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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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    Optimism Comes Into the Light
    Thu, Oct 8, 2020

    Up until today, the S&P 500 has been somewhat wishy-washy on whether or not it was to stay above its 50-DMA. Despite that choppy price action in addition to a crazy few days of headlines ranging from the squashing then revival of hopes for a stimulus deal to the president's contraction of and recovery from COVID, sentiment has seen a significant pick up this week. The American Association of Individual Investors' weekly reading on bullish sentiment rose 8.5 percentage points this week to 34.74%. That is the highest level of bullish sentiment since the initial rally off the bear market lows on April 16th when bullish sentiment was only slightly higher at 34.86%. That 8.5 percentage point increase was also the largest one week rise in bullish sentiment since January when it rose 8.76 percentage points.

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    Those gains to optimism took from the bearish camp as bearish sentiment fell to 38.97%. Although the 4.1 percentage point decline was not particularly large—for example, less than a month ago we saw a larger 8.06 percentage point decline—bearish sentiment has fallen back below 40% for just the second time since mid-June; the other week below 40% being August 27th (39.62%). Bearish sentiment is now at the lowest level since June 11th.

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    With bullish and bearish sentiment at new highs and lows, respectively, the bull-bear spread has reached its least negative level since June 11th. At -4.23, the record streak of consecutive negative readings in the spread—meaning bearish sentiment outweighs bullish sentiment—is on the ropes, but still alive growing to 33 weeks long.

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    The gains in bullish sentiment also took from neutral sentiment as the percentage of investors reporting as such fell from 30.69% to 26.29%. That is the lowest level for neutral sentiment since a reading of 23.79% back in mid-July. It was also the largest single week decline in the reading since that same week.

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  2. bigbear0083

    bigbear0083 Content Manager
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    Air Passenger Traffic Achieves Upward Lift
    Mon, Oct 12, 2020

    With COVID case counts on the rise throughout the country, you would think that Americans would be a bit more concerned about getting on airplanes. Rather than hunker down, though, Americans have been increasingly spreading their wings. The latest passenger throughout numbers released by TSA showed that on Sunday 984,234 passengers went through security checkpoints at US airports. That was the highest single-day reading since March 16th. This weekend's air passenger traffic also helped to push the 7-day average of traffic to new post-COVID highs. After rising and then falling back down after the Labor Day holiday, air passenger traffic has 'surged' in recent days to push the current 7-day average up to 819,384 passengers per day.

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    Air travel has been on the rise, but the term surge may be too strong. When we compare air passenger traffic levels to where they were a year ago, we're still down over 65% on a 7-day average basis. Even yesterday's strong passenger numbers were still down over 61% from their same levels last year. In other words, there's still a lot of room for improvement! The chart below compares the y/y change in passenger throughput to the performance of the Airline ETF (JETS) since the start of the pandemic. Not surprisingly, there has been a pretty strong correlation between the two as increases in passenger traffic have been accompanied by rallies in the airlines and vice versa.

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  3. bigbear0083

    bigbear0083 Content Manager
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    "Meet the Nasdaq"
    Mon, Oct 12, 2020

    Tim Russert used to sign off from each week's episode of Meet the Press with the tagline, "If it's Sunday, it's Meet the Press." Borrowing from that phrase, the Nasdaq's tagline might as well be "If it's Monday, it's Meet the Nasdaq." With a gain of over 3% today, the Nasdaq is doing what it always does on Mondays - rally! The chart below shows the year-to-date performance of the Nasdaq so far in 2020 as well as its performance if you only owned the index on Mondays. Year to date, the Nasdaq is up an impressive 32.7%, putting it on pace for the first back-to-back annual gain of over 30% since 1998 and 1999. Even crazier, though, is the fact that the Nasdaq is up over 20% year-to-date on Mondays alone! The weekday that most people love to hate has been responsible for more than 60% of this year's Nasdaq gain.

