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Below we highlight how often the Dow has had positive returns by month over the last 100 years. As shown, the Dow has had gains in December 71% of the time, which is the best month by a wide margin. The next closest months are January and August at 63%.
Bespoke's Paul Hickey will appear on CNBC's Street Signs today at 2:00 PM ET to discuss the current market events surrounding Dubai.
After the market selloff last Friday, the percentage of stocks above their 50-day moving averages in the S&P 500 currently stands at 56%. As shown in the first chart below, market breadth, at least by this measure, has been very poor over the past few weeks. During prior rallies within this bull market, the reading got up to and stayed near 75%-85% for quite a while. On the most recent rally to new highs, however, not nearly as many stocks moved back above their 50-days.
Financials and Energy are the two sectors causing the drag. Both sectors currently have just 33% of stocks above their 50-days. Technology is the only other sector with less than 50% of stocks above their 50-days (46%). Telecom, Utilities, Health Care, and Consumer Staples currently have the highest percentages of stocks above their 50-day moving averages. Investors have definitely taken a defensive position in recent weeks.
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The Dow is currently on pace to have its second biggest decline on the day after Thanksgiving since it became an official federal holiday in 1941. As shown below, the biggest decline on the day after Thanksgiving came in 1987 when the index fell 1.87%. At that point, markets were still digesting the October '87 crash, and the Dow went on to fall 8.76% in the week after Thanksgiving.
The Dow has normally been strong on the day after Thanksgiving, with an average gain of 0.30% on the day. With international markets dropping significantly while we ate turkey yesterday, however, today turned out to be anything but normal.
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As shown in the Bloomberg snapshot of Dubai's historical sovereign debt credit default swap price, the recent spike up to 600 bps or so isn't even near the level of 1,000 bps seen earlier this year. Had Dubai's default risk spike earlier this year been an isolated event like it is this time around, it would have made news back then. At the time, however, default risk was spiking for the majority of developed nations as well, so Dubai was the least of our problems. Now that global markets have stabilized and exited crisis mode, an isolated event in Dubai where default risk doesn't even spike to its 2009 highs has caused a global market selloff.
Below we highlight current credit default swap prices and the year-to-date change for the sovereign debt of 39 countries. As shown, default risk has declined for every country except Japan in 2009, including Dubai.
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Last week we released a B.I.G. Tips report on seasonal trading patterns around the Thanksgiving holiday. As you'll see in the report (click thumbnail image), US equity markets have historically done much better in the week before Thanksgiving than in the week after. The Friday after Thanksgiving has historically been very positive for the markets as well. Hopefully this Friday is no different. At Bespoke Premium, we typically release one to two B.I.G. Tips reports like the one below each day along with many other reports that can be viewed on our products page. To stay one step ahead of the market, subscribe to Bespoke Premium today.
While there probably aren't a lot of people shedding tears over it, the stock of Goldman Sachs (GS) can't seem to get out of its own way. We've highlighted the relative weakness in this stock several times over the last few weeks, so this shouldn't come as any surprise, but GS is now on pace to close at its lowest levels since early November. Politicians in Washington and conspiracy theorists may be rejoicing in Goldman's misery, but if there's one thing Goldman employees can be thankful for it is that with the stock lagging the overall market, the intensity of public backlash directed towards the company seems to have abated. Next thing you know, the conspiracy theorists will claim that 'evil' Goldman is purposely making their stock weak just so they can buy back the stock at lower prices.
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This week's sentiment survey from Investors Intelligence showed that bullish sentiment among newsletter writers is near its highest levels since the March lows (50.6%), while bearish sentiment is at a five-year low (17.6%). This puts the spread between bulls and bears at 33, which is the highest level since December 2007.
High levels of bullish sentiment are typically considered contrarian, but we would note that sentiment can remain bullish for extended periods of time with little impact on the market. During the bull market from 2003 - 2007, the spread between bulls and bears was frequently above 30, but equities remained strong. While it is true that markets typically peak when bullish sentiment is high, however, high levels of bullish sentiment don't necessarily mean an imminent decline.
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If there's one thing for investors to be thankful for this year, it's the turnaround we've seen in the stock market in 2009. From the depths of despair, the market has managed to gain back a huge chunk of its big declines during the last bear market. Since Thanksgiving became an official federal holiday (1941), the S&P 500 has been up 20% or more through Thanksgiving 16 times, and this year is one of them. With a year-to-date gain of 22.72%, the S&P 500 is having its best year heading into Thanksgiving since 1997 when the index was up 28.47%. As shown, the average change for the rest of the year when the S&P 500 has been up 20% or more through Thanksgiving has been 1.96%, with positive returns 10 out of 15 times. Happy Thanksgiving!
