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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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    Trading Before Labor Day Weekend Generally Bullish
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    Labor Day has become the unofficial end of summer and the three-day weekend has become prime vacation time for many. Business activity ahead of the holiday was more energetic in the old days. From 1950 through 1977 the three days before Labor Day pushed the DJIA higher in twenty-five of twenty-eight years. However, since then the days leading up to the long weekend have become somewhat mixed. In the last 21 years, Thursday has been weaker than Friday for DJIA and S&P 500 on average. NASDAQ and Russell 2000 however have been stronger on Thursdays and softer on Fridays.

    Frequency of gains has been modestly better on Friday. DJIA, S&P 500, NASDAQ and Russell 2000 have all advanced more often than declined on Friday. Also of note is volatility on Thursday and Friday appears throughout the table with numerous moves in excess of 1% scattered throughout.
     
  2. bigbear0083

    bigbear0083 Content Manager
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    3 Charts To Watch If You Are Bullish

    The S&P 500 Index just closed the door on its best August since 1986, making new all-time highs along the way, while also closing up five months in a row.

    First things first, make no mistake about it; this is a new bull market. That of course doesn’t mean it will last years like previous bull markets, but a nearly 57% gain in 5 months is what we’d classify as a bull market.

    Here are all the bull markets going back to the Great Depression and where this one ranks.

    [​IMG]

    Now let’s dig into the 5 month win streak. It is quite rare for stocks to gain from April through August, as the summer months tend to be somewhat tricky. Yet, we found there were six other years that saw these 5 months all close higher and the rest of the year was higher five times, with some solid returns in there. In fact, the only year that was lower the rest of the year was 2018, mainly due to the Fed policy mistake in December 2018.

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    “What might surprise many investors is 5 month win streaks are actually incredibly bullish going forward,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, a year after a 5 month win streak has seen the S&P 500 higher 25 of the past 26 times.”

    As shown in the LPL Chart of the Day, the S&P 500 Index gained more than 35% during this 5 month win streak, the most ever. Yet, the future gains after 5 month win streaks is very impressive, higher 25 out of 26 times a year later. An object in motion tends to stay in motion and this sure seems to be the case here.

    [​IMG]
     
  3. bigbear0083

    bigbear0083 Content Manager
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    JOLTS Show Some Return To Normalcy
    Wed, Sep 9, 2020

    Today's Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics (BLS) on the flows in and out of jobs as well as the number of job openings was pretty encouraging. As shown in the first pair of charts below, the number of open jobs as a percentage of the labor force has surged back to pre-pandemic levels and is close to the very strong levels seen at the prior peak. This is a good sign that labor demand is holding up pretty well in aggregate.

    [​IMG]

    Also encouraging is that while not at extreme lows, layoff and discharge rates are back to the levels they sat at in 2019. Instead of settling at a new higher level, the 1.4% private sector layoff and discharge rate is at the same level it was at numerous times during 2019 and the first two months of 2020. Hiring, which crashed and then surged as businesses started to reopen, was 4.1% the labor force in July. That was a stronger pace than any month in the history of the last expansion.

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    Finally, we think quit rates are about the best indicator of labor bargaining power available. As shown, they are bouncing and bouncing hard. They have not fully recovered from COVID's hit, but the size and speed of the bounce is consistent with a very strong trajectory for labor markets relative to what other indicators (for instance, permanent job losses in the Employment Situation Report, or the level of unemployment claims) are saying.

    [​IMG]
     
  4. bigbear0083

    bigbear0083 Content Manager
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    Housing Still Hot Headed Out of Summer
    Wed, Sep 9, 2020

    This morning, the Mortgage Bankers Association (MBA) released this week's reading on mortgage applications. Seasonally adjusted purchases were up 2.6% from last week, rising to the highest level since the first week of July. In the past few months as housing activity has surged, other than that July reading, there was only one other time that purchases were stronger, and that was in the second week of June. In other words, purchase activity is once again on the rise after taking a bit of a breather in the summer months and is currently back to some of its strongest levels since early 2009. With rates staying low, refi activity similarly remains around some of its stronger levels of the past decade gaining nearly 3% this week. Granted, that is still in the range that the index for refinances has been in since the spring.

