Post by Admin/YBB on Sept 30, 2023 4:20:30 GMT -6
From Barron’s, October 2, 2023 (Part 1, Market Week+)
Pg 28, TRADER. SEPTEMBER, the worst month is over; damage was DJIA -3.50%, SP500 -4.87%, Nasdaq Comp -5.81%. What about OCTOBER? It’s discounted by a mean-reverting bounce and the start of good seasonality (but that doesn’t really start until November 1). EARNINGS bottomed in Q2; the Q3 earnings season starts on October 13. The ECONOMY is strong. SENTIMENT is very negative. There is good support for SP500 around 200-dMA of 4,200. So, despite the wall of worries (Fed, government shutdown, high oil prices), it’s time to buy stocks. (A problem with rotating authors for regular columns is that they can be uneven or inconsistent).
Selected INFRASTRUCTURE-related small-caps will benefit from government fiscal stimulus programs (energy transitions, reshoring, semis) – ACM, FLR, MTZ, MYRG, PWR, STRL.
OIL futures are in BACKWARDATION due to short-term imbalances. So, oil prices are headed down. OXY should be able to capitalize on this. It’s using cash flows to pay down expensive preferreds from BUFFETT/BRK who also owns 25% of OXY.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
FOMC 5/1/24+ hike +25 bps (cycle peak 5.50-5.75%)
(Cuts in mid/late-2024) (Probabilities for most rate-ranges aren’t high, so some unusual projections are seen in 2024. These can be ignored for now until more info/data come along.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.34%, SP500 -0.74%, Nasdaq Comp +0.06%, R2000 +0.48%. DJ Transports -0.13%; DJ Utilities -6.28% (HUGE move added to losses already). (Rotating spot long bond TLT -3.00% (large move)) US$ index (spot) +0.56% (remains too strong over 100+), oil/WTI futures +0.84% (adds to notable up-moves in last 3 weeks), gold futures -4.02% (large move).
YTD (index changes only), DJIA +1.09%, SP500 +11.88%, Nasdaq Comp +26.30%. (Rotating spot long bond TLT -9.01%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell for a 2nd week; ratio of winners:losers 2:3.
AAII Bull-Bear Spread -13.0% (low).
%Above 50-dMA for NYSE-listed stocks 26.51% (oversold; even more oversold for SP500); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 24.1% (oversold); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 29, INTERNATIONAL. JAPAN (EWJ +22% over 12 months) is an exporter and is not in a rush to raise rates even with current inflation at +3%. Companies have become more shareholder-friendly; the TSE has implemented sanctions on companies whose market-caps are below book value. Japanese stocks may be fine so long as the US economy hold up.
EXTRA, COMMODITIES. COPPER prices have plunged with Germany in recession and China slowdown. Dr Copper sees risks to global economy. Let us hope that copper prices stabilize and turnaround.
Pg 30, OPTIONS. With oil surging, the Government shutdown looming, and Moody’s threatening to downgrade the US sovereign credit (to join the 2 others who have done so already), consider selling puts on blue-chips you would like to buy at lower prices.
(SP500 VIX 17.52, Nasdaq 100 VXN 21.28 (high), options SKEW 133.48 (high), bond MOVE 113.55 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 43: A BAD week in EUROPE again (Denmark +0.06%, Belgium -3.20%) and a BAD week in ASIA again (Philippines +3.95%, HK -3.32%) (CHINA Golden Week Holiday October 1-7).
TREASURY* 3-mo yield 5.55%, 1-yr 5.46%, 2-yr 5.03%, 5-yr 4.60%, 10-yr 4.59%, 30-yr 4.73%;
REAL yields 5-yr 2.38%, 10-yr 2.24%, 30-yr 2.33%;
FRNs Index** 5.40% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.17, +0.6% (pg 50; rising since mid-July, now near 11/2022 high). GOLD fell to 1,871, -2.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 107.48, -6.20% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next month’s data on 10/12/23 will be used for the I-Bond rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “This Time is Really Different for the ECONOMY. Just Look at the JOB Market’s Confounding Strength”. Despite 18 months of FED monetary tightening, the job market remains strong. Wages have become a sticky part of INFLATION. Factors include Covid checks; fiscal stimulus; rising labor-force participation; growth in services sector; strong construction; small business creation, etc. AI may further boost PRODUCTIVITY. Soft landing may be possible after all. However, job growth is slowing; layoffs are rising. These crosscurrents may last for a while. This time is really different.
