US Sector Snapshot

Below we highlight our trading range and breadth charts for the S&P 500 and its ten sectors.  The trading range charts highlight overbought/oversold levels for the various sectors, and the breadth charts highlight the percentage of stocks in the sector trading above their 50-day moving averages.

The S&P 500 is currently right at its 50-day moving average, and 49% of the stocks in the index are trading above their 50-days.  A few days ago, more than 70% of stocks were trading above their 50-days, so we’ve pulled back from those overbought levels in the last two days.  Most sectors are bouncing around their 50-days as well, so we’re currently at a key inflection point for the market.  If indices can break above their 50-days and hold for more than a few days, the market’s uptrend could continue for some time.  If we continue to head lower over the next day or two, however, oversold levels will be back in the crosshairs quickly.  For now, we’re just experiencing a healthy overbought pullback within a short-term uptrend from the March 9th lows.

Source: Bespoke Research

Percentage of US Stocks Above 50-Day Moving Averages

Below we highlight the percentage of stocks trading above their 50-day moving averages for the S&P 500 and its ten sectors.  This is a good breadth indicator to measure the underlying strength or weakness of rallies or declines.  As shown, 62% of the stocks in the S&P 500 are currently trading above their 50-days, which is getting close to the 75%-80% level that we’ve seen at prior market peaks during this bear market.

In the Financial sector, 69% are trading above their 50-day moving averages, which is the highest level in about a year.  This speaks to the strength of Financials during this rally.  On the other hand, Industrials, Health Care, and Utilities all have less than 50% of stocks trading above their 50-days, which means breadth has lagged during the rally for these sectors.  Breadth has been strongest for Technology, Materials, Energy and Telecom.  More than 70% of stocks in each of these sectors are currently trading above their 50-days.

Source: Bespoke Research

ANZ Data Preview: RBA Minutes (March)

Some key questions we’ll be looking to be answered in the minutes of the RBA’s March meeting, to be released at 11:30 AEDT today?

• Did the Board seriously discuss the option of cutting interest rates again in March?    
• If so, what stopped the RBA from cutting?  We know the RBA believes ‘substantial stimulus’ has now been provided and the tone of Stevens’ semi-annual testimony ahead of the meeting suggested they were comfortable at that time with the expansionary setting of policy. What we will be looking for in the minutes then was whether the Board took note of specific sectors (eg. The strong uptick in housing finance approvals).  If so, were they concerned that further cuts in interest rates would promote imbalances in the economy going into a deeper economic slowdown in H2?  If this is the case, the chance of a deep cut in rates in April must be further scaled back – a 25bp cut would likely be the maximum. 

• Or did the Board go into the meeting with the deliberate strategy of pausing in order to leave some ammunition in reserve for when the unemployment rate moves towards (and above) 6.0% by year end?  In which case, not only would a 25bp cut be the likely maximum in April, market expectations for the RBA to hit their terminal low (2.5% to 2.0%) by mid-year must be pushed back towards end Q3 or even Q4.
• If either of the two above points are confirmed, not only is a 25bp cut more likely than any further 50bp move, but the market must start thinking about a non-trivial risk of another pause from the Board in April (particularly given the bounce in equity markets and apparent easing in wholesale credit conditions in the last week) .
• So what could the minutes reveal that would see the market price in a greater chance of a 50bp cut?  For this, it will be important to see whether the minutes elaborate on whether the RBA was expecting a contraction in Q4 GDP growth in Q4.  We believe they would have noted the possibility, but that the actual contraction of 0.5% would have taken them by surprise.  If this is confirmed, this weaker starting point for the economy as well as the surprising jump in the unemployment rate last week provides a strong reason to cut in April, and may get the markets thinking more about a 50bp cut. 

Our call remains for a 25bp ease in April.  Weaker local economic data should be enough to prompt a cut, while ‘keeping some ammunition in reserve” and a bounce in market conditions lean towards a measured pace of easing

Tricom Today 6-2-09

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The market is up 28 slightly underperforming the 56 point rise predicted by the SFE Futures this morning. All sectors up. Property leading the way up 3.2% with Stockland Group up 5.8% after recent savage falls. Banks all up between 1-2% responding to a solid rise in the US banks overnight. NAB gave a trading update with no disasters. News Corp down 5% as they slash their earnings guidance and report a shabby set of interim results. Resources up over 1% as BHP and FMG keep rising on the theme of higher shipping rates and iron ore volumes and prices. Iron ore stocks having a moment in the sun. Small resources stocks up despite the fall in metals overnight Kagara Limited up nearly 11% early on. Nickel stocks strong on the China theme.Gold doing well on the higher gold price. Newcrest and Lihir up 3.5% on the open. Oil stocks mostly up on the slightly higher oil price.

Tricom Today 5-2-09

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The market is down 14, dropping off as the morning progresses – underperforming the 14 point rise predicted by the SFE Futures this morning. Resources up 4.6% – most other sectors down. BHP and RIO up 5.2% and 7.6% early on. Fortescue Metals up 9% on the open. Most the miners up on the strong base metal prices and research from one broker suggesting the iron ore market is improving with BHP saying Chinese dstocking of iron ore had run its course. Gold stocks strong on the higher gold price. Industrials down 4.1% . Lend Lease has placed $302m of shares overnight at 605c and fallen 17.2% to 560c putting the placees over $20m underwater. Qantas. capital raising went through near the bottom end of the placement range at 185c and the price is down 17% to 190c this morning. Placees are just above water. Leighton Holdings up 2.7% on the back of winning a $475m contract in Abu-Dhabi. Banks down between 2-4%. UK banks had a bad night and there are concerns over Obama.s plans for financial resurrection.

Tricom Today 4-2-09

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The market is down 19 bit disappointingconsidering the 26 point rise predicted by the SFE Futures this morning. All sectors down.Property falling heavily again on the back of the Westfield $2.9bn capital raising yesterday 276.2m new shares WDC down 13% earlyon and already back to the 1050c placement price – sector down another 9.9% after a 6.3% fall yesterday. BHP is up 1.8% after posting interim results at the bottom end of the expected range but with a confident statement.Fortescue up 5% early on restructuring some shipping contracts with Bocimar. RIO down
1.4%….the BHP results took the shine off itdespite an 8% rise in ADR form. Base metal stocks mixed. Industrials down 1.1%. Banks all down 1-2% except for Westpac Bank which is up 1.2%.

Tricom Today 28-1-09

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The market is up 40 points compared to the 43 point rise predicted by the SFE Futures.The Banks putting in a great performance. Financials up 2.8%. CBA up 7.2%. Property Trusts are underperforming after Westfield – the sectors biggest company – announced late last night it would writedown $3bn worth of assets. Building stocks are struggling on the back of a profit warning from Boral – down 15%. Resources down 0.4% – BHP up 0.4% and RIO down 2.8% saying it won’t rule out an equity raising to pay down debt later this year.The Dow Futures suggest an 87 point gain on Wall Street tonight.

Tricom Today 22-1-09

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Our market is up 9 up 49 at best – a little disappointing considering Wall Street had a positive session overnight and the SFE Futures suggested a 46 point rise. Resources have managed to slip into negative territory but most of the other sectors are above water. The big news today is the extension of the shorting ban on financials by 6 weeks bringing relief to that sector and Wesfarmers going into a trading halt after announcing they will be raising $2.8bn in a 3 for 7 rights issue at 1350c.