Post by Admin/YBB on Jun 29, 2024 4:05:02 GMT -6
From Barron’s, July 1, 2024 (Part 1, Market Week+)
Pg 26, TRADER. This narrow rally may stumble badly in Summer. Mega techs are leading, while cyclical DJIA, equal-weight SP500 (RSP), small-cap R2000 (IWM) are lagging. That isn’t a healthy market. The risk is that investors overstay with expensive mega techs.
Small-cap growth bottomed in mid-June and the bounce may have staying power (or, it may be a false start again). The SC-growth stocks with lower beta and good free cash flows (FCFs) include YELP, POWL, SMPL, EEFT, GMS, CVLT.
Nvidia/NVDA has pulled back from its June high. There has been no news. It got overextended at 37% above its 50-dMA that may also serve as near-term support (a longer-term support may be at 200-dMA). The AI story is intact for a few years (until the competitors catch up). This pullback may provide an entry point for those waiting to get in.
www.barrons.com/magazine?mod=BOL_TOPNAV
CME FedWatch. It’s a tool 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 7/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
FOMC 1/29/25+ hold
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.08%, SP500 -0.08%, Nasdaq Comp +0.24%, R2000 +1.27%. DJ Transports +2.00%; DJ Utilities -0.31%. (Rotating spot NVDA -2.39%) US$ index (spot) +0.07% (remains too strong over 100), oil/WTI futures +1.00%, gold futures +0.49%.
YTD (index changes only), DJIA +3.79%, SP500 +14.48%, Nasdaq Comp +18.13%. (Rotating spot NVDA +149.47%)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 1+:1 .
FUND INFLOWS +/OUTFLOWS-: Stocks -|+, taxable bonds +|+, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +16.2% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
NYSE %Above 50-dMA 50.13% (positive, barely); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 49.0% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 29, INTERNATIONAL. A pullback in BRAZIL provides another chance to jump in (ETF EWZ; fwd P/E 7.2). President LULA is pushing back the goal for primary surplus to 2026 (from 2025); debt service is 30% of the budget (primary budget excludes debt service). He is also locking horns with central banker NETO. With current rates at 10.5%, but inflation +4%, rates may be cut and that would be bullish for Brazilian bonds.
Pg 30, OPTIONS. Ignore politics for investment decisions. Focus on financials and look for high-quality stocks. Sell puts on good stocks that you want to buy at lower prices.
SP500 VIX 12.44 (low), Nasdaq 100 VXN 16.24 (low), options SKEW 141.79 (high), bond MOVE 98.59 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 43: A down week in EUROPE (Norway +1.32%, France -2.09% (elections Sunday)) and an up week in ASIA (Philippines +3.49%, HK -2.29%).
DOLLAR rose a bit, ^DXY 105.85, +0.05% (pg 50). GOLD fell to $2,331, -0.2% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 137.37, -0.21% for the week)
INTEREST RATES
TREASURY* 3-mo yield 5.48%, 1-yr 5.09%, 2-yr 4.71%, 5-yr 4.33%, 10-yr 4.36%, 30-yr 4.51%;
REAL yields 5-yr 2.09%, 10-yr 2.08%, 30-yr 2.23%;
FRNs Index** 5.305% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*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 18, COVER STORY, “Wall Street’s Hottest Lottery Ticket: Zero-Dated Options (ODTE)”. The zero-day-to-expiry (ODTE) options for SP500 now account for almost 50% of the total daily volume of SP500 options. These ODTEs (2022- ) are for major indexes (so, cash-settled); have lottery style payouts; have wide bid-ask spreads; so, trade them with stop or limit orders. The ODTEs for individual stocks may be launched by 2025; however, there are issues related to large effects from earnings releases, company news, etc. While option investors commit only small amounts of money, remember that dealers have to hedge by buying/selling some amounts of underlying securities. So, the options markets can affect the general market and its volatility. The fear-gauge VIX doesn’t capture the ODTE activity, but there is now VIX1D. The ODTEs haven’t been stress-tested.