Pg 7, UP AND DOWN WALL STREET. Chevron/CVX (outperforming XLE, XOP) CEO Mike WIRTH has to deal with risky tanker-transports of oil; variety of risks in CA (company was founded there), Venezuela, Kazakhstan, etc; gradual energy transitions; manage huge capex, etc. 39.4% of production is in the US. Buffet/BRK owns 6.3%.
Pg 9, STREETWISE. Financial services company D.A. Davidson, based in MT, recommends several small/mid-cap “Bisons” (well, that is also its logo): AX, BC, WDFC, WIRE, TREX, JKHY, NDSN in an all-cap list of 17 “Bisons”.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 28, TRADER. SEPTEMBER, the worst month is over; damage was DJIA -3.50%, SP500 -4.87%, Nasdaq Comp -5.81%. What about OCTOBER? It’s discounted by a mean-reverting bounce and the start of good seasonality (but that doesn’t really start until November 1). EARNINGS bottomed in Q2; the Q3 earnings season starts on October 13. The ECONOMY is strong. SENTIMENT is very negative. There is good support for SP500 around 200-dMA of 4,200. So, despite the wall of worries (Fed, government shutdown, high oil prices), it’s time to buy stocks. (A problem with rotating authors for regular columns is that they can be uneven or inconsistent).
Selected INFRASTRUCTURE-related small-caps will benefit from government fiscal stimulus programs (energy transitions, reshoring, semis) – ACM, FLR, MTZ, MYRG, PWR, STRL.
OIL futures are in BACKWARDATION due to short-term imbalances. So, oil prices are headed down. OXY should be able to capitalize on this. It’s using cash flows to pay down expensive preferreds from BUFFETT/BRK who also owns 25% of OXY.
www.barrons.com/magazine?mod=BOL_TOPNAV
The CME FedWatch tool is based on current fed fund futures quotes around the FOMC meetings and the assumption of gradual fed fund rate changes (+/- 0.25%). In the list below, more than 50% probability is used to indicate rate hike; “+” is shown after the FOMC date to indicate that rate hike can be at that or a later FOMC.
FOMC 11/1/23+ hold
FOMC 12/13/23+ hold
FOMC 1/31/24+ hold
FOMC 3/20/24+ hold
FOMC 5/1/24+ hike +25 bps (cycle peak 5.50-5.75%)
(Cuts in mid/late-2024) (Probabilities for most rate-ranges aren’t high, so some unusual projections are seen in 2024. These can be ignored for now until more info/data come along.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -1.34%, SP500 -0.74%, Nasdaq Comp +0.06%, R2000 +0.48%. DJ Transports -0.13%; DJ Utilities -6.28% (HUGE move added to losses already). (Rotating spot long bond TLT -3.00% (large move)) US$ index (spot) +0.56% (remains too strong over 100+), oil/WTI futures +0.84% (adds to notable up-moves in last 3 weeks), gold futures -4.02% (large move).
YTD (index changes only), DJIA +1.09%, SP500 +11.88%, Nasdaq Comp +26.30%. (Rotating spot long bond TLT -9.01%)
SENTIMENTS
In the hindsight, several sentiment indicators PEAKED around 7/20/23.
NYSE cumulative (5-day) A/D LINE fell for a 2nd week; ratio of winners:losers 2:3.
AAII Bull-Bear Spread -13.0% (low).
