Open The (Buyback) Window!
1.) BUYBACK – Stock buybacks of publicly traded company stock tends to account for a lot of flow into equities. The number of companies that have been allowed to buy their own stock back has been decreasing due to the blackout window due to earnings announcements. But right now we are currently in peak earnings blackout, with just 24% of S&P 500 index weight outside repurchase blackout windows. That figure rises to about 55% by month-end. That then hits about 75% by November 3 (Midterm Election Day), and about 85% by November 9, as companies report earnings and trading windows reopen. What’s this mean? One of the larger impacts on stock flow often comes from buybacks, and that window is starting to reopen.
2.) S&P 500 – So yesterday was a down day for the index. In fact, it was the first day in 53 sessions that the index was down at least -1%. So the S&P 500's streak of consecutive days without a decline of at least 1% ends at 53. It was the longest since 2020. That’s fine…that happens. Of course there will be those that try to make a correlation to the 2020 springtime volatility. That’s not what I’m thinking about. What’s important is considering what the likelihood is for the next several weeks and months. As you can see in the analysis below, 6 to 12 months out, history has shown fairly strong returns after the end of a streak of wins.
3.) SEMIS – It’s fair to think of the strength of this bull market being on the backs of semiconductor companies. So that means it’s also fair to think about the health of that sector either feeding into the strength of this market, or taking away from it. Recently, in the very short erm…like 1 week…the Semi sector has not done well, down about -10.7%. However, lost in the short term noise is the fact that this sector is still up +4.58% over the last month. One month momentum is important as it tends to draw the momentum funds in. What could hold them back some is over the last 3 months, this sector is down -1.91%. That’s important as the sector approaches longer term support near the current prices. Importantly, the semi sector is now in their 4th 10%+ correction since early June. That's the most corrections inside a window that small since late 2002. What was late 2002? The end of that brutal bear market. It’ll be important how this sector starts acting here as SMH – the semi exchange traded tracker fund – nears the low end of its trend level. South Korea is an important region as it relates to semiconductors and their economy is slowing (on a rate of change basis) on both an inflation and growth perspective. Economies that experience growth and inflation decelerating at the same time tends to not be great. However, the KOSPI “Capitulation Index” is nearing a point where it has seen a reversal in markets as investors “give up”.
