Redeem this !!! Buyouts behind the recent bullish market trend

You may remember our article from last weekend on “” where we alluded to the Fed (Plunge Protection Team) entering the market on the weekend of Friday and buying stocks to “propel” the market.

While we’re sure this has happened, we are now learning from Bank of America (NYSE 🙂 and Goldman Sachs (NYSE 🙂 that companies saw the brief and significant pullback as an opportunity to buy back their own stock.

Bull market – Share buybacks

Essentially, this is another group of artists adding to the impressive image on the rise this year. For those unfamiliar with this concept, there are several reasons why companies buy back stocks:

• Listed companies buy back shares held by the public and withdraw those shares into their own treasury. This reduces the number of shares outstanding and increases the amount of earnings per share available, which tends to increase the value of the shares.
• Companies are sitting on huge piles of cash and have to deploy it or there will be a shareholder revolt to increase (or institute) a dividend or special distribution to shareholders.
• Companies believe that the growth of their business, the potential appreciation in stock prices and the lack of other investment opportunities justify prioritizing investments in their own stocks.
• The thesis of these companies is that if they reduce the outstanding shares held by others, including large institutions, the potential appreciation of their shares (future ROI) is a much better use of their money than cash. in their coffers.
• They have already received board approval to repurchase the shares (and reduce the outstanding shares) and are only waiting what they deem an appropriate window to execute the buybacks.

We have now learned that the week of November 29 and especially Friday December 3, late afternoon, was just such an opportunity. Additionally, given the seasonality and typical capital inflows from bonuses, year-end partnership distributions, and the possibility of a year-end ‘Santa’ rally, it appeared to be the right time to put these buybacks into action.

Bank of America reported a $ 6.7 billion increase in buyouts during this recent pullback, beating all estimates from companies tracking buyouts. They also state that 40% of net share purchases are due solely to repurchases this year.

It is up about 23% this year and 64% of that return is due only to 5 stocks: Microsoft (NASDAQ :), Google (NASDAQ :), NVIDIA (NASDAQ :), Apple (NASDAQ 🙂 and Tesla ( NASDAQ 🙂 :). At least 3 of these companies are the largest companies to buy back their shares this year.

The graph below shows the extent of this share buyback throughout 2021:

Net purchases of BofA customers by customer group

Risk activated / bullish

• Risk indicators have improved to become primarily risk-oriented with the exception of the iShares Russell 2000 ETF (NYSE 🙂 which is still neutral
• As we highlighted last week, major stock indexes have rebounded from near-term oversold levels
• Sentiment shows that the number of underlying stocks within the SPDR® S&P 500 (NYSE 🙂 that are above their 10-day moving average is turning sparkling, a sharp correction from recent oversold readings.
• Short-Term Volatility via iPath® Series B S&P 500® VIX Short-Term Futures â„¢ ETN (NYSE 🙂 has foregone recent gains and is at short-term risk
• While all of the key market sectors we are seeing were positive this week, the Technology Select Sector SPDR® Fund (NYSE 🙂 and SPDR® S&P Homebuilders ETF (NYSE 🙂 led the week, an indication of risk.
• The majority of sectors, with the exception of the Financial Select Sector SPDR® Fund (NYSE 🙂 and the SPDR® S&P Retail ETF (NYSE :), are now back in a bullish phase.

Neutral metrics

• Volume models have improved to neutral, an improvement over the distribution we saw last week
• Insiders of the market for SPY have improved, but there is still a disparity between the McClellan oscillator showing a negative number despite a drastic improvement in prices (thin market)
• On a 30 day basis, IWM is still down -8% while other industries are up about 1% on average over the same period. IWM is currently in the distribution phase
• The value theme, via Vanguard Value Index Fund ETF Shares (NYSE 🙂 vs Growth, via Vanguard Growth Index Fund ETF Shares (NYSE :), remains undecided in the short term, with the long term trend remaining intact in favor of growth.
• Foreign stocks lag behind US stocks
• via {{9227 | SPDR® Gold Shares (NYSE 🙂 has underperformed SPY on a relative basis throughout the year, but it looks like it will continue to trade in a range close to its key moving averages over the course of the year. during the week, watch for a break above the 50 and 200 day moving averages
• The iShares 20+ Year Treasury Bond ETF (NASDAQ 🙂 was overbought last week and then fell back this week, now trading within its 8-month trading range.
• Cash volatility (.X) still maintains support at its 200-day moving average for now

Risk disabled / Bearish

• Within the modern Mish family, Retail (XRT) lags behind and is still down -3.5% in the past 6 months
• Soft Commodities – Invesco DB Agriculture Fund (NYSE 🙂 – weakened on a relative basis, but absolute price basis maintained its breakout and remains in a bullish phase
• The Chinese, via WisdomTree Chinese Yuan Strategy Fund (NYSE :), crashed last week, down more than -6%, adding energy to the rally in US equities
• Hindenburg indicator still shows 17 omens

Crypto

• Despite being down on the week, (BTC) still maintains support at its 200-day moving average and is trading above $ 48,000, (at the time of writing) seeing even a bit of a rebound in the weekend
• The ratio peaked at 3 year highs last week and now appears to be recovering, indicating the possibility that Bitcoin may start to outperform on a relative basis very soon.
• (MATIC) topped all large cap cryptos last week + 5%, hitting its highest levels since May
• Regulatory discussions in the United States regarding the cryptocurrency industry have garnered favorable attention this week, as well as in other large countries like India, where regulations are proving to be much looser than many would expect. ‘had planned.