In a post last Friday, we noted that based on our Stock Seasonality tool, the S&P 500 was entering what has historically been its weakest seven-day stretch of the calendar year.  That’s right, over the last ten years, the S&P 500 has been down in the one week period from the close on 5/10 through 5/17 by a median of 1.78% with declines eight out of ten times.  The image below is from the post last Friday and shows how in the one-week period, our gauge of performance for the S&P 500 was all the way down to zero, meaning it doesn’t get any worse than that!  When the market opened on Monday morning it was looking like another mid-May week from hell as the S&P 500 gapped down sharply on trade fears.  In a pretty impressive turnaround, though, bulls clawed their way back and the S&P 500 was only down modestly on the week as of Friday afternoon.

So now that we have gotten through ‘hell week’ for the market, what can we expect next week?  Below we show the updated gauges for the S&P 500’s historical performance over the next week, month, and three months (from the close on 5/17).  While the week of 5/10 through 5/17 has typically been horrible, the week that follows has historically been slightly above average with the S&P 500 posting a median gain of 0.37%, which ranks in the 55th percentile of all 7-day periods throughout the year.  Looking further out than a week, returns improve from there.  The S&P 500’s median return one month after the close on 5/17 is a gain of 1.84% (71st percentile), and the median three-month return is a gain of 3.86%, which is better than 75% of all other one week periods throughout the calendar year.  Now, if you want to find the stocks that have historically performed best during this period of the year, head on over to the Stock Seasonality tool for more info.  If you are not currently a Bespoke Premium client, start a two-week free trial today for immediate access.

After a strong slate of economic data on Thursday, today’s data continued the positive trend with a much stronger than expected sentiment report from the University of Michigan where the headline index came in at its highest level since January 2004.  While economists were forecasting the index to come in at a level of 97.2, the actual reading was much stronger at 102.4. That beat relative to expectations was the biggest since October 2017. The big driver of this month’s strength was the fact that the expectations component surged 8.6 points to 96.0 from 87.4.  Over the last few years, the expectations component of the UMich Sentiment report has tried unsuccessfully to break above 90, but this month it blew right through that level to the highest levels of the current economic cycle.

Not only did the expectations component make new highs relative to the last few years, but it’s also at levels not seen in over 15 years.  The fact that this index is making new highs is an encouraging one as it indicates confidence about the future, and with the number of Americans feeling like they are living ‘paycheck to paycheck‘ at multi-year lows, how can you blame them?

The one head-scratcher?  It’s a bit counter-intuitive to see consumer sentiment and the probability of rate cuts from the FOMC so high at the same time!  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Our Chart Scanner Tool has become an incredibly popular and useful tool for clients as it gives a user the ability to quickly scan through hundreds of charts in order to find the most attractive (or unattractive) patterns.  Included with the tool are a number of pre-defined screens that allow users to see stocks that hit 52-week highs or lows in the previous session or experienced “death” or “golden” crosses.

A Golden Cross occurs when a stock’s upwardly sloping 50-day moving average (DMA) crosses above its 200-DMA, which also has to be rising.  Conversely, a Death Cross occurs when a downwardly sloping 50-DMA crosses below the 200-DMA, which also has to be moving lower. Technicians consider Golden Cross formations to be a positive signal, while a Death Cross is considered to be negative.  Although it is valuable to look at Golden and Death Cross formations, as we have pointed out in the past, it is not always a reliable pattern and does not always serve as a good buy or sell signal.  Today, we wanted to highlight recent examples of each formation and show how they performed going forward

As an example of a Golden Cross, below we highlight Generac Holdings (GNRC) which saw a Golden Cross yesterday.  GNRC makes home generators and has seen steady growth as concerns over the reliability of the power grid have increased in recent years.  Over the last ten years, GNRC has shown consistently positive returns in the three month period following its four prior golden crosses. As you can see below, the stock’s average three-month return has been a gain of 10.13% (median: 11.38%).

On the negative side, below we highlight the price chart of the iShares MSCI Turkey ETF (TUR) from 2009 to 2019. Turkey has been a country in turmoil in recent years, and prior death crosses in TUR have played out as the formation suggests.  In the three prior death crosses for the ETF, the stock has declined over the following three months for an average decline of 11.31% (median: -4.63%).Our Chart Scanner tool is indispensable for any investor who likes to follow charts.  To receive access, start a two-week free trial to Bespoke Institutional for full access.

Tariff headlines have taken a front seat in the past couple of weeks leading stocks to see their worst declines of the year.  Not surprisingly, sentiment has begun to reflect price action.  One week after coming in at its highest level since October (around the time the S&P 500 hit its previous all-time high), bullish sentiment has fallen off of a cliff this week to 29.82% versus 43.12% last week.  From a historical perspective, this is not at any kind of extreme, but it did bring optimism to its lowest level of 2019 and by a pretty wide margin at that. Additionally, this was the largest drop in bullish sentiment since December 13th of last year when it fell 17.04% in a week. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Bears have overtaken the bulls this week as the bull-bear spread is now negative for the first time since January 17th.  Bearish sentiment spiked up to 39.3% from 23.19% last week.  While this was a massive spike higher, it is still well off of any sort of extreme and we actually saw higher readings late last year.  Investors Intelligence is echoing the AAII results as that survey showed the highest percentage of respondents since February (31.1%) expecting a correction. Granted, bearish sentiment in this survey remains muted as it actually fell to its lowest level since April of last year.

Tanking to 30.88%, it is hard to still say neutral sentiment is still elevated after peaking four weeks ago when it hit 46.31%.  This represents the sharpest four-week declines in neutral sentiment 1/23/16 when it fell 15.71 percentage points (from 51.31% to 29.77%). Currently, neutral sentiment is sitting less than a percentage point below its historical average.

Yesteday the Investment Company Institute (ICI) released weekly mutual fund flows for the week ending May 8th. Generally speaking, recent trends of huge outlfows from equity mutual funds and huge inflows to bond mutual funds have continued, with a few exceptions. Domestic large cap equities saw an inflow (their first in the past sixteen weeks), as did both emerging and developed market equity funds focused on international markets. High yield bond funds continued to see outflows, and flows into both global and domestic government bonds slowed. Muni bonds also continued to get huge flows, with one week flows in the 96th percentile of all periods. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.