Post by brosin on Sept 22, 2010 23:06:09 GMT -5
courtesy of Brian Shannon at Alphatrends
Caldaro: Overnight the Asian markets were mixed. Europe opened higher but closed -0.65%. US index futures were lower overnight and the market opened slightly lower at SPX 1138. It had closed at SPX 1140 yesterday. Within the first few minutes the market rallied to SPX 1144. That was the high for the day. For the next several hours the SPX drifted lower. Just past 1:00 the SPX hit 1132, still within the OEW 1136 pivot range, and then tried to rally. Around 3:00 the market hit SPX 1137 and then pulled back to close at 1134.
For the day the SPX/DOW were -0.35%, and the NDX/NAZ were -0.50%. Bonds gained 5 ticks, Crude slipped 30 cents, Gold added $6.00, and the USD was lower. Support for the SPX slips to 1107 and then 1090, with resistance at 1136 and then 1146. Short term momentum dropped to slightly oversold for the first time this month. Tomorrow, the weekly Jobless claims at 8:30, then Existing homes sales and BEA leading indicators at 10:00.
After hitting an uptrend high yesterday at SPX 1149 the market pulled back into the close. Today that pullback continued as the SPX hit 1132 around 1:00. This pullback pushed the short term momentum indicator to its first oversold condition of the month. It is also the largest pullback, (17 SPX points), since the rally began at the end of August from SPX 1041. This pullback has not been enough yet to help us comfirm an end to the apparent five wave short term rally from SPX 1041 to SPX 1149. The short term momentum, at this point, suggests that it is just that. Should the SPX trade down to 1130 over the next day or so it would confirm that count. As posted yesterday, a breakdown through the OEW 1136 pivot range would suggest a potential test of the 1107 pivot in the days ahead. A breakout above the OEW 1146 pivot range would indicate a further extension. Remember, we are counting the current five wave rally as only Minor wave 1 of Intermediate wave three. This uptrend should contain five Intermediate waves. We are only in the beginning of the third.
Cobra: The bottom line, the short-term trend is not clear so I hold no position overnight.
SHORT-TERM: TREND IS NOT CLEAR OFFICIALLY BUT I’M BEARISH BIASED
Short-term direction is not clear, either an up Price Channel or a Bear Flag is in the forming. So we’ll have to wait until tomorrow.
Now we’ve got the red day after the red FOMC, the question is: Will history repeat itself this time? Well, better not red day again tomorrow, because a strong uptrend should never have 3 red days in a row.
Since the chart pattern doesn’t confirm, so officially I cannot say top was in, but purely from signals point of view, I shall say either top was in or very close.
6.5.1a SPX and FOMC. As mentioned in today’s After Bell Quick Summary, a red day after a red FOMC meant more pullbacks ahead. Just it had only 3 cases recently, so may not mean anything. However, don’t forget the chart 6.3.1b Major Accumulation Day Watch as 2 red day after a Major Accumulation Day also meant more pullbacks. If a red day after a red FOMC means more pullback is merely a coincidence, then 2 red day after a Major Accumulation Day cases reflecting the same thing is just the 2nd coincidence? Two coincidences are just coincidence? Well, better take them a little bit seriously, I think.
Bespoke:
Plummeting Dollar?
How many times over the last two days have you heard the word ‘dollar’ preceded by plummeting? Given all the attention, the greenback must be down big right? Well not exactly. While the currency is down nearly 10% from its early June high, the US Dollar index is still up 3.3% on the year, which is actually more than 100 basis points better than the YTD return of the S&P 500.
Bullish Sentiment Highest Since Early August
According to the Investors Intelligence weekly sentiment survey, bullish sentiment (41.4%) among advisors is currently at its highest level since early August. As shown in the chart below, however, we've been here before. Since the S&P 500 peaked in the Spring, there have been two other periods where bullish sentiment improved to the 41% range only to fall back down as equities lost steam. Will the third time be the charm or are we in for more of the same?
Bespoke's Commodity Snapshot
With gold breaking to record highs every day lately, we thought now was as good a time as any to update our commodity snapshot. Below we provide our trading range charts for ten major commodities. In each chart, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold.
