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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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    Emerging Markets Cheering a Potential Biden Win
    Thu, Nov 5, 2020

    The US equity market has seen a massive rally in reaction to what is looking like a Biden victory over President Trump coupled with the Republican party maintianing its majority in the US Senate. None of these results are official at this point, so they are subject to change, but these are the most likely scenarios as of now. Outside of the US, emerging markets have also rallied. In just the last two days, the MSCI Emerging Market ETF (EEM) has rallied 5% and broken above resistance to new 52-week highs. If for no other reason then Biden's campaign slogan isn't America First, the rationale behind the rally makes some sense.

    [​IMG]

    The reaction of EEM in the aftermath of this election is very much different from what happened in 2016. Heading into the 2016 election, EEM had been trending higher, but pulled back in the days leading up to the election and broke its uptrend that had been in place since earlier in the year. Again, Trump's America First approach was understandably viewed as a headwind to emerging market equities.

    [​IMG]

    While the initial reaction of EEM to Trump's election was negative, that weakness didn't last long. The chart below shows the performance of EEM in the two months before and one year after the 2016 election. The gray box represents the same period shown in the chart above. Within days after breaking its uptrend after the 2016 election, EEM bounced back, rallied to its 50-DMA, tested its November low, and then in the early days of 2017 it was off to the races as EEM. In fact, even accounting for the post-Election Day declines, one year after the 2016 election, EEM was up 25% which was actually more than the 21% return for the S&P 500! The moral of the story here is that first reactions aren't always the right reactions, and as an investor it's not just imperative to know the environment you are operating in, but also when the tides are turning.

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  2. bigbear0083

    bigbear0083 Content Manager
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    Bullish Sentiment Back Above Average
    Thu, Nov 5, 2020

    After remaining depressed for most of the past few months, the past several weeks have marked a rapid turn higher in bullish sentiment as per the American Association of Individual Investors' weekly survey. As shown in the first chart below, bullish sentiment rose another 2.67 percentage points this week to 37.96%. That is the most optimistic reading on sentiment since the first week of March.

    [​IMG]

    As the percentage of bullish respondents has risen to the high-30% range, it has finally moved just barely above its historical average of 37.91%. That is the first time this has happened in 34 weeks. As shown below, that makes for the second-longest streak of below-average readings on bullish sentiment in the survey's history. The only one that went on for longer was back in 2016 when the streak lasted for exactly a year.

    [​IMG]

    As bullish sentiment rose, bearish sentiment fell. Only 31.48% of investors reported as bearish which is the lowest level of market pessimism since February 20th; one day after the last bull market peak. Following the stretch of historically elevated readings over the past few months, this week's decline brings the reading into the middle of its historical range (58th percentile), though unlike bullish sentiment, that is still slightly above the historical average of 30.63% as has been the case for the past 37 weeks. That is also the second-longest streak of above-average readings in bearish sentiment on record behind one that went on for 83 weeks ending in 2009.

    [​IMG]

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    Given the respective moves in bullish and bearish sentiment levels, the bull-bear spread has moved higher into positive territory after a reading of zero last week. With a move higher of 6.48 points this week, the bull-bear spread is at the highest level since February 20th.

    [​IMG]

    Not every investor has a strong opinion on the market though. The percentage of respondents reporting as neutral was also higher this week, rising 1.15 percentage points to 30.56%. That is still off the pandemic high of 31.96% from July.

    [​IMG]
     
  3. bigbear0083

    bigbear0083 Content Manager
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    Typical November Trading: Strong Start & Finish
    [​IMG]
    Historically speaking, November has a solid reputation for gains over the long-term and during the last 21 years. Since 1950, November is the best month of the year for S&P 500 and Russell 1000 (since 1979). It is also the second-best month for DJIA, NASDAQ and Russell 2000. Rankings have changed modestly during the last 21 years. S&P 500 and Russell 1000 slip to fourth best while DJIA and NASDAQ remain second best. Russell 2000 November performance improves to number one.

