Homebuilder Confidence Ebbs

After a post-election surge in December, homebuilder confidence pulled back more than expected to kick off the year.  While economists were forecasting the NAHB homebuilder sentiment survey to come in at a level of 69 this month, the actual reading came in two points lower at 67, and down three points from December’s originally reported reading of 70.  We would note that last month’s initial reading was also revised down one point, so the m/m decline was just two points.  Looking at the chart below, even after this month’s decline, sentiment remains above every other reading of this expansion prior to December.

011817 NAHB Chart

011817 NAHB TableThe table to the right shows the breakdown of this month’s report by traffic as well as present and future sales along with sentiment broken down by region.  Every component of the overall index declined in January, with the biggest decline coming in Present Sales while Traffic saw the smallest decline.  In terms of regions, sentiment on the coasts saw the largest decline, while homebuilder sentiment in the Midwest, which includes the rust belt states that went in favor of Trump, was unchanged at its highs for the cycle.  Even for the other three regions, though, it is important to remember that January’s decline in sentiment comes from what were the highest levels of the cycle.

011817 NAHB Chart Region

 

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Empire Manufacturing Index Backs Off Recent Highs

After a big jump post-election, the Empire Manufacturing report for January backed off of its recent highs, missing consensus forecasts in the process.  While economists were forecasting the headline reading to come in at a level of 8.5, the actual reading came in at 6.5.  While the current conditions index backed off slightly, expectations for the future remained right at their multi-year high from last month.

011717 Main Chart

Plans for capital expenditures and tech spending continued to rise this month, though.  Plans for Cap Ex spending rose to the highest level since February 2015, while plans to spend on technology also increased.

011717 Tech and Capex

Finally, the table below breaks down this month’s report by each of the report’s sub-indices.  As far as current conditions are concerned, New Orders and Shipments both declined, while every other category increased.  One notable increase was Prices Paid, which is now at its highest level in three years, while Prices Received is at its highest level in nearly five years.

011717 Table

 

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Most Shorted Stocks Lagging the Market

Short interest figures for the end of December were released after the close yesterday, and as one might expect given the rally in equities, negative bets on individual stocks continued their post-election decline.  The table below lists the 20 stocks in the S&P 1500 that have 30% or more of their free-floating shares sold short, and for each stock we also include how they have fared so far in 2017.  Even though equities have rallied so far this year, the most heavily shorted stocks haven’t taken part in the rally.  The average return of the 20 stocks listed is a decline of 1.47% (median: -1.08%).  In terms of breadth, it’s a more even split with nine stocks up and eleven down, but still skewed negative.

You won’t find a lot of household names on the list.  Many people will recognize companies like LendingTree (TREE), Restoration Hardware (RH), Lumber Liquidators (LL), Tempur Sealy (TPX), and Big Lots (BIG), but most of the others are all obscure small cap companies.  In terms of individual returns, though, there haven’t been too many outliers.  The biggest downside losers have been Eagle Pharma (EGRX) and World Acceptance (WRLD), while the biggest winner has been Greenbrier (GBX).  As we said at the top, though, normally in a rising market environment you tend to see the most heavily shorted stocks do best.  Therefore, if this trend of underperformance continues, it would be a cause for concern for the broad market.

Interested in a more in-depth analysis of short interest trends?  Earlier today, we published our bi-monthly short interest report, which is available to all Bespoke Premium and Institutional clients.   Click here to start a no-obligation 14-day free trial now.

Most HSorted

106 Weeks and Counting

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The streak goes on.  Despite new all-time highs in the major equity benchmarks and the DJIA getting within half a point of 20,000, individual investors still can’t get to a majority in the bullish camp.  According to this week’s survey from AAII, bullish sentiment dropped by about two and a half points in the latest week, falling from 46.20% down to 43.64%.  That’s actually the lowest level since early December and shows that just like the overall consolidation we have seen in the market in the last several weeks, sentiment has also taken a breather.  For the sake of reference, if bullish sentiment goes another five weeks without reaching 50%, it will be the longest streak of sub-50% readings in the history of the survey.

AAII Bullish 011217

Although bulls aren’t in the majority, they do have a clear plurality.  As shown in the charts below, bearish sentiment remains relatively low at 26.97%, while neutral sentiment is still under 30%.  We would also note that this is a big change from the first half of 2016, when neutral sentiment was the leader with weekly readings routinely above 40%.

AAII Bearish 011217

AAII Neutral 011217

Apple (AAPL) Back on the 52-Week High List

Each day with our Morning Lineup, we include charts of each stock in the Russell 1000 hitting 52-week highs and lows in the prior day’s session.  Back on Monday, one stock showed up on the list of new highs that hasn’t been on the list in quite some time.  That stock was Apple (AAPL), and it did so just in time to celebrate the 10th anniversary of the iPhone.  Even as the S&P 500 has hit multiple new all-time highs in the last several weeks, AAPL had been one stock that was conspicuously absent from the run to new highs.  In fact, Monday’s new 52-week high for AAPL ended a streak of 428 trading days where the stock failed to hit a new one-year high.  As shown in the chart to the right, that ranks as the ninth streak of a year or longer, the longest streak without a new high since 2003, and the fifth-longest streak since 1981.

So now that AAPL is back on the party bus, is the recent new high a sign of good things to come? In today’s Chart of the Day, we looked at each prior period where AAPL went a year longer without hitting a 52-week high and then calculated how the stock performed in the period after the streak ended.  See today’s Chart of the Day by starting a 14-day free trial to Bespoke’s premium research below.

aapl-streaks

 

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