%Above 50-dMA for NYSE-listed stocks 26.51% (oversold; even more oversold for SP500); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (StockCharts $NYA50R; $SPXA50R for the SP500 is also included in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 24.1% (oversold); Scale: oversold < 30, negative < 50, positive > 50, overbought > 70 (a proprietary index for %Above 75-dMA for selected 1,800 stocks). Unclear what day of the week it is released, but it seems to lag other sentiment indicators (Barron’s updates it on late-Fridays). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
Pg 29, INTERNATIONAL. JAPAN (EWJ +22% over 12 months) is an exporter and is not in a rush to raise rates even with current inflation at +3%. Companies have become more shareholder-friendly; the TSE has implemented sanctions on companies whose market-caps are below book value. Japanese stocks may be fine so long as the US economy hold up.
EXTRA, COMMODITIES. COPPER prices have plunged with Germany in recession and China slowdown. Dr Copper sees risks to global economy. Let us hope that copper prices stabilize and turnaround.
Pg 30, OPTIONS. With oil surging, the Government shutdown looming, and Moody’s threatening to downgrade the US sovereign credit (to join the 2 others who have done so already), consider selling puts on blue-chips you would like to buy at lower prices.
(SP500 VIX 17.52, Nasdaq 100 VXN 21.28 (high), options SKEW 133.48 (high), bond MOVE 113.55 (Yahoo Finance data).
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 43: A BAD week in EUROPE again (Denmark +0.06%, Belgium -3.20%) and a BAD week in ASIA again (Philippines +3.95%, HK -3.32%) (CHINA Golden Week Holiday October 1-7).
TREASURY* 3-mo yield 5.55%, 1-yr 5.46%, 2-yr 5.03%, 5-yr 4.60%, 10-yr 4.59%, 30-yr 4.73%;
REAL yields 5-yr 2.38%, 10-yr 2.24%, 30-yr 2.33%;
FRNs Index** 5.40% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose, ^DXY 106.17, +0.6% (pg 50; rising since mid-July, now near 11/2022 high). GOLD fell to 1,871, -2.9% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 107.48, -6.20% for the week)
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, NEW rate from May 1, 2023, is 4.30%; the fixed rate is +0.90%, the semiannual inflation is +1.69%.
(NOTE1 – the current semiannual inflation is +2.0562% (CPI-U, unadjusted) & next month’s data on 10/12/23 will be used for the I-Bond rate on November 1)
(NOTE2 – the Social Security COLA will also be known on 10/12/23. It is based on the Q3 average of CPI-W and the estimates now are around +3.2% COLA for 2024)
*Treasury Yield-Curve home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics?data=yield
**Treasury Direct (I-Bonds + T-Bills/Notes/Bonds, FRNs, TIPS)
www.treasurydirect.gov/auctions/announcements-data-results/frn-daily/
www.treasurydirect.gov/marketable-securities/
***For local rates www.depositaccounts.com/banks/rates-map/
(BONUS from Part 2 include Cover Story, Up and Down Wall Street, Streetwise and these won’t be repeated in Part 2)
Pg 16, COVER STORY, “This Time is Really Different for the ECONOMY. Just Look at the JOB Market’s Confounding Strength”. Despite 18 months of FED monetary tightening, the job market remains strong. Wages have become a sticky part of INFLATION. Factors include Covid checks; fiscal stimulus; rising labor-force participation; growth in services sector; strong construction; small business creation, etc. AI may further boost PRODUCTIVITY. Soft landing may be possible after all. However, job growth is slowing; layoffs are rising. These crosscurrents may last for a while. This time is really different.
Pg 7, UP AND DOWN WALL STREET. Chevron/CVX (outperforming XLE, XOP) CEO Mike WIRTH has to deal with risky tanker-transports of oil; variety of risks in CA (company was founded there), Venezuela, Kazakhstan, etc; gradual energy transitions; manage huge capex, etc. 39.4% of production is in the US. Buffet/BRK owns 6.3%.
Pg 9, STREETWISE. Financial services company D.A. Davidson, based in MT, recommends several small/mid-cap “Bisons” (well, that is also its logo): AX, BC, WDFC, WIRE, TREX, JKHY, NDSN in an all-cap list of 17 “Bisons”.
(EXTRAS from online Friday that didn’t make the weekend paper version)
See Column Topics. It seems some consolidation/rearrangement of Columns is going on.
(More later….)
Accessible from Morningstar (M*), PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).