    In the above chart, with just two trading days recorded so far, Russell 2000 is already off to a strong November, up 4.9% as of today’s close. DJIA, S&P 500, NASDAQ and Russell 1000 are also off to above average starts so far. Strength at the start of the month and in the later days of the month is well defined above. Trading days five through fourteen have historically been weaker.
     
  4. bigbear0083

    bigbear0083 Content Manager
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    2 Post-Election Charts You Need to See

    The election is over, but the questions are mounting. We don’t know who will be the next president as of Wednesday morning, but we do know that stocks tend to do well the final two months of an election year. “Once the uncertainty is over, stocks tend to rally in November and December, with November the best month of the year during an election year,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Of course, 2020 isn’t like any other year, and we still could be a ways away from who the winner will be.”

    The LPL Chart of the Day shows that the S&P 500 Index tends to do very well the final two months of the year, especially during election years.

    [​IMG]

    The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1928 incorporates the performance of predecessor index, the S&P 90

    One of the big takeaways so far from Tuesday night is that the Senate likely will stay Republican, meaning we may have a divided Congress. The chances of higher taxes and more regulation likely took a hit under this scenario. This could be a nice tailwind for stocks, as the S&P 500 historically has done quite well under a divided Congress, up more than 17% on average. Additionally, in years with a divided Congress, stocks have been higher the past 10 times, with 2020 potentially being the 11th in a row.

    [​IMG]

    This election is far from over, so stay tuned to LPL Research as we continue to monitor things!
     
  5. bigbear0083

    bigbear0083 Content Manager
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    New High in New 52 Week Highs
    Mon, Nov 9, 2020

    As equities and other risk assets surge, a massive number of S&P 500 stocks are hitting new 52 week highs today. As shown in the chart below, as of midday 27.92% of S&P 500 stocks have reached new 52 week highs today and just one stock, Biogen (BIIB), is reaching a new 52 week low. The net reading of 27.72% is the highest reading for net new highs since January of 2018. Prior to that, you would need to go all the way back to May 22nd of 2013 to find the last time there was such a high reading.

    [​IMG]

    Looking at the best-performing stocks in the index today, the list is mostly comprised of the stocks that have been extremely beaten down in the COVID economy like energy, travel, and retail/retail real estate names. Despite this, some still find themselves as some of those furthest below their 52-week highs. Take for example Carnival Cruiselines (CCL). The stock is seeing a phenomenal 35% gain just in today's session, but even at today's highs it was still well over 60% below its high for the year. It is a similar story for CCL's peer, Norwegian Cruise Line Holdings (NCLH) which is up 27.78% but was 61.4% from its highs at its best price today. On the other hand, there are 28 stocks that have come within 1% of their 52-week highs at their high prices today. Another 80 stocks have come within 5% of their 52-week highs at their intraday highs today.

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  6. bigbear0083

    bigbear0083 Content Manager
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    Big Milestone For Small Stocks
    Tue, Nov 10, 2020

    No US equity index has reacted more strongly since Election Day than the Russell 2000 small-cap index. As shown in the chart below, the index finally broke out above its highs from earlier in the year following Monday's positive vaccine news. After that move on Monday, the Russell 2000 was up over 10% in just the last six trading days.

    [​IMG]

    In just about any other year besides 2020, a 10%+ move in the Russell 2000 would be an extraordinary move, but this year the most recent move is actually the sixth one of at least that much. In fact, coming out of the March lows, the Russell saw three six-day moves of 19.1%, 16.3%, and 14.8%, respectively. The frequency with which we've seen these 10%+ moves in the Russell 2000 over a six-day period has been unlike any other year in the Russell's history. Behind 2020, the year with the next highest total of 10%+ moves was 2011 (4) and then 2008 (3), and the most there has been in any twelve-month rolling basis is five spanning late 2008 through the first half of 2009.

