Ticker Sense

Study Up: Midterms in One Week

With the US mid-term election date of November 7th approaching quickly, we wanted to provide an overview of what some of the Internet's top "prediction markets" have to offer in the way of odds.  The first two charts below come from the Iowa Electronic Markets site (constructed by the Univesity of Iowa's Tippie College of Business) while the bottom table belongs to Tradesports.com, one of the premiere online futures markets.  These results are as of around 9:30 this morning.  (Click to enlarge.)

IEM Congressional Control Market:

   

Tradesports Republican Congressional Control Futures Contracts:

As you can see, the consensus from both markets has the Republicans maintaining Senate control while losing House control.  In all cases, the probability of that taking place appears high: Tradesports users give the GOP about a 67% chance of retaining Senate control and only a 30% chance of keeping the House. 

The Iowa Electronics Markets poses the question a little differently, presenting three possible outcomes: Republicans "gain", Republicans "hold", and Republicans "lose".  For the House election, "gain" is defined as the Republicans winning more than 231 seats; "hold" means they have anywhere from 217-231 seats; and "lose" is defined as their winning 216 or fewer seats.  For the Senate election, "gain" = 55 and above, "hold" = 51 to 55, and "lose" = 50 and below.  The Iowa market currently gauges the chance of the GOP losing the House at a robust 75%, while giving them about a 70% chance of holding their position in the Senate.  Both figures are close to the predictions from Tradesports.com

Laszlo Birinyi on CNBC

   

For those interested, we would like to announce that Laszlo Birinyi will appear on CNBC's Morning Call today at 10:45 AM to discuss the markets and provide commentary about the potential effects of next week's mid-term elections.

Most Extended S&P 500 Stocks

Below is a list of the S&P 500 stocks that are trading the furthest above and below their 50-day moving averages.

Third Quarter Earnings

Two weeks into earnings season and the numbers have been strong once again.  As of Friday, 206 of the 284 (73%) S&P 500 companies that had reported this season beat estimates while 16% missed.  Upside guidance, however, is down this quarter, with only eight percent of companies issuing a more positive outlook.  Please see our historical tables below to compare prior quarters during the current bull market.

Nasdaq 100 Speculative Net Longs

After collectively going net short during the week of May 17th, speculators in the Nasdaq 100 futures contract went net long last week.  In the chart below, we compared the net speculative position in the futures contract (blue and red line) with the Nasdaq 100 (green line).  As the chart illustrates, while bullish sentiment among futures traders has increased since July, it remains below the levels we saw earlier this year, when the Nasdaq last traded at similar levels.

October 30th Blogger Sentiment Poll

Sentiment results remained the same as last week, with bearish sentiment up a mere 48 basis points from our last poll.  The historical results of our poll are tracked below, and below that, you can (as always) take a look at any number of the many outstanding blogs that participate.

Blogger Sentiment Poll Participants:

24/7 Wall Street  -  Abnormal Returns  -  Ant & Sons  -  Alpha Trends  -  Big Picture  - Bloggin' Wall Street  -  Capital Chronicle  -  Carl Futia  -  Confused Capitalist  -  ContraHour  -  Controlled Greed  -  Crossing Wall Street  -  Crowder Blog  -  CXO Advisory  -  Dean Lebaron  -  Fly on the Wall  -  Day Trade Team  -  Daily Dose of Optimism  -  Daily Options Report  -  Deal Breaker  -  Dr. John Rutledge  -  Elliot Wave Lives On  -  Fallond Stock Picks  -  Fickle Trader  -  Global Economic Trend Analysis  -  Hedgefolios  -  Information Arbitrage  -  Daily Blog Watch  -  Kirk Report  -  Knight Trader  -  Learning Curve  -  MaoXian  -  Market Talk with Piranha  -  Millionaire Now  -  Naked Shorts  - Peridot Capitalist  -  Quant Investor  -  Random Roger's Big Picture  -  SeekingAlpha  -  SelfInvestors  -  Shark Report  -  Sigma Options  -  Stock Advisors  -  StockCoach's Corner  -  Tech Trader Daily  -  Trade King  -  Trader Feed  - Trader Mike  -  Trader Tim  -  Ugly Chart  -  Wall Street Folly  -  WindRiver Blog  -  Wishing Wealth

Remember What a 1% Decline Feels Like?

At the start of the month, we posted that the S&P 500 had gone 55 consecutive trading days without a 1% decline.  At the time it was the third longest stretch of the current bull market (10/9/02-present).

Since that prior post, the S&P 500 has yet to record a 1% one-day decline, and the streak now sits at 75 trading days.  The chart below shows that the current streak is now the longest of the bull market and also the longest since way back in 1995.

Best and Worst Performing Stocks; Was it the "T" that made the difference?

The tables below highlight the best and worst performing stocks in the Russell 3000 over the past 5 days, the past 3 months, and year to date.  Interestingly, CNCT and CNC (two very different health care companies) were the two best performers on the Russell 3000 last week...go figure.

Weekly Guess the Dow

Two winners in this week's edition of Guess the Dow; "Alan Crabtree" (12088) and "bladerunna" (12086) each registered guesses within the requisite +/- 5 points of the Dow's actual close of 12090.26 for the prize of a free month of the Birinyi Newsletter Service.

Some new rules to announce for next week which translate into more prizes to go around: from now on, anyone within +/- 5 points of the DJIA's Friday close will win two months of the Newsletter Service, and if no one falls within the range, then the closest guesser will win one month.  This way we'll have a winner every week.

Historical results are displayed below.  Go ahead and use the comments section below to Guess the Dow's close next Friday.  All you need is a valid email.

Defending the Dow

In today's edition of Slate, one columnist offers his take on why the Dow's record-setting run is something of a misleading indicator of not only the economy's actual pulse but also that of the "overall stock market."

The Dow, the column explains, "does not well represent the whole market," as it points out weighting inequities and the fact that "the index only accounts for less than one-quarter of the market."  The author goes on to champion the S&P 500 as a vastly superior barometer for overall market performance, touting the S&P's increasd diversity:

The S&P 500, whose constituents represent 80 percent of the overall market, is a much more accurate gauge of general market performance. According to Standard & Poor's, some $1.26 trillion in assets is indexed to the S&P 500. Its breadth likewise makes it a much more popular benchmark for investors of all kinds. And when you look at the S&P 500, it's clear that the stock-market recovery is not as broad as the Republicans would like you to think.

We decided to take a look at just how different these two indices are, and if in fact they have performed with enough variance over the years to suggest that it's even possible that one might be a far better market indicator than the other.

The graphic below overlays the movements of the DJIA and the S&P 500 from 1980 until the present date:

As you can see, any trend in the Dow is tracked closely by the S&P; the exact correlation is 95.54%.  While the Dow has "gapped" visibly higher in recent years, the directions of both indices continue to track one another, meaning the implication that the Dow is overshadowing a secretly less successful S&P is questionable.  Moreover, the Dow's run isn't exactly sticking out like a sore thumb; the MSCI World Market index is also trading at record highs.