ORTEX Monthly Recap for November

ORTEX Perspectives on the S&P 500 for November

In what is a historically strong month for stocks, all three major averages snapped their three-month losing streaks to post their best month of the year. The Dow closed out November with an 8.9% gain. The S&P 500 rose 8.9% in November, while the Nasdaq advanced 10.7%. Both averages had their best monthly performance since July 2022, and were trading about 1% away from their respective 2023 highs. The 10-year Treasury yield, which had spooked investors by rising above 5% last month, collapsed this month as cooling inflation data rolled out, helping to boost sentiment for equities. The 10-year yield ticked a higher to 4.34% Thursday. ORTEX Short Interest Data showed an increase in bearish bets across the majority of sectors in November. Short interest (SI) shares in the Information Technology sector rose the most, up 8.64%, while Material stocks saw the largest fall, down by 10.8%.

Short sellers broke their two-month winning streak to record losses in November as stocks surged. In the aggregate, the bears lost $42.2 billion in November.

With the third quarter earnings season winding down in November, there have been fewer changes in forward-looking earnings estimates from Wall Street. Consumer Staples stocks received the largest increase in EPS estimates, up 3.03%. EPS estimates for the Financials sector fared the worst, down 5.67%.

Total Insider activity rose last month, with total activity up from $1.7 billion in October to $5.6 billion in November, of which nearly 10%, or $540 million, was Insider buying activity, according to ORTEX Insiders Data. However, unlike the last month, only a small portion (14%) 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 and regular market transactions, rather it was the result of exercise of share options.

Market developments in November

The market marched steadily higher for much of November as investors grew hopeful that the Federal Reserve is finally done raising interest rates, which fight inflation by slowing the economy. Those hopes got more support with a report that the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, cooled last month. The data showed a 3.5% rise on a year-over-year basis, a slowing from a 3.7% annual gain in prior month. These numbers were the latest in a string of positive inflation data seen in November that caused traders to conclude the Federal Reserve is likely done raising rates and could even begin lowering them in 2024.

November’s rally was also driven largely by the technology sector, where several companies with high values tend to disproportionately impact the market. Microsoft gained 12.1% for the month, while Nvidia rose 14.7%. Moreover, the 10-year Treasury yield, which had spooked investors by rising above 5% last month, collapsed this month as the cooling inflation data rolled out, helping to boost sentiment for equities. The 10-year yield ticked a higher to 4.34% Thursday.

Highest Short Seller Gain and Loss for November

In a reversal to last month, Tesla (Nasdaq:TSLA) was the biggest loser for short sellers, as bears lost $3.19 billion in the stock in November. Despite HSBC analyst Michael Tyndall posting a sell recommendation and a price target of $146, implying a 37% drop in the share price, Tesla’s share price has risen in November in anticipation of the Tesla Cybertruck delivery event. The dollar value of short interest in Tesla rose by 24% in November, as ORTEX data shows short interest now stands at $21.64 billion, up from $17.49 billion last month.

In a bad month for short sellers, RTX Corporation (NYSE:RTX) was the big winner. RTX announced a dividend of $0.59 per share in November. Despite a long-standing tradition of quarterly dividends dating back to 1985, RTX Corp faces scrutiny over the sustainability of its payouts. The company’s dividend yield over the past 12 months is reported at 2.85%, with an anticipated forward yield of 2.95%. Yet, the firm’s dividend growth has been on a decline, with an annual reduction of -9.80% over the past three years and -6.90% per year over the last five years. As of September 30, 2023, RTX Corp’s dividend payout ratio stood at 1.05, a figure that often signals potential risk to the dividend’s future if earnings don’t sufficiently cover the distributions to shareholders. Short sellers made $253 million in RTX in November.

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

Sirius XM Holdings currently has the highest ORTEX short score on our platform (with at least 3 analysts covering the stock), coming in at 98.87 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.

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