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  7. bigbear0083

    bigbear0083 Content Manager
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    Small Business Still Swimming
    Tue, Nov 10, 2020

    The NFIB's reading on small business optimism was unchanged in October. The headline index held steady at 104 which was slightly worse than expectations for a small increase to 104.1. While not higher or lower, the index remains around similar levels to just before the pandemic began and at the low end of the past few year's range.

    [​IMG]

    That low end of the past few years' range is also at the high end of the historic range. At 104, the headline index is still in the top 10% of all readings. With no change in October, breadth among the components was mixed, but most indices were still indicative of more companies reporting stronger conditions on a net basis, albeit not at the same pace as September. Of the ten indices that comprise the headline number, half fell versus September's levels, one was unchanged, and four were higher.

    For the labor market as a whole, multiple indices were not as strong as September, but the readings were still indicative of improvement. Even as the index for Plans to Increase Employment declined five points, there are still more companies expecting to increase hirings than decrease them. Meanwhile, fewer companies are reporting realized decreases in employment as the index for Actual Employment Changes rose 4 points to the strongest level in seven months. That is still consistent with more firms on net basis reporting decreases in employment over the past three months. Additionally, a third of companies continue to report that job openings are hard to fill (down 3 points from last month). 48% of responding firms also reported that there are few or no qualified applicants for their positions, and 87% of firms report that they are currently hiring or trying to hire. In other words, while plans to increase employment are not as strong as they were in September, hiring troubles rather than layoffs appear to a bigger factor. Also, an increasing number of businesses plan to raise hiring in the near future. Given this, a net 18% of firms report that they plan to increase compensation plans with a net 23% raising compensation in October, the same net percentage as September.

    As employment metrics are fairly strong, a higher share (net 11% vs 8% last month) of companies reported that they expected sales to be higher. Meanwhile, the index for Actual Sales Changes rose 12 points - tied for the fourth largest MoM gain on record. That was the first positive reading since March. With demand appearing strong, the index for Plans to Increase Inventories reached a record high in October which is a positive for growth going forward.

    [​IMG]

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  8. bigbear0083

    bigbear0083 Content Manager
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    3 Election Charts That Caught Our Attention

    Stocks just had their best week since April, with the S&P 500 Index incredibly a chip shot away from new all-time highs. Joe Biden will be the next President of the United States, but markets are confident Republicans will maintain the Senate, and this means gridlock in Washington. Remember, gridlock is good, as it pulls policy towards compromise and avoids extremes. Also, any legislative changes to taxes, regulation, and capital gains will have meaningful input from both parties.

    As shown in the LPL Chart of the Day, a split Congress tends to mean stronger stock returns, almost ignoring whether a Democrat or Republican is in the White House. The most likely outcome from the election at this point is a Democratic president with a divided Congress—a scenario that historically has produced solid S&P 500 returns of 15.9% a year.

    [​IMG]

    Assuming President-elect Joe Biden takes over in January 2021, it is important to note that historically stocks haven’t done as well the first and second years of a new president compared with an incumbent winning. This makes sense though, as historically voters may have chosen new leadership in part because of economic weakness, and the uncertainty of a new president’s policies could also hold things back some. If things are good, the president tends to win reelection. Things turn around significantly by the third year in office, though, if there’s new leadership. Of course, it’s worth noting that the first year of a new president has seen the S&P 500 higher recently, with stocks up nearly 20% the first year under President Donald Trump (2017) and 23% under President Barack Obama (2009).

    [​IMG]

    Lastly, the strength from stocks around the election has been rather historic. “The S&P 500 added 1% on four consecutive days, which hasn’t happened since late 1982,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Although there are only three other times this rare blast of strength happened since WWII, it is worth noting that strong returns going out a year took place after each instance.” The bottom line: Extreme buying pressure has a funny way of resolving higher, and we don’t anticipate this time being any different.

