ORTEX Monthly Recap for August

ORTEX Perspectives on the S&P 500 for August

August marked a tumultuous month for stocks. Despite a recent string of positive sessions that helped stock indexes trim their monthly losses, the S&P 500 lost 1.77%, while the Nasdaq shed 2.17%. The 30-stock Dow dropped 2.36% in August. Heading into September, which has the reputation as the worst month for stocks, investors will be hoping to reverse course and defy expectations. ORTEX Short Interest Data once again showed a mixed bag for bearish bets last month, with 7 of 11 sectors seeing a fall in short interest. Short interest (SI) shares in the Health Care sector rose the most, up 7.28%, while Financial stocks saw the largest fall as short interest shares decreased by 13.95%.

August finally saw a return to profit for short sellers as stocks fell. In the aggregate, the bears made $14.8 billion in August.

August brought the second half of earnings season, and there have been plenty of changes in forward-looking earnings estimates from Wall Street. Energy stocks finally bucked the trend – having had the largest falling profitability forecasts for four consecutive months – and received the largest increase in EPS estimates, up 4.58%. EPS estimates for the utilities sector fared the worst in August, down 2.69%.

Total Insider activity surged dramatically in August compared to July, with total activity rising to $8.8 billion, of which 34%, or $3 billion, was Insider buying activity, according to ORTEX Insiders Data. However, only 2.9% of the total buying activity was ranked as Medium or High trade significance, meaning the majority of this activity was not based on conscious decisions, rather the result of exercise of share options. This was not the case for insider selling activity in August, where 77% of all selling activity was based on conscious decisions like capital increases, option related sells, private placement and regular market transactions.

On the options front, positive order value for SPY was $4.14 billion, while negative order value for the fund was $7.04 billion. That positive order value ratio of 36.95% represents a significant reduction in sentiment among options traders, compared to July’s figure of 45.5%.

What’s new on ORTEX

ORTEX has released a new and much improved interface which all users can now access here!

The new interface also includes exciting new data sets, such as Sector Scores, intraday signals, Stock Movers (with added news to explain interesting price movements) and Money Flow. Moreover, we have also added the hugely requested Market Sentiment and US Government Trades data sets!

With S&P 500 and Stoxx index rebalances occurring in September, we released our predictions in August, granting our users time to position themselves accordingly. We recorded 100% precision for both STOXX 600 and STOXX 50, meaning everything we predicted was announced by STOXX, and also correctly called both deletions for the notoriously challenging S&P 500. Check out some of our prediction articles here.

Market developments in August

The Federal Reserve’s preferred measure of underlying inflation posted the smallest back-to-back increases since late 2020, encouraging a burst of consumer spending and feeding growing expectations that the economy can avert a recession. The report, published on August 31, showed the core personal consumption expenditures price index, which strips out the volatile food and energy components, rose 0.2% in July for a second month. The overall PCE price index also increased 0.2%, Bureau of Economic Analysis data showed. Moreover, U.S. nonfarm payrolls for August increased by 187,000, above the 170,000 estimate. However, the unemployment rate jumped from 3.5% last month to 3.8%, the highest since February 2022. Average hourly earnings increased 4.3% year on year, below the forecast of 4.4%. Combined with the downwardly revised figures for June and July, those are clear signs the U.S. jobs market is slowing. The moderation gives the Federal Reserve room to pause interest-rate hikes in September as it seeks to slow inflation while avoiding a downturn. Investors now see a 93% chance the Fed will keep rates unchanged at its September meeting and a 65.3% chance at its November meeting, according to the CME FedWatch Tool.

Earnings season wound down throughout August, and perhaps the standout performance came from Nvidia. The company’s market capitalization climbed higher in August thanks to its strong profit forecasts, which defied the broader downtrend in mega-cap technology stocks during the past month as an uptick in U.S. bond yields rattled the sector. Nvidia’s shares surged last month, boosted by its quarterly revenue forecast, which exceeded analyst expectations as the artificial intelligence boom fuels demand for its chips. Also, an announcement of a $25 billion share buyback lifted its shares. In stark contrast, other technology behemoths saw a sombre August. The market capitalization of Apple and Microsoft shares declined 4.4% and 2.4%, respectively, while Meta Platforms shares fell 7.1%.

