From Barron’s, February 19, 2024 (Part 1, Market Week+)
Feb 17, 2024 11:26:36 GMT
chang, rhythmmethod, and 11 more like this
Post by yogibearbull on Feb 17, 2024 11:26:36 GMT
From Barron’s, February 19, 2024 (Part 1, Market Week+)
Pg 25, TRADER. After a stock MELTUP, a short CORRECTION may follow. Trigger may be some bad earnings reports (red hot NVDA reports on Wednesday) or more hawkish Fed/FOMC who want +2% average inflation on a persistent basis. Sentiment is also strong, so are the fund flows. SP500 fwd P/E is 20.5. Tail risks are high.
The US has been the best place to be among GLOBAL stocks. With SP500 fwd P/E 21 (vs Nikkei at 20, Stoxx600 13, FTSE100 11), some are asking how long this can continue. But one should take into account different types of stocks/sectors in the global indexes and the US is the most tech heavy. So, the US outperformance may continue for a while (but beware that tech can also be very cyclical).
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 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
FOMC 9/18/24+ 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 -0.11%, SP500 -0.42%, Nasdaq Comp -1.34%, R2000 +1.13%. DJ Transports -3.62%; DJ Utilities +1.19%. (Rotating spot tech XLK -2.54%) US$ index (spot) +0.16% (remains too strong over 100), oil/WTI futures +3.06%, gold futures -0.58%.
YTD (index changes only), DJIA +2.49%, SP500 +4.94%, Nasdaq Comp +5.09%. (Rotating spot tech XLK +5.24%) (I may have jinxed it last week by switching early to YTD as I normally wait until Q1-end to do that)
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 1+:1
FUND INFLOWS +/OUTFLOWS: Stocks -|+, taxable bonds +|-, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +15.4% (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
%Above 50-dMA for NYSE-listed stocks 61.08% (positive); (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 73.4% (overbought); 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 31, INTERNATIONAL TRADER. There are several techs and fintech IPOs pending in the INDIAN market. They may come out at the top of their price ranges and may then shoot up. Tougher post-IPOs regulations (market, banking, others) apply to public companies that catch some companies off guard. The stories of some 2021 IPOs aren’t pretty, especially with the 2022 global tech wreck that followed. Many foreign investors may just stick with more established Indian companies.
Pg 32, OPTIONS. Consider the financials IBKR and KKR for selling puts in these uncertain markets. Both are run by legendary investors.
SP500 VIX 14.24 (low), Nasdaq 100 VXN 18.60 (low), options SKEW 142.62 (high), bond MOVE 109.20 (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 45: A good week in EUROPE (Sweden +2.27%, Belgium -0.61%, Greece -0.73%) (UK in technical recession) and a good up week in ASIA (China +3.39%, New Zealand -0.76%) (Japan in technical recession).
TREASURY* 3-mo yield 5.44%, 1-yr 4.98%, 2-yr 4.64%, 5-yr 4.29%, 10-yr 4.30%, 30-yr 4.45%;
REAL yields 5-yr 1.91%, 10-yr 1.97%, 30-yr 2.17%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 104.28, +0.2% (pg 50). GOLD fell to 1,998, -1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 107.86, -1.34% 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 November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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, “BIDEN & TRUMP are Headed for a Rematch. 5 High-Stake Issues to Watch”. Topics covered are debt/deficits, taxes, tariffs, the Fed, regulations, stock market. There are also elections in 75 countries.
NOTE. As we approach the US elections, Barron’s will have more elections and/or political features. My practice has been to SKIP trying to summarize these but only mention the features so that people can read those online or at their local libraries or at nearby newsstands ($5/copy).
Pg 6, UP AND DOWN WALL STREET. US stocks are expensive at nosebleed valuations – yield 1.44%, trailing P/E 22.4 (fwd P/E 20.5), P/B 4.6. This strong economy may never “land” but may encounter “air pockets”. Several stocks just have high prices – BRK-A (even BRK-B isn’t cheap anymore), NVR, CMG, NVDA, etc. The average SP500 stock price is $204.28 (vs $39.06 in 1983; $120.30 inflation-adjusted). DJIA, a price-weighted average, has several high-priced stocks – UNH, MSFT, GS, HD, CAT, MCD. What happened to stock-splits? Well, funds and institutions don’t care about stock prices, and retail investors can now use fractional trading at several brokerages. But WMT is splitting 3-for-1 on Feb 26 so that its associates can buy it in round lots.
Pg 8, STREETWISE. Nvidia/NVDA is the “Apple of AI” and that’s good (I think). It’s now #3 in SP500 by market-cap (#1 AAPL, #2 MSFT). Watch its earnings report on Feb 21 after the market close and it better be great. While it’s a semi chip company, NVDA also has substantial software revenues from recurring subscriptions. But its hardware business also depends on many external factors – tight chip supplies from TSM, global supply-chains, customer order leads/lags, etc.
(More later….)
LINK
Pg 25, TRADER. After a stock MELTUP, a short CORRECTION may follow. Trigger may be some bad earnings reports (red hot NVDA reports on Wednesday) or more hawkish Fed/FOMC who want +2% average inflation on a persistent basis. Sentiment is also strong, so are the fund flows. SP500 fwd P/E is 20.5. Tail risks are high.