    [​IMG]
     
  9. bigbear0083

    bigbear0083 Content Manager
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    Finally A New High for Small Caps
    Mon, Nov 16, 2020

    It only took over two years, but the Russell 2000 finally put in a new all-time high on Friday. As shown in the charts below, Friday marked the first all-time high on a closing basis since August 31st, 2018; a total of 553 trading days between highs. As shown in the second chart below, since the index began trading in the late 80's, that makes for the third-longest stretch without a new high. The only two longer periods were from March 10th, 2000 through April 2nd, 2004 and from July 16, 2007 through April 26th, 2011. Both of those streaks were nearly twice as long as the past two years' streak.

    [​IMG]

    The Russell 2000 is up another 2% to more fresh highs this morning, but the recent move to new highs has left the index very overbought. As shown in the snapshot of our Trend Analyzer below, at Friday's close small caps like the Russell 2000 (IWM) and Core S&P Small-Cap ETF (IJR) are two of the most overbought major index ETFs after having seen some of the strongest performance over the past five days. Granted, as other large-cap indices like the S&P 500 (SPY) and Nasdaq (QQQ) were quicker to return to all-time highs earlier this year making them some of the stronger performers on the year, small caps have been laggards on a year to date basis. In other words, this year's weakest performers have been a factor in recent strength. Click here to view Bespoke's premium membership options for our best research available.

    [​IMG]
     
  10. bigbear0083

    bigbear0083 Content Manager
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    A Month for the Ages
    Mon, Nov 16, 2020

    Just when you think you've seen it all from this market, a month like November comes around. Stock returns so far this month have been extraordinary, and what makes the gains even more impressive is the fact that they came not from a starting point of a depressed bear-market environment but instead from a level that was already pretty close to record highs. Within the Russell 3000, which encompasses stocks with market caps of all sizes, the average MTD performance of stocks in the index is a gain of over 15%. Even in the large-cap S&P 500, the average stock in the index has rallied more than 13.5% so far this month! Keep in mind too that these are just averages, and plenty of individual stocks are up multiples of that.

    In the Russell 3000, there are 51 stocks that are up over 50% so far in November. We don't have enough room to list them all, but the first table below shows the twenty top performers. Topping the list is Five Prime Therapeutics (FPRX), which has rallied more than 349% this month! That's years worth of returns in sixteen days. Behind FPRX, there are two other stocks - Cooper Standard (CPS) and Revlon (REV) - which have both more than doubled. Many of the names listed below are unknown small caps, but a handful of names like Transocean (RIG), Coty (COTY), and Lyft (LYFT) are very well known.

    [​IMG]

    In the large-cap S&P 500, the gains haven't been as gaudy but are still impressive. As shown in the table below, the twenty top-performing stocks in the index are all up over 30% MTD. One sector well represented on this list is Energy with eight of the twenty names listed coming from that sector.

    [​IMG]

    While just about every stock in the S&P 500 is up this month, 18 stocks have managed to trade lower. Of these 18 stocks, only two - Hanesbrands (HBI) and NortonLifeLock (NLOK) - are down more than 5%. What's really interesting about this list, however, is that while Energy dominates the list of S&P 500 winners, no sector dominates the list of losers as it's a diverse set of stocks spanning ten of the eleven GICS sectors. The only sector not represented is Industrials.

    [​IMG]
     
  11. bigbear0083

    bigbear0083 Content Manager
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    Long Term Averages Taken Out
    Tue, Nov 17, 2020

    With equities having another strong day yesterday, a large number of stocks closed above their 200-DMAs. For the S&P 500 as a whole, nearly 90% of the index closed above their long term moving averages. That was the highest percentage for the broad index since July 3rd, 2014. As equities pullback today, that reading is lower at 86.56% as of this writing which is still in the 90th percentile of readings since 1990.