Pg 6, UP & DOWN WALL STREET. The Magnificent 7 trade has been overdone. Funds are overexposed to mega-cap stocks; the large-cap growth is concentrated in a handful of mega-cap stocks. But value has been a losing bet – look at WBA, LUV, NKE, etc. However, there is hope for fallen software stocks that are showing signs of rebound – ADBE, CRM, NOW; ETF IGV.
ENERGY (XLE) may provide good diversification for tech (XLK) or semis (SMH). XLE bounced off its 200-dMA and its crossing 50-dMA would confirm this up move. But oil prices must remain steady. Global oil demand is strong, but OPEC production is down.
Pg 8, STREETWISE. Canned soups may be the most un-AI of things. Pandemic provided a brief boost to soups, but then, consumers forgot to restock. Chart of Campbell Soup (CPB; fwd P/E 14) tells as much. So, why are some analysts warming up to this Civil War era relic? Answer – Rao’s Homemade! (it’s a Sovos Brands that CPB acquired) The brand originated from a small, classy restaurant Rao’s in East Harlem, NY; it now has branches in LA, Miami. Of course, CPB has many other foods, snacks, drinks.
Disney’s (DIS; fwd P/E 22) legacy businesses are shrinking and streaming is barely profitable. About 67% of profits are from “Experiences” – parks, cruise, etc. UBS has a bullish recommendation.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 26, TRADER. This narrow rally may stumble badly in Summer. Mega techs are leading, while cyclical DJIA, equal-weight SP500 (RSP), small-cap R2000 (IWM) are lagging. That isn’t a healthy market. The risk is that investors overstay with expensive mega techs.
Small-cap growth bottomed in mid-June and the bounce may have staying power (or, it may be a false start again). The SC-growth stocks with lower beta and good free cash flows (FCFs) include YELP, POWL, SMPL, EEFT, GMS, CVLT.
Nvidia/NVDA has pulled back from its June high. There has been no news. It got overextended at 37% above its 50-dMA that may also serve as near-term support (a longer-term support may be at 200-dMA). The AI story is intact for a few years (until the competitors catch up). This pullback may provide an entry point for those waiting to get in.
www.barrons.com/magazine?mod=BOL_TOPNAV
CME FedWatch. It’s a tool 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 7/31/24+ hold (cycle peak 5.25-5.50%)
FOMC 9/18/24+ cut
FOMC 11/7/24+ hold
FOMC 12/18/24+ cut
FOMC 1/29/25+ hold
(Probabilities for some rate-ranges aren’t high, so there can be some unexpected moves.)
www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
FOR THE WEEK (index changes only), DJIA -0.08%, SP500 -0.08%, Nasdaq Comp +0.24%, R2000 +1.27%. DJ Transports +2.00%; DJ Utilities -0.31%. (Rotating spot NVDA -2.39%) US$ index (spot) +0.07% (remains too strong over 100), oil/WTI futures +1.00%, gold futures +0.49%.
YTD (index changes only), DJIA +3.79%, SP500 +14.48%, Nasdaq Comp +18.13%. (Rotating spot NVDA +149.47%)
SENTIMENTS
Sentiments are mixed.
NYSE cumulative (5-day) A/D LINE rose for a 2nd week; ratio of winners:losers 1+:1 .
FUND INFLOWS +/OUTFLOWS-: Stocks -|+, taxable bonds +|+, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|weekly change) (Stock funds had outflows)
AAII Bull-Bear Spread +16.2% (above average). (Thursday-Wednesday)
(Sentiment Scale: v low << avg - 1*SD; low < avg - 1*SD; below avg, avg, above avg for in-between; high > avg + 1*SD, v high >> avg + 1*SD)
ybbpersonalfinance.proboards.com/thread/141/aaii-sentiment-survey-weekly?page=12&scrollTo=1285
NYSE %Above 50-dMA 50.13% (positive, barely); (StockCharts $NYA50R for NYSE; $SPXA50R for the SP500 in the bottom panel),
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 49.0% (negative); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but is updated by Barron’s only on late-Fridays (so, it typically LAGS). The all-cap $NYA50R is typically closer to it than the large-cap $SPXA50R.
(Common Scale for %Above: oversold < 30-; 30 < negative < 50-; 50 < positive < 70-; overbought > 70; note that Delta MSI itself uses all in/out using 50% neutral value, but the same graduated scale is used here for both sources of %Above.)
