Post by Admin/YBB on Jul 20, 2024 4:01:57 GMT -6
From Barron’s, July 22, 2024 (Part 1, Market Week+)
Pg 23, TRADER. A wild week in which growth stocks fell and cyclicals and small-caps rose. Was it the market broadening? Rotation? Or investors rebalancing? Taking profits? We’ll find out in 6 months. About 80% of R2000 stocks hit 20-day highs. The factors seemed potential Fed rate cut(s), and changes in economic and election outlooks.
SMALL-CAPS as attractive election plays include cyclicals in energy, infrastructure, and financial sectors. Several have high short interests and any changes in their expectations may lead to large moves. Examples include ROAD, STRL, SFBS, AMR, CBT, SLVM.
VISA (V; yield 0.77%; fwd P/E 25) is attractive ahead of its earnings report on 7/24/24. The stock was hurt by the pandemic and the recent rejection by a judge of the settlement between the card companies and merchants on fees. Card and digital payment continue to grow.
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+ cut
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 +0.72%, SP500 -1.97%, Nasdaq Comp -3.65%, R2000 +1.68%. DJ Transports +1.68%; DJ Utilities +0.56%. (Rotating spot bank KBE +6.18%) US$ index (spot) +0.27% (remains too strong over 100), oil/WTI futures -2.53%, gold futures -0.77%.
YTD (index changes only), DJIA +6.89%, SP500 +15.41%, Nasdaq Comp +18.09%. (Rotating spot bank KBE +13.04%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1+:1.
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change) (All flows +, so where did the money come from?)
AAII Bull-Bear Spread +29.3% (high). (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
$NYA50R, NYSE %Above 50-dMA 67.37% (positive)
$SPXA50R, SP500 %Above 50-dMA 65.20% (positive)
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 69.8% (positive); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but reported by Barron’s on late-Fridays. The all-cap $NYA50R (NYSE has 2,760+ stocks) is typically closer to it than the large-cap $SPXA50R (SP500 has 500 stocks).
(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 26, INTERNATIONAL. Supply-chain issues for Airbus/EADSY are minor compared to the crisis at Boeing/BA. But Airbus stock has been punished almost as much as Boeing. Airbus has a huge backlog and it’s operating at maximum possible capacity. Its main supply issue is the lack of engines from Pratt and Whitney/RTX and CFM International (joint venture of GE and Safran). The newer engines are quieter and more fuel efficient, but also less durable. Airbus is going ahead with producing airplanes without engines – so basically “gliders” with engines to be added later.
Pg 27, OPTIONS. SP500 and related VIX options have been relatively stable in the face of recent news events. Recommended are bullish call-spreads for SPY.
SP500 VIX 16.52 (low), Nasdaq 100 VXN 21.51 (high), options SKEW 146.99 (high), bond MOVE 94.29 (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 40: A BAD week in EUROPE (Greece +0.90%, Norway +0.57%, Netherlands -8.91%) and a BAD week in ASIA (Philippines +2.05%, Taiwan -4.68%).
DOLLAR rose, ^DXY 104.37, +0.3% (pg 50). GOLD fell to $2,404, -0.1% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 149.89, -2.50% for the week)
INTEREST RATES
TREASURY*
T-Bills 3-mo yield 5.43%, 1-yr 4.87%; T-Notes 2-yr 4.49%, 5-yr 4.16%, 10-yr 4.25%; T-Bonds 30-yr 4.45%;
Real yields 5-yr 1.98%, 10-yr 1.93%, 30-yr 2.16%;
FRNs Index** 5.264% (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 pending; est +2.7%; +3.2% in 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 9, COVER STORY, “TRUMP Hasn’t Won the Election Yet. The Stock Market is Acting Like He Already Has”. That may explain the recent bounces in cyclicals, small-caps, gold, cryptos, etc. On the other hand, big techs face regulatory hurdles no matter who will be in power. It remains to be seen how far the AI hype can go – so far, there have only been huge capex, but little revenues or profits to show for them. Most investors should take the middle course (according to their risk tolerance and personal situations) and ignore the political noise.
Pg 6, UP & DOWN WALL STREET. Higher inflation ( > 2%) is bad for traditional 60-40 portfolios, according to BoA. The stocks and bonds have higher correlations now, and in 2022, both tanked. The politicians in DC favor inflationary fiscal policies – higher spending, deficits and debt. If there are doubts about the independence of the Fed, that would also hurt US bonds. Adding alternatives to the 60-40 mix, i.e. multi-asset funds with stocks-bonds-alternatives, may improve performance. Adding foreign exposure would also benefit from a weakening dollar, and that is what Vanguard (and several others’) 60-40 portfolios have.
Only a so-so ROTATION into small-caps. The SCs now are different. Many good small companies have grown and have migrated to MCs or LCs, many small companies (including the unicorns) remain private with easy funding available from private-equity, venture-capital and fund firms. So, there is a lot of garbage now in the publicly traded SCs – 42% of R2000/IWM is unprofitable. The expectation of Fed rate cuts(s) did provide a temporary boost to the SCs, but that may be fleeting. GOLD (bullion GLD, gold-miners GDX) looks better than SCs for your profits from LCs or LC-growth.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
Pg 23, TRADER. A wild week in which growth stocks fell and cyclicals and small-caps rose. Was it the market broadening? Rotation? Or investors rebalancing? Taking profits? We’ll find out in 6 months. About 80% of R2000 stocks hit 20-day highs. The factors seemed potential Fed rate cut(s), and changes in economic and election outlooks.
