a 34.9% chance of victory with Biden and Sanders in second and third.

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    Where things get more interesting is to figure out which candidates have the best chance of winning the general election assuming they win their primary. For example, President Trump's odds of winning his primary are 88.1%, but his odds of winning the general election for the Presidency are priced at 43.7%.

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    By dividing that 43.7% by the 88.1% chance of primary victory we can get to a 49.6% general election pricing assuming the candidate wins their primary. This conditional probability probably shouldn't be taken too seriously, but it's got some interesting results. Among candidates polling over 5%, Beto O'Rourke has the highest odds (80%) of a general election win if he takes the primary while other Democratic hopefuls Andrew Yang and Bernie Sanders are priced at 60%+ odds. Biden's general election odds are at 55% if he wins the primary, while Warren -- the current front runner -- is at 49.9%. Notably, although Trump is close at 49.6%, no Republican has a conditional priced probability over 50% to win the general.

    All of that said, these conditional relationships can be very unstable and are complicated to arbitrage, so we probably shouldn't place too much faith in the detail of their message, but it's still interesting to see that markets are implicitly optimistic about the electability of a candidate like Sanders or Yang relative to more mainstream candidates like Warren, Harris, or Biden.

    [​IMG]
     
  9. bigbear0083

    bigbear0083 Content Manager
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    Homebuilder Sentiment Reaches 11-Month High
    Tue, Sep 17, 2019

    Treasury yields have started to move higher from the record low levels reached in August, but sentiment among homebuilders remains strong as even at these levels interest rates are making housing much more affordable. The latest release of sentiment from the National Association of Homebuilders (NAHB) came in stronger than expected, rising from 67 up to 68 versus estimates for a reading of 66. At the current level of 68, sentiment is the highest it has been since last October, just before the market swooned in Q4.

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    Looking at the internals of this month's report, strength was pretty broad-based. In terms of the headline index's components, Future Sales was the only one that declined, and the magnitude of that drop was only modest. Present Sales increased from 73 up to 75, while Traffic was unchanged right at the neutral mark.

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    The chart below shows the regional breakdown of homebuilder sentiment going back to 2005. Sentiment in the Midwest was unchanged at 59 and is now the region of the country where sentiment is the weakest. That tag previously belonged to the Northeast, but after this month's 8 point jump, sentiment in that region of the country is tied for its highest level since the Financial Crisis. Sentiment in the South and West saw smaller improvements in sentiment this month, but builders in those regions are still much more optimistic than they are in the Midwest and Northeast.

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