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    As shown in the charts below, on a non-seasonally adjusted basis, purchase applications continue to run well above trend. Even with the big decline that went against seasonal norms in the spring (first chart below), the index of YTD purchase applications has averaged 290.1 each week compared to 272.4 last year (second chart below); these are by far the strongest readings of the past decade. For every week since the mid-June 2020 peak (which was later in the year than usual due to pent up demand; denoted by the blue dot in the first chart below), purchase applications have been consistent with seasonal trends, but each week's reading has been higher year over year by an average of over 24%. This week, thanks to the timing of the Labor Day holiday, the NSA purchase index rose by an even stronger 40% YoY which was by far the strongest reading of any week of this year.

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    Another housing indicator showing similarly strong demand that we touched on in last night's Closer was the July version of Black Knight's monthly Mortgage Monitor. Although it is at a greater lag than MBA's readings, this was yet another data point pointing to strong housing demand as new originations in June (lagged an extra month to the rest of the report that covered the month of July) surged to over 1.3 million which was the highest reading since at least 2013; doubling year over year. The July Mortgage Monitor also indicated that delinquencies as a percentage of all loans have continued to improve, falling to 6.9% compared to its recent peak of 7.76% back in May. Albeit improved, the delinquency rate is still elevated at its highest levels since early 2013/late 2012.

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  5. bigbear0083

    bigbear0083 Content Manager
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    Typical Early September Weakness Recovers Mid-Month Sells Off Month-End
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    As of yesterday’s close the market was down more than the historical average performance in September. DJIA was down nearly -3.3%, S&P 500 was down -4.8%, NASDAQ was off 7.9%, Russell 1000 was down -5.2% and Russell 2000 lost 3.7%. Today’s rally looks like the beginning of a textbook mid-month recovery rally However, the second half of September has historically been weaker than the first half. The week after options expiration week can be treacherous with S&P 500 logging 23 weekly losses in 30 years since 1990. End-of-quarter portfolio restructuring, and window dressing can amplify the impacts of any negative headlines.
     
  6. bigbear0083

    bigbear0083 Content Manager
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    5 Lessons Learned About Rising Rates

    While the direction of the 10-year Treasury yield over the last cycle was decidedly lower, as shown in LPL’s Chart of the Day, there were still six extended periods where it rose at least 0.75%, and in two of those it rose almost 2%. Looking ahead, economic growth below potential, slack in the labor market, and an extremely supportive Federal Reserve (Fed) may limit rate pressure in the near term, but with interest rates already low and massive stimulus in place, we believe the overall direction is likely to be higher.

    “Even in a falling rate period there are lessons from the last cycle about rising rates,” said LPL Financial Chief Investment Officer Burt White. “Among them: Careful when the Fed stops buying and sometimes the best defense is a good offense.”

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    While every economic cycle is unique, the last cycle highlighted these key takeaways about periods of rising rates:
    • Careful when the Fed stops buying. The two drivers of rising rates last cycle were economic growth and Fed bond purchases, also known as quantitative easing (QE). The Fed buys bonds to keep rates down, but the start of Fed buying has actually been the time when rates rise—likely on expectations that the purchases would help strengthen the economy. These periods also often followed large rate declines either because markets anticipated the start of Fed buying or the economy was faltering. The takeaway: unless the economy is really taking off, any rising-rate period may pause for an extended period, or even reverse, when the Fed backs off bond purchases.
    • Sometime the best defense is a good offense. Lower-quality, more economically sensitive bond sectors actually performed well during periods of rising rates during the last cycle. Rate gains were largely driven by economic improvement rather than a large pick-up in inflation, and that’s typically a good environment for sectors like high-yield bonds and bank loans. The downside is that these are much riskier bond sectors and don’t provide the potential diversification benefits of higher-quality bonds during periods of stock declines.
    • Don’t expect TIPS to provide much resilience because of their inflation adjustment. Treasury Inflation-Protected Securities (TIPS) are high-quality bonds that have provided a little extra insulation against rising rates compared to similarly dated Treasuries when inflation expectations increased. TIPS prices are adjusted for inflation, but even with the adjustment, they are still very sensitive to rates.
    • Investment-grade corporates can both hurt and help. If credit spreads narrow when rates are rising, investment-grade corporates can post some solid gains in a rising-rate environment, but if spreads are holding steady or even widening, they can be very sensitive to changes in Treasury yields, potentially (although not often) even more sensitive than Treasuries.
    • Mortgage-backed securities (MBS) have not provided as much insulation as corporates, but they also have had less downside. While MBS have certainly outperformed Treasuries during periods of rising rates, they have not performed as well as investment-grade corporates. But they also have come with less downside, losing only 1.4% in their worst performing period compared to a 4% loss during the worst period for corporates.
    With the Fed still providing strong stimulus and economic growth potentially poised to accelerate, we currently see an increased risk of rates moving higher. We are playing some offense with our equity exposure, which allows us to emphasize a focus on higher-quality bonds. Among bond sectors, we are emphasizing MBS and still prefer investment-grade corporates over Treasuries. History may not repeat, but if it rhymes, this positioning may help add resilience to a fixed income portfolio if rates extend their move off recent lows.
     