The US has been the best place to be among GLOBAL stocks. With SP500 fwd P/E 21 (vs Nikkei at 20, Stoxx600 13, FTSE100 11), some are asking how long this can continue. But one should take into account different types of stocks/sectors in the global indexes and the US is the most tech heavy. So, the US outperformance may continue for a while (but beware that tech can also be very cyclical).
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 3/20/24+ hold (cycle peak 5.25-5.50%)
FOMC 5/1/24+ hold
FOMC 6/12/24+ cut
FOMC 7/31/24+ cut
FOMC 9/18/24+ 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 -0.11%, SP500 -0.42%, Nasdaq Comp -1.34%, R2000 +1.13%. DJ Transports -3.62%; DJ Utilities +1.19%. (Rotating spot tech XLK -2.54%) US$ index (spot) +0.16% (remains too strong over 100), oil/WTI futures +3.06%, gold futures -0.58%.
YTD (index changes only), DJIA +2.49%, SP500 +4.94%, Nasdaq Comp +5.09%. (Rotating spot tech XLK +5.24%) (I may have jinxed it last week by switching early to YTD as I normally wait until Q1-end to do that)
SENTIMENTS
(ALL sentiments remain OK but peaked in mid-December)
NYSE cumulative (5-day) A/D LINE rose for a 4th week; ratio of winners:losers 1+:1
FUND INFLOWS +/OUTFLOWS: Stocks -|+, taxable bonds +|-, munis +|-, money-market funds +|0. (NEW FORMAT: 4wMA|Weekly change)
AAII Bull-Bear Spread +15.4% (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
%Above 50-dMA for NYSE-listed stocks 61.08% (positive); (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 73.4% (overbought); 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 31, INTERNATIONAL TRADER. There are several techs and fintech IPOs pending in the INDIAN market. They may come out at the top of their price ranges and may then shoot up. Tougher post-IPOs regulations (market, banking, others) apply to public companies that catch some companies off guard. The stories of some 2021 IPOs aren’t pretty, especially with the 2022 global tech wreck that followed. Many foreign investors may just stick with more established Indian companies.
Pg 32, OPTIONS. Consider the financials IBKR and KKR for selling puts in these uncertain markets. Both are run by legendary investors.
SP500 VIX 14.24 (low), Nasdaq 100 VXN 18.60 (low), options SKEW 142.62 (high), bond MOVE 109.20 (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 45: A good week in EUROPE (Sweden +2.27%, Belgium -0.61%, Greece -0.73%) (UK in technical recession) and a good up week in ASIA (China +3.39%, New Zealand -0.76%) (Japan in technical recession).
TREASURY* 3-mo yield 5.44%, 1-yr 4.98%, 2-yr 4.64%, 5-yr 4.29%, 10-yr 4.30%, 30-yr 4.45%;
REAL yields 5-yr 1.91%, 10-yr 1.97%, 30-yr 2.17%;
FRNs Index** 5.30% (Treasury updates it on Tuesdays following the Monday 13-wk T-Bill Auctions).
DOLLAR rose to ^DXY 104.28, +0.2% (pg 50). GOLD fell to 1,998, -1.3% (Handy & Harman spot, Thursday; pg 52); the gold-miners fell. (^XAU was at 107.86, -1.34% 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 November 1, 2023, is 5.27%; the fixed rate is +1.30%, the semiannual inflation is +1.97%.
(NOTE – The Social Security COLA for 2024, based on the Q3 average of CPI-W, is +3.2%)
*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, “BIDEN & TRUMP are Headed for a Rematch. 5 High-Stake Issues to Watch”. Topics covered are debt/deficits, taxes, tariffs, the Fed, regulations, stock market. There are also elections in 75 countries.
NOTE. As we approach the US elections, Barron’s will have more elections and/or political features. My practice has been to SKIP trying to summarize these but only mention the features so that people can read those online or at their local libraries or at nearby newsstands ($5/copy).
Pg 6, UP AND DOWN WALL STREET. US stocks are expensive at nosebleed valuations – yield 1.44%, trailing P/E 22.4 (fwd P/E 20.5), P/B 4.6. This strong economy may never “land” but may encounter “air pockets”. Several stocks just have high prices – BRK-A (even BRK-B isn’t cheap anymore), NVR, CMG, NVDA, etc. The average SP500 stock price is $204.28 (vs $39.06 in 1983; $120.30 inflation-adjusted). DJIA, a price-weighted average, has several high-priced stocks – UNH, MSFT, GS, HD, CAT, MCD. What happened to stock-splits? Well, funds and institutions don’t care about stock prices, and retail investors can now use fractional trading at several brokerages. But WMT is splitting 3-for-1 on Feb 26 so that its associates can buy it in round lots.
Pg 8, STREETWISE. Nvidia/NVDA is the “Apple of AI” and that’s good (I think). It’s now #3 in SP500 by market-cap (#1 AAPL, #2 MSFT). Watch its earnings report on Feb 21 after the market close and it better be great. While it’s a semi chip company, NVDA also has substantial software revenues from recurring subscriptions. But its hardware business also depends on many external factors – tight chip supplies from TSM, global supply-chains, customer order leads/lags, etc.
(More later….)
LINK