    As shown in the charts below, the same applies on a sector by sector basis as well. Consumer Discretionary, Consumer Staples, Financials, Industrials, and Materials all currently boast readings above 90%. For Consumer Discretionary, there have been a few similarly high readings since the start of the month, and these have all been the highest on record since at least 1990. For other sectors, recent readings have similarly been at multi-year highs. Levels for Communication Services, Health Care, and Materials, are all their highest since September or late August, but for others, it has been much longer since we saw similar readings. For example, the last time Industrials saw as high of a percentage of stocks above their 200-DMA was way back in May of 2013, and for Consumer Staples, the last higher reading was in October of 2013. The sector that has the weakest number of stocks above their 200-DMAs is unsurprisingly Energy. Whereas yesterday exactly half of the stocks in the Energy sector finished above their 200-DMA, today less than a third remain above that level. Granted, that is far better than the end of October when not even 5% were above.

    [​IMG]

    In the table below, we show a list of the S&P 500 Energy sector's components showing how far each is above/below their 200-day moving average as well as the MTD and YTD performance. Baker Hughes (BKR), Halliburton (HAL), and Marathon (MPC) are all the most elevated, currently above their 200-DMAs by double-digit percentages. TechnipFMC (FTI) and National Oilwell Varco (NOV) have been the top performers in the sector, but they both still sit a few percentage points below their 50-DMAs even after rallies of more than 40% this month. The only Energy sector stock to have fallen in what has been a remarkably strong month is Cabot Oil and Gas (COG), though it is one of the best performers YTD with a decline of just 2.4%. Still, its recent decline leaves it as one of the furthest below its 200-DMA.

    [​IMG]
     
  12. bigbear0083

    bigbear0083 Content Manager
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    Stocks Flying Around the Globe
    Wed, Nov 18, 2020

    Since bottoming on the last trading day of November, the S&P 500 (SPY) has had a banner month so far this November rising 10.61% month to date. While there is still nearly two weeks left in the month, SPY is on pace for its best month since April. That is also in the top 1% of monthly moves of the past two decades. Other than April, the only month of the past 20 years that has seen a larger gain was October of 2011.

    Looking across the various country ETFs in our Global Macro Dashboard, there similarly have been some massive moves so far this month. Several of these have risen over 20% and only two, India (INDA) and China (MSHI), have risen by single-digit percentages. Spain (EWP), Italy (EWI), France (EWQ), Mexico (EWW), Norway (ENOR), and the UK (EWU) are all on pace for their best month of the past twenty years. Every other country ETF is also seeing monthly moves in the top decile of their respective 20-year ranges. For some of these, like Singapore (EWS) or Switzerland (EWL), this month has been the best month in over a decade.

    [​IMG]
     
  13. bigbear0083

    bigbear0083 Content Manager
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    Breadth Approving
    Mon, Nov 23, 2020

    With yet another positive vaccine-related headline pushing the market higher today, Industrials and Materials are both touching new 52 week highs. As for the other sectors, only Consumer Staples and Health Care alongside the broader S&P 500 have made new highs at some point in the month of November. At the moment, those same sectors as well as Tech, Consumer Discretionary, and Communication Services are all within 5 percentage points or less of their respective 52-week highs.

    In terms of breadth, though, new highs have been easier to come by. As shown in the charts below, across the eleven sectors as well as the broader S&P 500, breadth has been generally confirming a move higher as only the cumulative A/D lines of Real Estate and Energy have not seen a new high within the past two weeks. Some of those new highs in breadth have also been a contrary story to price. With regards to Consumer Discretionary and Tech, prices have seen some lower highs over the past few months, but their advance-decline lines have been diverging from price and have continued to trend higher. Similarly, breadth in the Communication Services sector has continued to rip higher, unlike price which has stalled within the past couple of weeks.