  7. bigbear0083

    bigbear0083 Content Manager
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    Best and Worst Performing Stocks Since the 9/2 High
    Thu, Sep 10, 2020

    Since the S&P 500 and Nasdaq peaked on September 2nd, we've seen rotation out of the post-COVID winners and rotation into laggards in the value space. Below we take a look at the best and worst performing stocks in the Russell 1,000 since the 9/2 high for the S&P. For each stock, we also include its YTD total return and its percentage change from the 3/23 COVID Crash low through 9/2.

    Capri Holdings (CPRI) is up more than any other stock in the Russell 1,000 since 9/2 with a gain of 17.43%. Even after the recent gains, however, Capri -- the holding company for brands like Michael Kors, Jimmy Choo, and Versace -- is still down 52.9% year-to-date.

    Only four other stocks are up more than 10% since 9/2 -- Beyond Meat (BYND), PVH, Virtu Financial (VIRT), and Reinsurance Group (RGA). Interestingly, BYND and VIRT are also up big (~80%) year-to-date, while PVH and RGA are both down more than 35% year-to-date.

    What stands out the most about the list of winners is that only one Technology stock made the cut -- Sabre (SABR). Most names come from the two consumer sectors including cruise-liners like Carnival (CCL), Royal Caribbean (RCL) and Norwegian Cruise (NCLH), Kohl's (KSS), Williams-Sonoma (WSM), Six Flags (SIX), Foot Locker (FL), and Ralph Lauren (RL). Both UBER and LYFT also made the cut with gains of 6% since 9/2. The 30 biggest winners since 9/2 are still down an average of 20% year-to-date, while the rest of the stocks in the Russell 1,000 are up an average of 1.46% YTD.

    [​IMG]

    While only one Technology stock made the list of biggest winners since 9/2, the sector accounts for two-thirds of the 30 biggest losers over the same time frame. As shown below, since 9/2, the six worst performing stocks in the Russell 1,000 and ten of the worst twelve all come from Tech. Notably, though, these 30 stocks that have all fallen more than 12% since 9/2 are still up an average of 5.6% YTD. Were it not for the horrid YTD performance of the Energy stocks that made the list, the average YTD gain would be even higher.

    [​IMG]
     
  8. bigbear0083

    bigbear0083 Content Manager
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    9/11 Bullish Since 2002
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    Tomorrow we honor the fallen and the heroes of 9/11. Up in Nyack, New York we will remember our hometown 9/11 fallen hero Welles Crowther, the man in the red bandanna. Before Welles was a trader at Sandler O’Neill at the Twin Towers and played lacrosse at Boston College where he graduated with honors and a degree in economics he was a Nyack High School graduate and lacrosse player, wearing his trademark red bandanna on the field. Hopefully we will be able to host our Red Bandanna Classic lacrosse tournament next year again.

    For the past 18 years the market has also seemed to remember and honor this day with a rather bullish record. 9/11 has been on the weekend 5 times since 2002 so we have used the next trading day in the table below and shaded those years in grey.

    DJIA was up 15 of the 18 years with an average gain of 0.56%; S&P 500 also up 15 of 18 with a 0.55% average; NASDAQ up 15 of 18, average 0.73%; Russell 1000 up 15 of 18, average 0.55% and Russell 2000 up 14 of 18, average 0.71%.
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  9. bigbear0083

    bigbear0083 Content Manager
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    Election Charts You Need To See: Part 1

    First off, our thoughts go out to everyone who was impacted by the tragic events of September 11, 2001—19 years ago today. It is a day to reflect and remember those who were lost.

    One of the top requests we’ve had here at LPL Research is for more charts on the election. Over the next week, we will share some of our favorite charts on this very important subject.

    Here’s how the S&P 500 Index performs under various presidents and congressional makeups. The best scenario has historically been a Democratic president and Republican Congress, while a Republican president and Democratic Congress has been the weakest.

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    Building on this, a split Congress historically has been one of the best scenarios for investors.

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    The best scenario under a Republican president is a split Congress, a potential positive for 2020 that has played out after the massive reversal in the stock market since March.

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    Looking at the four-year presidential cycle shows that stocks haven’t been down during a year the president was up for a re-election since FDR in the 1940s, another bullish tailwind for 2020.

