Topley’s Top Ten – February 16, 2018

1.Sector Leadership-Tech and Financials Bounce the Most Off Lows. No Sector Leadership Rotation Yet.

Bespoke Investment Group
Below is one of the many charts included in this week’s Sector Snapshot, which highlights how much each S&P 500 sector fell from its 52-week highs to its recent low as well as how much each sector has now rallied off of its low.  As you can see, Tech has bounced the most off of its low, followed by Financials and then Materials.  Energy has struggled the most.  It had been down 14.8% from its 52-week high, but it’s only up 1.4% off of its low.

https://www.bespokepremium.com/think-big-blog/

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Topley’s Top Ten – February 14, 2018

1.Stocks and Bonds Going Down Together Like Last Week is a Rare Occurrence.

When Stocks and Bonds Go Down Together
Charlie Bilello

High on the list of the greatest fears among investors is a scenario in which stocks and bonds go down together.

Last week those fears were realized when the S&P 500 (SPY) suffered its worst week since January 2016 while long-term Treasury bonds (TLT) also declined.

Source Data: Pension Partners, YCharts

This was an unusual occurrence to say the least. Of the 20 worst weekly S&P 500 declines since July 2002 (inception of the long duration ETF), last week was only the 2nd time long duration Treasuries also finished lower.

Treasuries tend act as a safe haven during times of equity market stress, showing positive returns on average during the worst stock market declines. This tendency is amplified on the long end of the curve, as investors are often positioning for weaker economic conditions that coincide with falling interest rates. A precipitous drop in interest rates, of course, is the best friend of duration.

However, there are certain times when the very source of equity market anxiety is a rise in interest rates and potential inflation. During such times you can see stocks and long bonds fall together. We last saw this briefly in 2013 during the so-called “taper tantrum”…

https://pensionpartners.com/when-stocks-and-bonds-go-down-together/

Found at www.abnormalreturns.com

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Topley’s Top Ten – February 6, 2018

1.In Textbook Fashion…Street was Max Short Volatility Before Yesterday’s 84% VIX Spike.

The stock market is finally getting a long-awaited bout of volatility. The Cboe Volatility Index — or VIX — spiked 84% on the day, its biggest single-day increase of all time, according to data going back to 1990. The VIX reflects expectations for volatility in the S&P 500, and trades inversely to the benchmark roughly 80% of the time.

The Ultimate “Pain Trade” as the street was max short Volin the latest FMS form BofA.   Margin Clerks ramped hard at 2:30-3pm today.  Twits saying “8M SPY options trading on the day after more than 7M on Friday” – @OptionsHawk replied “Highest marks in over 2 years…when everyone finally starts buying protection, we tend to be close to a bottom (June ’16, Nov. ’16, Aug ’17)”

Chart from Dave Lutz at Jones

 
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