Aside from oil and natural gas, every commodity shown is either at or above the top of its trading range. As shown, gold's recent move has pushed it outside of its range. Moves to similar levels over the last year have been met with pullbacks. Silver and platinum are also just above the top of their trading ranges as well. And if you thought the metals were overbought, check out the charts of corn and orange juice!
International Revenue Exposure
In recent years investors have placed an added emphasis on the percentage of revenues that a stock derives domestically versus outside of the US. Bespoke was one of the first research shops to really focus on this stock characteristic, and it is now one of the most important yet hard to find data points because of its impact on performance. When the US dollar is declining, it provides an added benefit to companies that generate a large portion of sales outside of the US. When the dollar is rallying, these large international companies lose out, while companies that generate most or all of their sales inside the US benefit.
In 2009, 33.7% of S&P 500 stocks generated all of their revenues inside the US, while 25% generated more than 50% of their revenues outside of the US. As noted earlier, the dollar is up 3.82% this year, and domestic companies have benefited. The stocks with 100% domestic revenues are up an average of 8.03% year to date, while stocks with >50% international sales are up an average of 5.22%.
Knowing the geographical revenue numbers of a company is extremely helpful if you’re trying to gain international exposure by owning US stocks or trying to benefit from moves in the US dollar currency. If you want to play a dollar rally, stick with domestics, and vice versa for a dollar decline. We recently finished compiling the 2009 revenue exposure numbers for the Russell 1,000 and S&P 500 and put it all into the Bespoke Interactive International Revenues Database. In the database, you can easily find out the revenue exposure for individual stocks as well as screen for the stocks with the most international or domestic exposure. To receive access to this database, you have to be a yearly subscriber to the Bespoke Premium or Premium Plus service. Please click here to subscribe today.
International Revenues by Sector
ln our last post we highlighted the year-to-date performance of stocks that generate all of their revenues inside the US as well as those that generate more than half of their revenues outside of the US. Investors who like to play sectors should also be aware of international revenue exposure. Sectors with heavy international exposure stand to benefit when the dollar is falling, while sectors with heavy US exposure benefit when the dollar is rallying.
Below is a chart highlighting the average percentage of international revenues for stocks in each S&P 500 sector. As shown, the Technology sector has the most international exposure at 53.8%. It's also the only sector where more revenues come from outside of the US than inside. The Materials sector ranks second at 41.6%. The average stock in the entire S&P 500 generates 29.6% of its revenues outside of the US. Telecom and Utilities are the most US-based sectors, while Financials and Consumer Discretionary are the other two sectors with less exposure than the entire S&P 500.
Best September Since 1939
Notwithstanding today’s weakness, the S&P 500 is still on pace to have its best September since 1939. With a month to date (MTD) gain of 8.1%, the S&P 500 is still well behind the 15.6% MTD gain from September 1939, but still ahead of the 7.6% MTD gain we saw back in 1998. As shown in the table, strong Septembers seem to come in clusters. This is the second year in a row where the S&P 500 has been up more than 5% on a MTD basis, as the index was up 5.0% at this time in September 2009. The S&P 500 was also up more than 5% at this point in the month for three years in a row back in 1996, 1997, and 1998, and back in the 1950s, both September 1954 and 1955 were also up more than 5% as of September 22nd.
Looking at the S&P 500’s performance over the rest of the month shows that strong Septembers do not necessarily finish strong. Of the nine prior periods highlighted, the S&P 500 has declined an average of 1.2% for the rest of the month with positive returns less than half of the time (3 out of 9).
No Longer A "Goldman" Market
Up until just a few months ago, Goldman Sachs (GS) was seemingly talked about every day and used as a barometer for the overall market. For whatever reason, and probably to the delight of Goldman, the stock has taken a backseat in the stock market in recent months. Come to think of it, there hasn't been much news from the entire financial sector recently either. The correlation numbers between Goldman and the S&P 500 highlight this trend.
Below is a chart showing the correlation between the daily % change of GS and the S&P 500 over a rolling 50-day period going back to 2000. The closer the number is to one, the more correlated the daily moves are. Over the last 10 years, the average 50-day rolling correlation between the two has been 0.72. As shown, the number has gotten close to one quite a few times, which highlights how much Goldman and the overall market traded with each other. But recently the daily correlation has been trending lower, and it currently stands at 0.49. Past drops in correlation between GS and the S&P have quickly reversed, but the number has stayed low now for a few months. It's definitely no longer a "Goldman" market.