    Lastly, sectors making new highs in terms of price like Industrials and Materials have seen breadth do the same in recent days. Broadly speaking, the direction of breadth has been consistent with recent price moves, and even for the areas where that is not necessarily the case (as with Tech), the strong breadth can be taken as a positive for internals.

    [​IMG]
     
  14. bigbear0083

    bigbear0083 Content Manager
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    Seasonally Low Volumes
    Tue, Nov 24, 2020

    Due to the Thanksgiving holiday, it is a shortened trading week with no trading occurring Thursday and an early close on Friday. As a result, trading volumes are bound to be light this week. In the table below we show the average volume in SPY volume versus its 50-DMA for each calendar day of the year since SPY began trading in the early 1990s. As shown in the bottom-most row, whereas the months in the first quarter of the year and October have been seen the most above-average volumes (relative to the 50-DMA), the year tends to close out on relatively muted volumes. In November and December, volumes have averaged anywhere between 4.57% and 5.91% below the 50-DMA. In other words, investors historically have been the most active at the start of the year, ramping up activity again in October before taking a step back around the holidays.

    As previously mentioned, volumes in November are notably weak and the time surrounding Thanksgiving is no exception. Thanksgiving can be anytime from November 22nd through the 28th, and as highlighted below, these are some of the days with the lowest volumes of the year. Similarly, the days surrounding Christmas and leading up to New Year's have been the period of weakest volumes of the year.

    [​IMG]

    Some of these weak volumes account for simply less time with the market open given the half-days the day after Thanksgiving and on Christmas Eve, but even still, these are both generally quiet times for the market. In the table below, we show a more granular look with volumes versus their 50-DMA during Thanksgiving week. As shown, since 1993 when SPY began trading, less than a fifth of days during the week of Thanksgiving have seen volumes that were above the 50-DMA. While Monday and Wednesday see significantly smaller volumes, Friday's shortened sessions understandably result in volumes being less than half what is the norm. We'd also note that the much stronger than average volume in SPY on the Friday after Thanksgiving in 1993 was partially a result fo the fact that it was the first year of the ETFs existence and it wasn't nearly as ubiquitous of a trading tool as it quickly became in subsequent years.

    [​IMG]
     
  15. bigbear0083

    bigbear0083 Content Manager
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    The Thanksgiving Trade
    [​IMG]
    Trading around Thanksgiving has a bullish tendency perhaps buoyed by the “holiday spirit.” First published in the 1987 Stock Trader’s Almanac, the Wednesday before and the Friday after Thanksgiving combined were up 34 times in 35 years. The only S&P 500 decline was in 1964.

    Subsequently, this trend changed. In the 33 years since 1987, there have been 9 declines and 24 advances. The best short-term trade appears to be getting long into any weakness on Monday or Tuesday of Thanksgiving week and selling into any subsequent rally by the end of Thanksgiving week. But as COVID-19 cases are on the rise again remain nimble as exogenous events like Greece’s debt crisis in 2011 or 2018’s fourth quarter rout can cancel Thanksgiving on Wall Street.
    [​IMG]
    Also of note is the change in the yearend rally. Prior to 1987, from the close of trading on the Friday after Thanksgiving to yearend, the S&P 500 rallied only 20 times in 35 years. As Thanksgiving bullishness lost steam in 1987, the rally afterwards occurred more frequently. Since 1987, S&P 500 has logged gains in 25 of 33 years from the close on Friday after Thanksgiving to yearend.
     
  16. Auri

    Auri Well-Known Member

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    $IDEX was overbought on E tractor news and now corrects after trading up to $4.75 ............ a buying opportunity ?


    IDEX Chart.png
     
  17. bigbear0083

    bigbear0083 Content Manager
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    Stocks and Bonds Both in Rally Mode
    Tue, Dec 1, 2020

    When it comes to equity market performance in a given month, it doesn't get much better than November. While the S&P 500's total return of 10.95% in the month was only the second-best monthly performance of the year, it was still enough to rank as the third-best month for the S&P 500 in the last thirty years and just the ninth month since 1980 that it was up 10%+.