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    Here’s another look at this, as stocks historically have done much better when there isn’t a lame duck president.

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    Come back on Monday, as we’ll share some more election charts then.
     
  10. bigbear0083

    bigbear0083 Content Manager
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    Homebuilder Sentiment Soars
    Wed, Sep 16, 2020

    Homebuilders had nothing to complain about in recent months, as the National Association of Homebuilders (NAHB) sentiment index was already tied for its best levels on record. Today's release of the September update surpassed all expectations. While economists were forecasting the headline index to come in at a level of 78, the actual reading was five points higher at 83. Never before has the homebuilder sentiment index topped 80, let alone moved as high as 83. If this sentiment survey was a stock chart, technicians would consider it a textbook breakout.

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    The internals of this month's report were also very strong. Both Present and Future sales as well as Traffic all surged to record highs, and on a regional basis, every region except the West increased. The decline in the West likely stems from the fires in California, but even with that decline, all four regions are now comfortably back above their pre-COVID levels.

    [​IMG]

    [​IMG]
     
  11. bigbear0083

    bigbear0083 Content Manager
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    Election Charts You Need To See: Part 2

    As we noted last week, the demand for election charts is off the charts (pun intended), so we are sharing some of our favorite election charts.

    Without further ado, here are some more election charts you need to know as November 3 inches closer.

    How stocks perform three months before the election has a stellar track record of predicting who will win in November. If stocks are higher, the incumbent party tends to win, while if stocks are lower, the incumbent party tends to lose. This indicator accurately predicted the winner 87% of the time (20 of 23) since the late 1920s.

    [​IMG]

    Building on this, if President Donald Trump is going to win, right about now is when the S&P 500 Index should start to outperform. Of course, if it weakens, it could mean we will be looking at a President Joe Biden soon.

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    Speaking of presidents up for re-election, here’s what the S&P 500 historically has done during re-election years.

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    Lastly, here are two final charts that may help forecast the outcome.

    If real per capita disposable income is higher, the incumbent president usually wins. Conversely, if wages are weak, that bodes well for someone new in the White House. Given real per capita disposable income is up more than 7% this year, it would suggest President Trump should take more than 70% of the votes. Of course, this is greatly skewed due to the CARES Act, so we’d put a major asterisk next to this one.

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    To sum up, Gallup poll approval ratings have done a nice job of predicting how many votes a president up for re-election might get. With a 42% Gallup approval rating currently, this comes out to 49% of the total votes for President Trump, which points to a close race.

    [​IMG]
     
  12. bigbear0083

    bigbear0083 Content Manager
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    Retails Sales Shifting to Slower Growth

    Retail sales rose 0.6% month over month in August following July’s downwardly revised 0.9% advance, but sales fell short of Bloomberg’s consensus expectation for a 1% increase. The retail sales control group, which excludes building materials, autos, and gas, fell 0.1% month over month and also missed estimates (source: US Census Bureau).

    The speed of retail sales’ recovery to pre-pandemic levels—just five months—has been remarkable, although the July 31 expiration of supplemental jobless benefits provided a headwind during the important back-to-school shopping season. During the 2008–09 financial crisis, retail sales did not return to their prior peak for more than three years!

    As shown in the LPL Chart of the Day, sales in August 2020 were 2.6% higher than in August 2019, impressive given the impact of the pandemic and lockdown recession. Some restrictions have eased but many remain in place, making this rebound particularly impressive. August sales were 1.9% above the levels back in February, when the numbers were inflated by an 8.5% year-over-year increase in grocery store sales on some early shelf-stocking.

    [​IMG]

    “Retail sales’ ability to remain above pre-pandemic levels is remarkable considering the shrinking boost from supplemental jobless benefits while social distancing and business restrictions have continued,” said LPL Financial Equity Strategist Jeffrey Buchbinder. “We expect steady gains to continue as more restrictions are eased and consumer confidence is restored, though still-high unemployment and dwindling stimulus make the road ahead a bit tougher.”

    Looking at the various segments, sales gains were supported by the continued recovery in restaurants, up 4.7% (but still down 17% year over year), and housing-related spending. Weak spots included food sales, sporting goods (off elevated levels), and department stores. E-commerce sales continued to chug along, growing 20% year over year but were unchanged from July’s levels.

    The consumer recovery from the pandemic has been impressive despite the shortfall in August retail sales. Fading stimulus and still-high unemployment may slow the pace of consumer spending growth this fall, but the progress to date is encouraging.
     

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