Caldaro: Overnight the Asian markets were mixed. Europe opened higher but closed -0.65%. US index futures were lower overnight and the market opened slightly lower at SPX 1138. It had closed at SPX 1140 yesterday. Within the first few minutes the market rallied to SPX 1144. That was the high for the day. For the next several hours the SPX drifted lower. Just past 1:00 the SPX hit 1132, still within the OEW 1136 pivot range, and then tried to rally. Around 3:00 the market hit SPX 1137 and then pulled back to close at 1134.
For the day the SPX/DOW were -0.35%, and the NDX/NAZ were -0.50%. Bonds gained 5 ticks, Crude slipped 30 cents, Gold added $6.00, and the USD was lower. Support for the SPX slips to 1107 and then 1090, with resistance at 1136 and then 1146. Short term momentum dropped to slightly oversold for the first time this month. Tomorrow, the weekly Jobless claims at 8:30, then Existing homes sales and BEA leading indicators at 10:00.
After hitting an uptrend high yesterday at SPX 1149 the market pulled back into the close. Today that pullback continued as the SPX hit 1132 around 1:00. This pullback pushed the short term momentum indicator to its first oversold condition of the month. It is also the largest pullback, (17 SPX points), since the rally began at the end of August from SPX 1041. This pullback has not been enough yet to help us comfirm an end to the apparent five wave short term rally from SPX 1041 to SPX 1149. The short term momentum, at this point, suggests that it is just that. Should the SPX trade down to 1130 over the next day or so it would confirm that count. As posted yesterday, a breakdown through the OEW 1136 pivot range would suggest a potential test of the 1107 pivot in the days ahead. A breakout above the OEW 1146 pivot range would indicate a further extension. Remember, we are counting the current five wave rally as only Minor wave 1 of Intermediate wave three. This uptrend should contain five Intermediate waves. We are only in the beginning of the third.
Cobra: The bottom line, the short-term trend is not clear so I hold no position overnight.
SHORT-TERM: TREND IS NOT CLEAR OFFICIALLY BUT I’M BEARISH BIASED
Short-term direction is not clear, either an up Price Channel or a Bear Flag is in the forming. So we’ll have to wait until tomorrow.
Now we’ve got the red day after the red FOMC, the question is: Will history repeat itself this time? Well, better not red day again tomorrow, because a strong uptrend should never have 3 red days in a row.
Since the chart pattern doesn’t confirm, so officially I cannot say top was in, but purely from signals point of view, I shall say either top was in or very close.
6.5.1a SPX and FOMC. As mentioned in today’s After Bell Quick Summary, a red day after a red FOMC meant more pullbacks ahead. Just it had only 3 cases recently, so may not mean anything. However, don’t forget the chart 6.3.1b Major Accumulation Day Watch as 2 red day after a Major Accumulation Day also meant more pullbacks. If a red day after a red FOMC means more pullback is merely a coincidence, then 2 red day after a Major Accumulation Day cases reflecting the same thing is just the 2nd coincidence? Two coincidences are just coincidence? Well, better take them a little bit seriously, I think.
Bespoke:
Plummeting Dollar?
How many times over the last two days have you heard the word ‘dollar’ preceded by plummeting? Given all the attention, the greenback must be down big right? Well not exactly. While the currency is down nearly 10% from its early June high, the US Dollar index is still up 3.3% on the year, which is actually more than 100 basis points better than the YTD return of the S&P 500.
Bullish Sentiment Highest Since Early August
According to the Investors Intelligence weekly sentiment survey, bullish sentiment (41.4%) among advisors is currently at its highest level since early August. As shown in the chart below, however, we've been here before. Since the S&P 500 peaked in the Spring, there have been two other periods where bullish sentiment improved to the 41% range only to fall back down as equities lost steam. Will the third time be the charm or are we in for more of the same?
Bespoke's Commodity Snapshot
With gold breaking to record highs every day lately, we thought now was as good a time as any to update our commodity snapshot. Below we provide our trading range charts for ten major commodities. In each chart, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold.
Aside from oil and natural gas, every commodity shown is either at or above the top of its trading range. As shown, gold's recent move has pushed it outside of its range. Moves to similar levels over the last year have been met with pullbacks. Silver and platinum are also just above the top of their trading ranges as well. And if you thought the metals were overbought, check out the charts of corn and orange juice!