August’s Top Performing Trading Signal

On August 16th, ORTEX generated an Event Earnings Q2 On the Day Trading Signal for Eton Pharmaceuticals (Nasdaq:ETON) based on historical trading activity.

Shares of specialty pharmaceutical company Eton Pharmaceuticals (Nasdaq:ETON) surged after it posted second-quarter numbers with a surprise positive bottom line. During the quarter, revenue jumped 62.2% year-over-year to $12 million, outperforming estimates of $10.10 million. Moreover, while analysts were expecting a net loss per share of $0.09 for the quarter, the company delivered an EPS of $0.18. The jump in the company’s topline came on the back of a nearly 175% growth in product sales and royalty revenue during the quarter. Moreover, Raghuram Selvaraju of HC Wainwright & Co, the lone analyst covering the stock, reiterated his buy rating and increased his target price from $9 to $10, giving a return potential of 118.82%. The signal returned 72.69% over the prior best holding period of 13 days, making this the best performing ORTEX Trading Signal in August.

Please note that ORTEX Trading Signals are based on historical performance and are not investment advice.

Highest Short Seller Gain and Loss for August

For the second month in a row, Nvidia (Nasdaq:NVDA) was the biggest loser for short sellers, as bears lost over $540 million in the stock in August. Nvidia’s share price was buoyed by its strong profit forecasts, which defied the broader downtrend in mega-cap technology stocks during the past month, and an announcement of a $25 billion share buyback. Nvidia remains one of the most successful trades in 2023, up 238% year-to-date. Short interest did fall last month, as ORTEX data shows short interest stands at 1.12% of free float, or $12.92 billion, down from $15.02 billion last month.

The big winner for the bears last month was Johnson & Johnson (NYSE:JNJ). In a tough month, Johnson & Johnson cut its guidance for 2023 adjusted profit after separating the Kenvue Inc. consumer health company. J&J is among a host of big drugmakers divesting themselves of lower-margin, yet dependably profitable, consumer units in order to focus on the high-stakes business of making new medicines. J&J fell 3.5% in August and given its high level of short interest, short-sellers reaped $1.3 billion in gains from betting against the company, the most profitable short trade in August.

Please note that ORTEX Trading Signals are based on historical performance and are not investment advice.

Short Squeeze Candidates with the Highest ORTEX Short Scores

The Lion Electric Company currently has the highest ORTEX short score on our platform (with at least 3 analysts covering the stock), coming in at 94.63 out of 100. Our ORTEX Short Score uses a multi-factor model that incorporates multiple short-related metrics, with a higher score indicating that the stock is heavily-shorted and has other characteristics that increase the possibility of a short squeeze occurring.

Stock Market cap USD Sub-Industry Short Score Estimated Short Interest % FF
The Lion Electric Company $                       501,319,277 Machinery 94.63 15.22
Velo3D $                       310,860,991 Machinery 94.30 14.91
Fisker Inc. $                  2,045,401,767 Automobiles 93.37 42.8
Hyzon Motors Inc. $                       313,411,846 Machinery 92.92 14.83
Cipher Mining Inc. $                       755,376,786 Software 92.78 26.51
AirSculpt Technologies $                       433,269,305 Health Care Providers and Services 92.04 22.82
Beyond Meat $                       775,204,923 Food Products 91.43 36.02
SmileDirectClub $                          65,893,409 Health Care Equipment and Supplies 90.06 22.51
Enliven Therapeutics $                       674,466,709 Pharmaceuticals 90.05 42.82
Invitae Corporation $                       261,228,603 Health Care Providers and Services 89.50 21.37