Ticker Sense

Weekly Guess the Dow

Looks as if none of our contestants had any idea the Dow would follow last week's gains with another strong week.  The actual close of 11,560.77 was almost 50 points above the highest guess we received.  The guesses for next week should be an interesting indicator as to whether our contestants think the market has broken out or if we're overdue for a correction.  Go ahead now and place your guess in the Comments section below; remember, anything within +/- 5 points wins a free month of the Birinyi Newsletter service.  You have until Monday's open to vote.

   

Overbought ETFs

Good ole' Typepad has been causing problems with posting this morning, but we are now able to get into the system.  Anyways, below we list those ETFs that are currently the most overbought.

KSS makes it 10 days in a row; Can BBBY make it 7?

Kohl's (KSS) is now up ten days in a row -- something that has only happened one other time in the stock's history (in November 2001 it went up 12 days in a row).  Bed Bath & Beyond (BBBY) is up six days in a row.  In the past three years, this has happened five other times and each time the stock has been down the seventh day.  See table below for the longest current consecutive up and down streaks for S&P 500 stocks.

Oil Bubble Bandwagon

Earlier today several news articles quoted vaunted energy analyst Philip Verleger as predicting drastically low oil prices in the near future.  "It's not unthinkable that oil prices could return to $15 or less a barrel, at least temporarily," he said in the Seattle Times and other papers. 

Verleger, who gained renown for his prescient, ahead of the pack call of $70-a-barrel way back in August of 2004 (when the country was feeling sorry for itself at $48), has made a bold move by forecasting such ultra-cheap oil prices on a day when futures still hover around $70.  But if he turns out to be right, and you've been a diehard Verleger disciple ever since his 2004 prophecy made headlines, you might be a little upset at his recent drastic turnaround.  Why?  On July 24th of this year, Verleger appeared in a Bloomberg article in which he concurred with fellow analysts that crude would soon hit 100 bucks.  "Commodity investors looking for $100 oil will see it," he stated. 

So, If we have indeed seen crude oil's peak for the next few years, anyone who bought in at the $75 level from when that quote was published will have been better off had they invested in Tom Cruise(maybe).  With his $15 call today, it seems possible that Verleger's strategy might be to choose a dramatic landmark far in the direction of whichever horizon the market appears headed toward. 

Daily Analyst Actions

One of the sections of our Daily Market Report, which is available to our mini-institutional subscribers, is called "Significant Analyst Actions".  In this section we highlight the major analyst calls in the pre-market.  In addition to summarizing the particular action, we also provide the composite rating by all the Wall Street analysts covering the stock (ratings are on a scale of one to five with five being the best).  This allows an investor to see if the analyst making the call is going against the herd or not.  For example, today, UBS downgraded GE from a buy to neutral.  Since GE has a composite rating of 4.7, the UBS analyst's call is going against the consensus.

Since analyst actions are not always the most reliable predictor of a stock's future performance, we also have gone ahead and highlighted in grey which rating actions were made by analysts who have one of the top three prior records on the stock.  Again, using GE as an example, we see that not only is the UBS analyst going against the herd, in the past, he has also had a good record on the stock vs. his peers.

DD, DNA, HCP, IR, XMSR, BA, DTV, EMR, GE, JOE, CAKE, CBS, CMG, GD, OMC, SNDK

Consecutive Up and Down Days for Stocks

Adding a new twist to our usual post of S&P 500 stocks that have been up or down a certain number of consecutive days, we do the same but also look at the prior times the event has happened for each stock to see what it usually does the following day.  KSS, for example, which has been up nine days in a row now, has only been up nine days in a row one other time in the last three years, and it went down 1.83% the next day.  BIG, on the other hand, has been up six days in a row, and has gone up for a seventh day six out of nine times for an average gain of 0.98%.  Please direct any questions to the comments section.

A Hangover For Hedge Funds

For the hedge fund industry, August was just “one of those months."  Often regarded as vehicles exclusively for the rich to get richer, the industry lost a little bit of its luster this month.  According to Hedge Fund Research Inc, not one major hedge fund strategy outperformed the S&P 500 during the month. In theory, hedge funds are supposed to provide steady and consistent returns, so if they underperform during a strong month, it is not necessarily such a bad thing.  However, no one likes to get a statement or letter that says they were only up 1% when the market was up more than twice that.

This morning, the Wall Street Journal ran a story which further illustrated how tough the month of August was.  Goldman Sachs is regarded by most to be the savviest trading house on Wall Street, and for years we have referred to it as Wall Street’s largest hedge fund since such a high percentage of its profits come from its proprietary trading group.  This month, however, one of the company’s largest funds, which manages $10 bln in assets for its most elite clients, fell nearly 10% during the month, equating to a loss of $1 bln.

Sector Relative Strength

Below we present charts depicting sector relative strength vs. the S&P 500 over the last year (rising lines indicate sector outperformance while falling lines represent sector underperformance).  These charts are presented on a regular basis as part of our Birinyi mini-institutional service.

Over the last two days, the energy sector is now underperforming the S&P 500 over the last year (It seems like a while ago since you could last say that).  One sector which stands to benefit from declining energy prices is the consumer discretionary sector, which although it has underperformed over the last year, it is making a strong comeback.  Technology also seems to be benefiting, as it has staged a rebound since energy peaked.

INTC, HPQ, PFE Have Led the Dow Higher

Below we rank the Dow 30 stocks by their daily percent change (1=best) for each of the last 20 days.  Summing up each stock's daily rank shows that INTC, HPQ, and PFE have the lowest totals, indicating that they have consistently ranked near the top.

Companies Guiding Lower vs Higher

Below is a historical chart of the spread between the number of US companies issuing positive guidance versus negative guidance.  We took the 1-month average of the daily spread and calculated it on a rolling basis.  Since 2000 there have only been two periods (4/02 and 4/04) where the one-month average showed more companies guiding higher than lower.  One interesting aspect of the chart is that although many investors worry that future earnings expectations are too high, on a net basis company guidance remains close to the high end of its historical range.