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    In the table below we summarize the performance of the Nasdaq by weekday so far in 2020. Monday's average daily gain of 0.57% with gains more than 75% of the time is both the best average daily return and the most consistent to the upside. Tuesdays and Wednesdays haven't been particularly bad for the Nasdaq either. Both days have seen an average one-day gain of 0.30% or more, and Wednesday has been positive three-quarters of the time. While the first three trading days of the week have been strong, Thursday and Friday have been days to forget. Although both days have also experienced positive returns more than half of the time, the average one-day change for both is negative resulting in declines on a cumulative. Thursday has been the weakest with a cumulative decline of 11.53% while Friday's cumulative decline has been more modest at just 3.46%. TGIM.

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  4. bigbear0083

    bigbear0083 Content Manager
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    Small Business Smiles
    Tue, Oct 13, 2020

    Sentiment among small businesses continued to improve in the month of September according to the NFIB's monthly Small Business Optimism Index. As shown below, the index rose 3.8 points to 104 which is now just half of a point below the levels prior to the pandemic in February. That was also better than expectations of a smaller improvement to 101.2. Small business sentiment has now risen in four of the past five months.

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    In the table below, we break down this month's report by each of the ten components of the headline number as well as the many other indices included in the report such as those not used as inputs to the headline number and what small businesses are reporting to be their biggest problems.

    Across all indices of the September report, breadth was solid with only a couple of indices falling month over month—Expected Credit Conditions and Credit Conditions Availability. Some of those that were higher saw record or near-record month-over-month increases.

    Some of the most notable indices this month included those regarding inventories. The Current Inventories index which gauges the net percent of owners viewing current inventory levels as too low rose 2 points to a record high reading of 5. Given this, the index for Plans to Increase Inventories is tied with the reading from November of 2004 for a record high of 11. Indicating low inventory levels, the report is consistent with some other recent data like the regional Fed manufacturing surveys. Those low inventories are resulting in higher prices as that index's 12-point increase in September marked the biggest one month gain on record. While the Higher Prices index is not at any sort of an extreme, September's move indicates that a rising number of businesses are raising prices.

    Additionally, those higher prices and lower inventory numbers appear to be a result of demand that continues to rapidly improve. The indices for Actual Sales and Actual Earnings Changes remain negative for a sixth and tenth month in a row, respectively, meaning a net number of businesses continue to see lower rather than higher top and bottom-line numbers. But these indices are seeing big moves higher. For the index of Actual Earnings Changes, the 13-point climb in September was the largest on record and the 9-point increase for Actual Sales Changes followed a 13-point increase in August; both being some of the largest one-month moves on record. In order to meet the needs of this demand, a higher number of businesses plan to increase employment with that index rising to 28; the highest level since December of 2018. Even though businesses seek to hire more, they also report it is hard to fill positions as the index of Job Openings Hard to Fill rose to the top 5% of all readings. Cost and quality of labor also were reported as two of the most pressing problems for businesses.

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  5. bigbear0083

    bigbear0083 Content Manager
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    Small Businesses Cautiously Optimistic
    Tue, Oct 13, 2020

    In an earlier post, we highlighted the details of the September NFIB Small Business Optimism report. The report showed overall sentiment among small businesses has continued to improve as demand has bounced back (though it has not yet fully recovered as still more businesses report lower sales and earnings on a net basis) leading to low inventory levels, higher prices, and a need for more employment. While generally improved conditions have lifted optimism, that is not to say small businesses have given an all-clear. The Uncertainty Index from NFIB has risen each of the past three months with September's 2-point increase bringing it back to the same level as March of this year. In other words, it is perhaps best to say that small businesses are cautiously optimistic.

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    From the pandemic to the Election, there are plenty of reasons for businesses to be uncertain. As for what they are reporting to be the biggest problems, labor remains at the top. 30% of businesses have reported that either cost (9%) or more predominately quality (21%) of labor are their biggest issues. While off the highs from the past few years, the current readings are still historically elevated.

    Behind labor, government related problems also are largely on the minds of business owners. Government red tape and taxes combine to account for 29% of businesses' biggest problems. While that is a large share, neither of those indices are at any sort of extreme.