Pg 29, INTERNATIONAL. A pullback in BRAZIL provides another chance to jump in (ETF EWZ; fwd P/E 7.2). President LULA is pushing back the goal for primary surplus to 2026 (from 2025); debt service is 30% of the budget (primary budget excludes debt service). He is also locking horns with central banker NETO. With current rates at 10.5%, but inflation +4%, rates may be cut and that would be bullish for Brazilian bonds.
Pg 30, OPTIONS. Ignore politics for investment decisions. Focus on financials and look for high-quality stocks. Sell puts on good stocks that you want to buy at lower prices.
SP500 VIX 12.44 (low), Nasdaq 100 VXN 16.24 (low), options SKEW 141.79 (high), bond MOVE 98.59 (Yahoo Finance data).
(Low VIX, high SKEW combo is a sign of nervous bulls)
finance.yahoo.com/quotes/%5EVIX,%5EVXN,%5ESKEW,%5EMOVE,%5EXAU/view/v1
Pg 43: A down week in EUROPE (Norway +1.32%, France -2.09% (elections Sunday)) and an up week in ASIA (Philippines +3.49%, HK -2.29%).
DOLLAR rose a bit, ^DXY 105.85, +0.05% (pg 50). GOLD fell to $2,331, -0.2% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 137.37, -0.21% for the week)
INTEREST RATES
TREASURY* 3-mo yield 5.48%, 1-yr 5.09%, 2-yr 4.71%, 5-yr 4.33%, 10-yr 4.36%, 30-yr 4.51%;
REAL yields 5-yr 2.09%, 10-yr 2.08%, 30-yr 2.23%;
FRNs Index** 5.305% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
Top FDIC insured savings deposit rates*** (This feature has been discontinued but see the link below)
US SAVINGS I-Bonds**, Rate from 5/1/24 – 10/31/24 is 4.28%; the fixed rate is 1.30%, the semiannual inflation is 1.48%.
(NOTE – The Social Security COLA for 2025, based on the Q3 average of CPI-W, is ?, est +3%)
*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 18, COVER STORY, “Wall Street’s Hottest Lottery Ticket: Zero-Dated Options (ODTE)”. The zero-day-to-expiry (ODTE) options for SP500 now account for almost 50% of the total daily volume of SP500 options. These ODTEs (2022- ) are for major indexes (so, cash-settled); have lottery style payouts; have wide bid-ask spreads; so, trade them with stop or limit orders. The ODTEs for individual stocks may be launched by 2025; however, there are issues related to large effects from earnings releases, company news, etc. While option investors commit only small amounts of money, remember that dealers have to hedge by buying/selling some amounts of underlying securities. So, the options markets can affect the general market and its volatility. The fear-gauge VIX doesn’t capture the ODTE activity, but there is now VIX1D. The ODTEs haven’t been stress-tested.
Pg 6, UP & DOWN WALL STREET. The Magnificent 7 trade has been overdone. Funds are overexposed to mega-cap stocks; the large-cap growth is concentrated in a handful of mega-cap stocks. But value has been a losing bet – look at WBA, LUV, NKE, etc. However, there is hope for fallen software stocks that are showing signs of rebound – ADBE, CRM, NOW; ETF IGV.
ENERGY (XLE) may provide good diversification for tech (XLK) or semis (SMH). XLE bounced off its 200-dMA and its crossing 50-dMA would confirm this up move. But oil prices must remain steady. Global oil demand is strong, but OPEC production is down.
Pg 8, STREETWISE. Canned soups may be the most un-AI of things. Pandemic provided a brief boost to soups, but then, consumers forgot to restock. Chart of Campbell Soup (CPB; fwd P/E 14) tells as much. So, why are some analysts warming up to this Civil War era relic? Answer – Rao’s Homemade! (it’s a Sovos Brands that CPB acquired) The brand originated from a small, classy restaurant Rao’s in East Harlem, NY; it now has branches in LA, Miami. Of course, CPB has many other foods, snacks, drinks.
Disney’s (DIS; fwd P/E 22) legacy businesses are shrinking and streaming is barely profitable. About 67% of profits are from “Experiences” – parks, cruise, etc. UBS has a bullish recommendation.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