    The chart below shows the S&P 500's annualized total return over the last one, two, five, ten, and twenty years and compares the current returns to the historical average. For the last year, the S&P 500's total return has been 17.5% which is nearly six full percentage points higher than the historical average. For the last two years, the annualized return has been nearly as strong at 16.8%, and it is actually even stronger relative to the historical average of 10.5%. Moving further out the time horizon, the S&P 500's annualized returns drift lower, and while the five and ten-year annualized returns are greater than average, the S&P 500's annualized gain of 7.3% in the last 20 years is more than 3.5 percentage points below the historical average of 10.9%.

    [​IMG]

    The last couple of years haven't just been strong for equities. Over the last year, long-term US Treasuries, as measured by the Merrill Lynch 10+ Year US Treasury Index, have rallied 15.7%, which is more than six full percentage points greater than the historical average of 9.5%. Over the last two years, returns have been even stronger with an annualized gain of nearly 20%, or more than double the historical average of 9.1%! While the last two years have been strong for US Treasuries, the last five, ten, and twenty years have all seen returns of between one and two percentage points below their historical average.

    [​IMG]

    Lately, when you see rallies in the equity market, it tends to be accompanied by a decline in treasuries as yields rise. In November, though, that wasn't the case. Even with the S&P 500 up 10.95%, long-term US Treasuries rallied just over 1%. So how uncommon is it for stocks to rally like they did in November while bonds also rally. Actually, it is not very uncommon at all. The table below shows the nine months since 1980 where the S&P 500's total return in a given month was 10% or more, and of those months, long-term treasuies also rallied in every month but one (October 2011).

    [​IMG]
     
  18. bigbear0083

    bigbear0083 Content Manager
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    Manufacturer Recovery Continues
    Tue, Dec 1, 2020

    This morning, the Institute for Supply Management (ISM) released a less positive outlook for the US manufacturing sector. The headline number for ISM's Manufacturing index fell from 59.3 last month down to 57.5. A drop was expected, but the actual results were worse than the drop to 58.0 that had been forecasted. That reading indicates that the manufacturing sector continued to grow in November but at a slower rate than October.

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    Similar to the various Federal Reserve bank surveys from around the country, breadth in the November report was more negative than in recent months. Of the ten indices excluding the headline number, only three were higher in November: Backlog Orders, Supplier Deliveries, and Export Orders. Additionally, two indices—Customer Inventories and Employment—showed contractionary readings.

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    One theme of the report was that orders remain very healthy. New Orders fell from 67.9 to 65.1, but that is a sixth consecutive month of expansionary readings. Although the index was lower this month, meaning new order growth decelerated, it remains in the top decile of historical readings. As new orders have continued to grow, so too have backlogs. The index for Backlog Orders has continued to press higher, rising to 56.9 from 55.7. That is in the 88th percentile of all months and is now at the highest level since August of 2018. Demand continues to improve with new orders coming in at a historically strong pace, even though it is slower than last month, and order backlogs have once again risen as a result.

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    As new order growth decelerated, so too did production. The index fell from 63.0 in October to 60.8 last month. That is still consistent with growth (readings above 50) in production but at the slowest rate since June. One factor that potentially had an impact on the slowdown in production is issues with suppliers. The index for Supplier Deliveries rose for the fourth month in a row in November and reached the highest level since May. Higher readings in the Supplier Deliveries index indicates longer lead times and vice versa. In other words, products from suppliers have been taking longer to reach manufacturers, in turn, impacting productivity.

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    Although suppliers appear to have some constraints and production has slowed slightly, business inventories rose for the second month in a row even as more and more firms report that customer inventories are too low. The index for Customer Inventories now sits in the bottom 2% of historical readings after dropping another 0.4 points in November. At 36.3, the index is at the lowest level since June of 2010. That low reading can be considered positive for future production.