SMALL-CAPS as attractive election plays include cyclicals in energy, infrastructure, and financial sectors. Several have high short interests and any changes in their expectations may lead to large moves. Examples include ROAD, STRL, SFBS, AMR, CBT, SLVM.
VISA (V; yield 0.77%; fwd P/E 25) is attractive ahead of its earnings report on 7/24/24. The stock was hurt by the pandemic and the recent rejection by a judge of the settlement between the card companies and merchants on fees. Card and digital payment continue to grow.
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+ cut
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 +0.72%, SP500 -1.97%, Nasdaq Comp -3.65%, R2000 +1.68%. DJ Transports +1.68%; DJ Utilities +0.56%. (Rotating spot bank KBE +6.18%) US$ index (spot) +0.27% (remains too strong over 100), oil/WTI futures -2.53%, gold futures -0.77%.
YTD (index changes only), DJIA +6.89%, SP500 +15.41%, Nasdaq Comp +18.09%. (Rotating spot bank KBE +13.04%)
SENTIMENTS
NYSE cumulative (5-day) A/D LINE fell; ratio of winners:losers 1+:1.
FUND INFLOWS +/OUTFLOWS-: Stocks +|+, taxable bonds +|+, munis +|+, money-market funds +|+. (NEW FORMAT: 4wMA|weekly change) (All flows +, so where did the money come from?)
AAII Bull-Bear Spread +29.3% (high). (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
$NYA50R, NYSE %Above 50-dMA 67.37% (positive)
$SPXA50R, SP500 %Above 50-dMA 65.20% (positive)
stockcharts.com/h-sc/ui?s=%24NYA50R&p=D&b=5&g=0&id=p91704957718 .
Delta MSI 69.8% (positive); a proprietary index for %Above 75-dMA for selected 1,800 stocks that is published midweek but reported by Barron’s on late-Fridays. The all-cap $NYA50R (NYSE has 2,760+ stocks) is typically closer to it than the large-cap $SPXA50R (SP500 has 500 stocks).
(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 26, INTERNATIONAL. Supply-chain issues for Airbus/EADSY are minor compared to the crisis at Boeing/BA. But Airbus stock has been punished almost as much as Boeing. Airbus has a huge backlog and it’s operating at maximum possible capacity. Its main supply issue is the lack of engines from Pratt and Whitney/RTX and CFM International (joint venture of GE and Safran). The newer engines are quieter and more fuel efficient, but also less durable. Airbus is going ahead with producing airplanes without engines – so basically “gliders” with engines to be added later.
Pg 27, OPTIONS. SP500 and related VIX options have been relatively stable in the face of recent news events. Recommended are bullish call-spreads for SPY.
SP500 VIX 16.52 (low), Nasdaq 100 VXN 21.51 (high), options SKEW 146.99 (high), bond MOVE 94.29 (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 40: A BAD week in EUROPE (Greece +0.90%, Norway +0.57%, Netherlands -8.91%) and a BAD week in ASIA (Philippines +2.05%, Taiwan -4.68%).
DOLLAR rose, ^DXY 104.37, +0.3% (pg 50). GOLD fell to $2,404, -0.1% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 149.89, -2.50% for the week)
INTEREST RATES
TREASURY*
T-Bills 3-mo yield 5.43%, 1-yr 4.87%; T-Notes 2-yr 4.49%, 5-yr 4.16%, 10-yr 4.25%; T-Bonds 30-yr 4.45%;
Real yields 5-yr 1.98%, 10-yr 1.93%, 30-yr 2.16%;
FRNs Index** 5.264% (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 pending; est +2.7%; +3.2% in 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 9, COVER STORY, “TRUMP Hasn’t Won the Election Yet. The Stock Market is Acting Like He Already Has”. That may explain the recent bounces in cyclicals, small-caps, gold, cryptos, etc. On the other hand, big techs face regulatory hurdles no matter who will be in power. It remains to be seen how far the AI hype can go – so far, there have only been huge capex, but little revenues or profits to show for them. Most investors should take the middle course (according to their risk tolerance and personal situations) and ignore the political noise.
Pg 6, UP & DOWN WALL STREET. Higher inflation ( > 2%) is bad for traditional 60-40 portfolios, according to BoA. The stocks and bonds have higher correlations now, and in 2022, both tanked. The politicians in DC favor inflationary fiscal policies – higher spending, deficits and debt. If there are doubts about the independence of the Fed, that would also hurt US bonds. Adding alternatives to the 60-40 mix, i.e. multi-asset funds with stocks-bonds-alternatives, may improve performance. Adding foreign exposure would also benefit from a weakening dollar, and that is what Vanguard (and several others’) 60-40 portfolios have.
Only a so-so ROTATION into small-caps. The SCs now are different. Many good small companies have grown and have migrated to MCs or LCs, many small companies (including the unicorns) remain private with easy funding available from private-equity, venture-capital and fund firms. So, there is a lot of garbage now in the publicly traded SCs – 42% of R2000/IWM is unprofitable. The expectation of Fed rate cuts(s) did provide a temporary boost to the SCs, but that may be fleeting. GOLD (bullion GLD, gold-miners GDX) looks better than SCs for your profits from LCs or LC-growth.
(More later….)
Accessible from PB-Big Bang, Facebook + Threads (“at”yogibearbull), Twitter (“at”YBB_Finance).