    Poor sales, on the other hand, remains as the third major concern for businesses. 12% of businesses reported poor sales as the single most important issue in September, down from 15% in August and 7-percentage points lower than the April peak. While improved, the number of businesses seeing demand as a major issue is still at some of the highest levels of the past several years.

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  6. bigbear0083

    bigbear0083 Content Manager
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    Sentiment By State
    Thu, Oct 15, 2020

    Below is a look at the year-to-date reading for the high-frequency Morning Consult daily consumer sentiment indicator. While still well off highs seen prior to the COVID Crash in late February and early March, sentiment has generally been ticking higher off the lows. You'll notice in the chart below, however, that while the "Future Expectations" reading is still bouncing back nicely, the "Current Conditions" reading has been going more sideways over the last couple of months.

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    We can also look closer into state level readings from the daily Morning Consult sentiment numbers. In the heat map below, we show the changes in the levels of consumer sentiment for each state since mid-February. As shown, the lower 48 have seen much larger improvements than Alaska or Hawaii with the largest improvements coming in the Northeast and parts of the Midwest. On the other hand, in addition to Hawaii and Alaska, some of the key swing states like Maine, New Hampshire, and Nevada have improved the least. Of all 50 states, Vermont's current reading on sentiment is the closest to its February levels, but even Vermont is still down 17.9 points.

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  7. bigbear0083

    bigbear0083 Content Manager
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    Rocketing Restaurants
    Mon, Oct 19, 2020

    In Friday's Bespoke Report sent to members, we noted two groups that have been surprisingly strong performers over the past several months: brick and mortar retailers and restaurants. Focusing on the latter, in the chart below we show the S&P 1500 Restaurants index over the past five years. As shown, up until last week the index's last high prior to the pandemic actually came well before the rest of the market's peak in February. The S&P 1500 Restaurants peaked in August of last year and only made a lower high on February 20th before falling over 40% during the course of the COVID Crash in late February and early March. Since the low on March 18th, the index has now risen over 77% and just broke out to a new all-time high.

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    COVID lockdowns and restrictions on in-door dining have impacted the restaurant industry like nothing ever seen before. Based on the monthly Retail Sales report, the Bars & Restaurants category has seen its share of total retail sales fall more than any other group since COVID began, while the Food & Beverage Store (grocery stores) category has been one of the biggest gainers. This is what makes the recovery for the S&P 1500 Restaurants group so noteworthy. While single-location restaurants run by individuals may be having a tough time with capacity limits depending on their geographic location, the publicly-traded restaurant companies with locations throughout the US have seemingly adapted much better in the post-COVID world. That's what their share prices are telling us at least.

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    As shown in the table below, nearly all of the stocks in the S&P 1500 Restaurant group made 52-week lows around the time of the broader market bear market low in mid-March. All but four have since seen their stock price double. Brinker (EAT), the parent company of Chili's, has risen the most since its low having gained well over 500%. Even after those massive rallies, there are still eleven that are down over the past five years and eleven that are down on a year-to-date basis. Dave & Busters (PLAY) and Red Robin (RRGB) are both down by more than 50% in 2020.

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    Of this group, Domino's Pizza (DPZ) is the only one that has reported third-quarter earnings so far this earnings season with overall decent results beating on both the top and bottom line. As shown in the screenshot below, we created a Custom Portfolio of these stocks so members can track these names as earnings season carries on. From our Earnings Explorer data, the rest of the stocks in the group are scheduled to release earnings over the next several weeks.

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  8. bigbear0083

    bigbear0083 Content Manager
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    It's Singles Month!
    Tue, Oct 20, 2020

    Today's release of September data on Housing Starts and Building Permits was mixed at the headline level as Housing Starts missed expectations while Building Permits topped consensus forecasts. In each case, the magnitude of the beat or miss was similar, so in the end, it was basically a wash from a top-level perspective.