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  19. bigbear0083

    bigbear0083 Content Manager
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    Claims Back to the Lows
    Thu, Dec 3, 2020

    After two weeks of upticks, initial jobless claims saw some good news this week ahead of the Nonfarm Payrolls number on Friday. Claims experienced a sizeable decline falling 75K from last week's upwardly revised reading of 787K. A decline had been expected with forecasts calling for a drop to 775K. Instead, the decline was much larger as claims came in at 712K. That is just 1K above the pandemic low from the first week of November. Although it is still a historically high reading, claims have continued to get closer to moving below the pre-pandemic record high of 695K from October of 1982.

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    The picture was even better for unadjusted claims. Although the current time of the year has historically marked a seasonal upswing in claims, the 48th week of the year has typically marked a decline week over week. Given the seasonal tailwind for the current week of the year, claims fell to a new low for the pandemic. Unadjusted claims came in at 713.8K, 122.5K below last week's reading of 836.3. That was the largest weekly decline in the unadjusted number since the last major leg lower in the first week of August when claims fell by nearly 150K.

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    As we note every week, while the decline in regular state initial claims is a welcome sign no matter what, it does not show the entire picture. In the chart below, we show initial claims and claims through the Pandemic Unemployment Assistance program (PUA). This week, total claims between regular state and PUA also reached a new low for the pandemic coming in just above 1 million this week and below the previous low of 1.021 million from the first week of November. That was a result of not only the drop in regular state claims, but PUA claims also falling 30K to a new low.

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    While lagged an additional week to initial jobless claims, adjusted continuing claims likewise painted a pretty optimistic picture as well. Continuing claims fell 569K this week, down to 5.52 million, exceeding expectations for a decline to 5.8 million. That is the first reading below 6 million since March 20th, and it is also now well below what had been the pre-pandemic record high of 6.635 million from the global financial crisis.

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    Including the data for all programs of the weekly report adds yet another week of lag, but it does give a more complete picture. For the week of November 13th, total continuing claims fell to 20.2 million from 20.56 million the previous week. That is slightly below the level from the last week of October, which brings total claims to the lowest level since April. Taking a look across the programs, the overall decline was driven by drops in regular state claims and an even larger decline in PUA claims.

    Given the length of time that many claims have been in place though, counts for programs that extended insurance once expiration is reached (which varies in length from state to state) like the Extended Benefits program and Pandemic Emergency Unemployment Compensation (PEUC) program have continued to rise. With regards to the Extended Benefits program, claims have now risen for 22 straight weeks through November 13th, albeit the most recent week's 59.7K rise was the smallest week over week increase since August 21st. Similarly, PEUC claims have continued to rise with the most recent week adding another 79.7K. That leaves the total number of claims between these two programs at over 5.25 million for the first time of the pandemic. That means that despite some light at the end of the tunnel of the COVID front given positive vaccine news, with the pandemic continuing to drag on, nearly a quarter (26%) of all people receiving jobless benefits have been unemployed for an extended period of time.

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  20. bigbear0083

    bigbear0083 Content Manager
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    December Jobs Day: Historically a Bullish Day, S&P 500 Advanced 75% of Days
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    Tomorrow morning the Bureau of Labor Statistics will release its Employment Situation report for November. Depending upon your preferred source, the consensus estimate is for a gain of approximately 450,000 net new nonfarm jobs. That would be much better than the 307,000 that ADP reported yesterday. Historically, the market has responded favorably to the jobs report released in December. S&P 500, NASDAQ, Russell 1000 and Russell 2000 have all advanced fifteen times in the last twenty years. DJIA’s record has one more loss. Average gains range from a low of 0.36% by DJIA to 0.69% by Russell 2000. Sizable losses in 2018 do drag down historical average performance, but the overall trend spanning the last twenty years remains bullish.
     

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