Yesterday afternoon, we asked readers to take part in a market sentiment poll. In answering whether the Dow would be higher or lower than its current level at the end of 2009, 53% of respondents said higher, while 47% said lower. Bullish sentiment trumped bearish sentiment by 6 percentage points, which we don't interpret as being overly optimistic.
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The average stock in the Russell 3,000 is up 48.98% year to date, while the index itself is up 23.18%. If you take out the top performing stock in the index, the average year-to-date change for all stocks drops to 45.8%! That's because the top stock -- DDRX -- is up a whopping 9,319% in 2009. The next best performing stock this year -- VNDA -- is up 1,980%, so DDRX is the leader by a wide margin.
In the Russell 3,000, 72% of stocks are up so far in 2009, and 30.5% of the index is up more than 50%. Four hundred and sixteen stocks are up more than 100%, 130 are up more than 200%, 58 are up more than 300%, and 9 are up more than 1000%. Many traders like to buy the best performing stocks heading into the last month of the year with the idea that professional money managers will want to have these names on their books when end-of-year statements go out. The stocks listed below are all up more than 325% in 2009.
A basic rule of technical analysis is that as long as a stock trades above its 50-day moving average (DMA), it is in an uptrend. When a stock trades above that level it should be bought, and when it breaks down below the 50-DMA, investors should consider exiting their long positions. Based on this metric, if you are long Apple Computer (AAPL) or Google (GOOG), you haven't even considered selling them in a long time.
In the charts below, we highlight streaks in each stock where they traded without closing below their 50-day moving average. For AAPL, the stock is within five trading days of breaking its July 1986 record for most consecutive days above its 50-day moving average (186 days). GOOG is already trading into record territory for its longest streak above its 50-day moving average at 96 days (and counting), although here we would note that the stock has only been public since 2004.
AAPL is currently trading $10 above its 50-DMA (5.2%), so a couple of bad days in a row could put an end to that streak at anytime. For GOOG, however, the stock is trading more than $50 above its 50-DMA (9.5%), so here it's a likely bet that that stock's streak will hit the triple digit mark. While many are still hesitant to call the rally off the March lows a bull market, these two stocks have sure been in bull mode.
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After an impressive rally off the Summer lows, China's Shanghai Composite index has recently risen to within 3.5% of its 2009 highs. However, after last night's decline, the index has dug itself into a bit of a deeper hole. Last night, China's benchmark index declined over 3% for its worst day since August 31st. The decline was in reaction to growing concerns that the nation's largest banks will be forced to raise capital due to the unprecedented amount of loans they have extended in 2009. With China down over 3%, the baltic dry index down for the third straight day, and Russia cutting interest rates to record low levels, the early tone for emerging markets is looking a little shaky.
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The stock in the Russell 1,000 currently on the longest winning streak is Campbell Soup (CPB). Campbell Soup (CPB) has gone up 14 trading days in a row, which is double the next closest winning streak. Who knew that this maker of canned goods could go on such a tear? Is 2012 causing that much of a scare?
The dollar's impact on stocks continues to generate investor interest. Both USA Today and Bloomberg did stories on the subject recently and mentioned our work from a piece we released to Bespoke Premium subscribers on November 10th (click thumbnail below to view report). When the dollar falls, it helps companies that generate revenues outside of the US, and all you have to do is look at stock performance this year for proof. Along with receiving reports like the one below on a daily basis, yearly Bespoke Premium members have access to our International Revenues Database that highlights the percentage of sales that all companies in the Russell 1,000 and S&P 500 generate both domestically and internationally. If you expect the dollar to go lower, find stocks in the database with high amounts of international revenues. If you expect a dollar turnaround, you can find fully domestic stocks. Regardless of your view on the dollar, knowing the geographic sales makeup of stocks you own or might own is as important as ever. Click here to join Bespoke Premium and access the database today.
Probably the main reason why the S&P 500 has struggled to take out old highs in recent weeks is the performance of the Financial sector. It's actually surprising that the market is where it is given how poorly the Financials have done. As shown in the first chart below, the S&P 500 Financial sector can't even get above its 50-day moving average, much less test its bull market highs from a month or so ago.
The Financials led us into and out of the bear, and it's hard to imagine the overall market continuing its bullish pace over the next few months without a resurgence in the Financials. The question right now is whether to treat the stagnation as a bullish signal to gain exposure to the sector or a bearish signal to sell the broad market.