    Within the details of the report, two trends stood out. First, in terms of both starts and permits, single-family units were the star of the show. Single-family Housing Starts rose 8.5% m/m and more than 22% on a y/y basis, while single-family Building Permits also saw similar levels of increases. In both cases, September's levels for single-family units were the strongest since mid-to-early 2007. The second notable trend evident in this month's report was a very strong environment in the Northeast. On a m/m basis, Housing Starts in the Northeast surged 66.7% while Permits increased over 25% m/m. There's been no shortage of stories out there highlighting the exodus out of big cities like New York, and these trends suggest former residents of the Big Apple are moving out to the greener pastures of the suburbs.

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    From a longer-term perspective, the quickly improved residential housing market bodes well for the broad economy. Housing Starts and Building Permits typically roll over leading up to and then plunge during recessions. This time around, the nature of the pandemic and the shutdowns were so instantaneous that economic data didn't have time to roll over, and the massive amounts of subsequent stimulus and liquidity made the pullback short-lived. What's most amazing about where things stand now is that even as the NBER hasn't even announced the official end of the recession, Housing Starts on a 12-month average basis are already near their pre-recession highs! Normally, once a recession ends, it takes years before Housing Starts get back to their prior highs.

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    Taking a closer look at more recent data, the chart below shows the 12-month average of both Housing Starts and Building Permits over the last ten years. Incredibly, from their late 2018 highs through mid-2019 lows, both saw larger declines than they did during the pandemic.

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    While the 12-month average of Housing Starts and Building Permits are knocking on the door of new multi-year highs, the strength in single-family units has already pushed those readings to new post-financial crisis highs. Whether or not the economy rolls over again as economic momentum stalls out is up for debate, but looking at this data and the homebuilder sentiment data from Monday, it's hard to look at it and say that the recession is not over.

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  9. bigbear0083

    bigbear0083 Content Manager
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    October Optimism For Homebuilders
    Mon, Oct 19, 2020

    Given housing inventories remain historically low thanks to still strong demand, homebuilders have plenty to be optimistic about. The National Association of Home Builders (NAHB) has continued to show this strength as its monthly sentiment survey set a record high for the month of October. Back in August, the index tied the previous record level of 78 from December of 1998. Over the past two months, it has only raised that bar, coming in at 85 this month; 2 points above forecasts and last month's reading of 83.

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    The rise in the index comes on broad strength across each of the sub-indices. Present Sales, Future Sales, and Traffic all matched or made record highs in October. The only sub-index that was not higher was for Traffic, though, it was unchanged at a record high.

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    As for the look across each of the four US regions, the West and Northeast both saw sizeable upticks to new records, but sentiment in the Midwest and South were actually slightly lower. For the Northeast, this is the third record in a row. Meanwhile, the West's record high in October finally surpassed the prior high of 91 from October of 2005. Finally, even though sentiment fell in the Midwest and South, both remain at higher levels now than any month other than September's record highs.

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  10. bigbear0083

    bigbear0083 Content Manager
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    California Back in the Game as Claims Continue to Fall
    Thu, Oct 22, 2020

    Another week, another pandemic low for jobless claims. Initial jobless claims came in at a seasonally adjusted 787K this week. That is down 55K from last week's revised number which was taken down by a similarly large 56K from the original print of 898K. Since the report released on October 1st, reporting of claims out of the most populous state in the US, California, has been on pause in order to reduce backlogs and implement fraud protection. As a result, California claims have been held constant at 226K over the past few weeks. This week the revisions for those past weeks are in and reporting from the Golden State has resumed. The most recent claims reading from that state came in at 158K compared to the revised 176K last week. In other words, although it did not account for the entirety of the big moves, California's numbers accounted for a large portion of the downward revision last week as well as this week's decline.

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    Regardless of the nuance concerning California, overall national claims were healthier this week. Unadjusted claims fell as is seasonally normal for this week of the year, coming in at a pandemic low of 756.6K. That is a 73.1K decline from last week's revised 829.7K print (revised down from 885.9K).

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    Lagged one week to initial claims, continuing jobless claims were also lower this week falling to 8.373 million. That is not only the lowest level since the final two weeks of March, but it was also the first time that continuing claims were below 10 million in back to back weeks since then. Again, with the point that state-level reporting quirks could play a role in the large moves, this week also marked a third consecutive week that claims have fallen by more than one million week over week; the only time in the history of the data that has happened.