International Revenue Exposure
In recent years investors have placed an added emphasis on the percentage of revenues that a stock derives domestically versus outside of the US. Bespoke was one of the first research shops to really focus on this stock characteristic, and it is now one of the most important yet hard to find data points because of its impact on performance. When the US dollar is declining, it provides an added benefit to companies that generate a large portion of sales outside of the US. When the dollar is rallying, these large international companies lose out, while companies that generate most or all of their sales inside the US benefit.
In 2009, 33.7% of S&P 500 stocks generated all of their revenues inside the US, while 25% generated more than 50% of their revenues outside of the US. As noted earlier, the dollar is up 3.82% this year, and domestic companies have benefited. The stocks with 100% domestic revenues are up an average of 8.03% year to date, while stocks with >50% international sales are up an average of 5.22%.
Knowing the geographical revenue numbers of a company is extremely helpful if you’re trying to gain international exposure by owning US stocks or trying to benefit from moves in the US dollar currency. If you want to play a dollar rally, stick with domestics, and vice versa for a dollar decline. We recently finished compiling the 2009 revenue exposure numbers for the Russell 1,000 and S&P 500 and put it all into the Bespoke Interactive International Revenues Database. In the database, you can easily find out the revenue exposure for individual stocks as well as screen for the stocks with the most international or domestic exposure. To receive access to this database, you have to be a yearly subscriber to the Bespoke Premium or Premium Plus service. Please click here to subscribe today.
International Revenues by Sector
ln our last post we highlighted the year-to-date performance of stocks that generate all of their revenues inside the US as well as those that generate more than half of their revenues outside of the US. Investors who like to play sectors should also be aware of international revenue exposure. Sectors with heavy international exposure stand to benefit when the dollar is falling, while sectors with heavy US exposure benefit when the dollar is rallying.
Below is a chart highlighting the average percentage of international revenues for stocks in each S&P 500 sector. As shown, the Technology sector has the most international exposure at 53.8%. It's also the only sector where more revenues come from outside of the US than inside. The Materials sector ranks second at 41.6%. The average stock in the entire S&P 500 generates 29.6% of its revenues outside of the US. Telecom and Utilities are the most US-based sectors, while Financials and Consumer Discretionary are the other two sectors with less exposure than the entire S&P 500.
Best September Since 1939
Notwithstanding today’s weakness, the S&P 500 is still on pace to have its best September since 1939. With a month to date (MTD) gain of 8.1%, the S&P 500 is still well behind the 15.6% MTD gain from September 1939, but still ahead of the 7.6% MTD gain we saw back in 1998. As shown in the table, strong Septembers seem to come in clusters. This is the second year in a row where the S&P 500 has been up more than 5% on a MTD basis, as the index was up 5.0% at this time in September 2009. The S&P 500 was also up more than 5% at this point in the month for three years in a row back in 1996, 1997, and 1998, and back in the 1950s, both September 1954 and 1955 were also up more than 5% as of September 22nd.
Looking at the S&P 500’s performance over the rest of the month shows that strong Septembers do not necessarily finish strong. Of the nine prior periods highlighted, the S&P 500 has declined an average of 1.2% for the rest of the month with positive returns less than half of the time (3 out of 9).
No Longer A "Goldman" Market
Up until just a few months ago, Goldman Sachs (GS) was seemingly talked about every day and used as a barometer for the overall market. For whatever reason, and probably to the delight of Goldman, the stock has taken a backseat in the stock market in recent months. Come to think of it, there hasn't been much news from the entire financial sector recently either. The correlation numbers between Goldman and the S&P 500 highlight this trend.
Below is a chart showing the correlation between the daily % change of GS and the S&P 500 over a rolling 50-day period going back to 2000. The closer the number is to one, the more correlated the daily moves are. Over the last 10 years, the average 50-day rolling correlation between the two has been 0.72. As shown, the number has gotten close to one quite a few times, which highlights how much Goldman and the overall market traded with each other. But recently the daily correlation has been trending lower, and it currently stands at 0.49. Past drops in correlation between GS and the S&P have quickly reversed, but the number has stayed low now for a few months. It's definitely no longer a "Goldman" market.