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The S&P/Case-Shiller housing price numbers for September are set to be released tomorrow morning, and the big question is whether or not we'll see a year-over-year increase in home prices in any of the 20 cities that Case-Shiller tracks.
Below we highlight the home price levels of the 20 cities and two composite indices in September 2008 and August 2009. August numbers were the last ones released since there is a two-month lag in the data. As shown, Dallas and Denver are the closest to showing a year-over-year increase in prices, as both were down less than 1% from 9/08 to 8/09. Both cities need to register very small month-over-month gains to see a year-over-year increase. If either of them turn positive tomorrow, the financial media will likely jump all over it.
The S&P 500 has once again broken above 1,100 and is currently trading a bit higher than its bull market closing high of 1,110.32 from last week. The intraday bull-market high of 1,113.69 for the S&P occurred last Monday, so the index is still a few points below that. Pretty much everything is contributing to today's rally, which is a good sign. As of 10:45 AM ET, 488 stocks in the S&P 500 were up on the day while just 9 were down (3 unchanged).
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For those interested, below we provide a list of the S&P 500 stocks with the highest percentage of buy ratings. To make the list, at least 5 analysts have to cover the stock. As shown, only one stock in the S&P 500 has 100% buy ratings -- FMC Corp. Thermo Fisher Scientific (TMO) used to have 100% buy ratings, but an analyst at Jefferies had to ruin the TMO party by putting a hold on the stock on Tuesday. Cognizant Technology (CTSH), Flowserve (FLS), CME Energy (CMS), and Google (GOOG) are the other five stocks in the S&P 500 with 90% or more buy ratings. Unsurprisingly, Apple (AAPL) is also on the list with 85.71% buy ratings. Thirty-six out of 40 analysts covering Google have a buy on the stock, while 36 out of 42 analysts covering Apple have a buy on it. Those are some pretty high percentages, but that's just the name of the game in analyst-land. Other notable names on the list include Mastercard (MA), Pfizer (PFE), Coca-Cola (KO), and Hewlett-Packard (HPQ).
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For all the dividend hunters out there, below we provide a list of the S&P 500 stocks with dividend yields above 5%. As shown, Frontier Communications (FTR) tops the list with a yield of 13.33%. Windstream (WIN) has the second highest yield at 9.95%, followed by Q (8.63%) and CTL (7.98%). The four highest yielding stocks in the S&P 500 are all in the Telecom sector. Altria Group (MO) has the highest dividend yield in the Consumer Staples sector at 7.12%.
In late 2008, this list would have been littered with financial stocks whose yields spiked since share prices were tanking. The dividends for the majority of financials ended up being cut or eliminated, however, so they no longer pay the nice dividends that investors looking for yield like. Now that things have stabilized, look for financials to start boosting dividends again. But as always, buyer beware.
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In the S&P 500, 60% of stocks are trading above their 50-day moving averages. As shown in the first chart below, this indicator has made a series of lower highs in recent months, even as the S&P 500 has made subsequent new highs over this time period. This means that less and less stocks have been helping the index move higher, and it's definitely something that favors the bearish argument. The Financial sector currently has the lowest percentage of stocks above their 50-day moving averages at 45%. It's also the only sector with a reading below 50%. Consumer Staples, Health Care, and Industrials currently have the highest percentage of stocks above their 50-days.
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Bespoke's Paul Hickey will appear on Bloomberg TV on Thursday (11/19) at 5:30 PM ET to discuss Bespoke's current outlook on the market. It used to be that if you asked someone how the market was doing, their answer would depend on how it had acted over the last few weeks or months. Nowadays, though, your answer will more likely be a reflection of the last day or even hours. Over the last two years, the mood has become so volatile that the market regularly shifts from one extreme in sentiment to another.
One way to highlight this is by looking at the number of days where a net of more than 80% of the stocks in the S&P 500 move up or down in a given day. These are days where the net differential between up S&P 500 stocks and down S&P 500 stocks exceeds +/-400. As shown below, in the early part of this decade, +/- 400 days were few and far between. While the first seven years of this decade never saw a year where even 10% of trading days were +/-400 days, the frequency in the last three years has all been above 10%. In fact, over the last two years, +/-400 days have made up more than 20% of all trading days.
Some will argue that the uptick in day to day extremes is due to the fact that we were in a bear market. However, we would point out that in the first three years of this decade we were also in a bear market where the S&P 500 lost half its value, and we didn't see anything even close to the extremes in sentiment that we are seeing now. For better or worse, the more likely culprit for the uptick in market mood swings is the increased popularity of ETFs. As more take bets on sectors and asset classes rather than individual stocks, it has become a market where good news lifts all boats, and bad news sinks all ships.
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