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    While regular continuing claims have continued to fall, they do not necessarily tell the full story as there are multiple other programs like Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and extended benefits to name a few. Although these are lagged yet another week (most recent data for the first week of October), they show the same story of continued improvements as total claims have fallen for three straight weeks. The two largest programs—regular state claims and PUA claims—have been the main drivers. On the other hand, one worrying sign is PEUC and extended benefits have been on the rise in recent weeks, though they both remain relatively small but still a growing shares of total claims.

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  11. bigbear0083

    bigbear0083 Content Manager
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    Leading Indicators Returning Back to a Normal Range
    Thu, Oct 22, 2020

    Like some other indicators earlier this year, the index of Leading Economic Indicators released each month by the Conference Board experienced both its largest-ever m/m decline and increase in the span of under six months. In March, when the US economy was essentially shut down, the index of Leading Indicators dropped a record 7.4% in just a single month. By June, as the economy started re-opening, the index saw a record m/m gain of over 3%. While it hasn't been enough to erase all of the declines, it has come a long way. Since that June surge, though, the last three months have seen a deceleration of the growth in Leading Indicators for three months in a row to September's level of 0.66%. While 0.66% is down a lot from the June high, before the last three months, 0.66% would have been the strongest level of growth in this index since February 2018.

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    As mentioned above, the index of Leading Indicators is still well off of its highs, but it has still erased more than half of the declines we saw prior to the COVID crash. The chart below shows the Leading Indicators index going back to 1959, and looking at the index's behavior during prior recessions would once again suggest that the recession is over. In every recession of the last 60 years, never before has there been a time where the index saw this large of an increase from its lows with the economy still in recession.

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    The ratio of Leading Indicators to Coincident Indicators also shows an interesting trend with regards to the current period relative to others. First off, as we have noted in the past, throughout history the ratio has typically started to roll over well before the onset of a recession. Even in the current period, the ratio peaked more than a year before the recession started. Compared to prior periods, the rollover wasn't nearly as large in magnitude as prior periods, and there's obviously no way this ratio could have predicted a global pandemic, but technically speaking its record of accurately predicting recessions remains intact.

    The lower chart shows a larger version of the ratio since the start of 2009, and in it, we show each of the prior periods during this span where the ratio saw an extended period without making a new high. For the current period, it has now been 24 months since the ratio's last peak. While that's a long time, from the middle of 2011 through mid to late 2013, the index went even longer without making a new high.

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  12. bigbear0083

    bigbear0083 Content Manager
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    NASDAQ 100 Battles Support
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    The big tech NASDAQ 100 index ($^NDX), which is tracked by the $QQQ ET, is struggling to hold current support at 11615. We had some folk ask us to post our current support and resistance levels for the NDX. In addition to several support levels there are a couple of Candlestick Doji patterns that our good friend, the venerable John Person (@PersonsPlanet), schooled us on when we did the Commodity Trader’s Almanac together. It is featured in his most excellent book, Candlestick and Pivot Point Trading Triggers.

    It looks like we logged a Dragonfly Doji at the high on September 2, which has bearish implications. Then today there was a likely failed Morning Star Doji, which is a bottom reversal pattern, when NDX closed below yesterday’s close. NDX needs to hold support here around 11615, which lines up with the 9/4 and 10/6 opens and the top of the September cup pattern.

    If 11615 fails to hold, the next level of support seems to be around 11245, which aligns with the top of the mid-August consolidation and the bottom of the mid-September consolidation as well as the 9/28 Doji Hammer gap and the early October consolidation. Further support is shown in the chart down at 10750, 10470 and the old February 2020 high at 9775.

    Current resistance sits around 12130 near the top of the September mini-Waterfall decline and the October highs and then above that at the September Doji high of 12420. A move higher over the next day or so with a green candlestick would be constructive. A break below 11615 would bring 11245 into play.
     

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