Weekly S&P500 ChartStorm - 13 March 2022
The charts focus on the S&P500 (US equities); and the various forces and factors that influence the outlook - with the aim of bringing insight and perspective.
1. Speculative Futures Positioning: Always a lot of if's and but's when it comes to speculative futures positioning indicators like this (e.g. it might not be representative, or could reflect the other leg of some hedging or long/short trade, etc).
BUT, one thing is very clear -- this is not a picture of capitulation.
More evidence for: "feel kinda bearish, but still long".
2. Midterm Malaise: One for the "this is normal and healthy" bucket...
It is not unusual to see a large pullback during mid-term years... (and in that destruction the creation of opportunities regularly happens).
3. The Stockmarket *is* The Economy: Recessions expose the weak spots, destroy unsustainable models, and crush earnings. How this current stockmarket correction resolves (e.g. down then back to bull, vs down and down into bear market mode) will depend powerfully on whether a recession occurs.
And it seems kinda likely, by my read -
4. Bear Market History: Another table, basically a Friendly Reminder of what bear markets look like. (p.s. I wouldn't call COVID-19 a bear as such, it was a crash... bears are more sustained downturns in price which tend to be driven/reinforced by crappy macro etc -- rather than "dOwN 20% iS a bEaR mArKet!").
5. Regime Change? "Downside Volatility" is starting to dominate... a common feature of bear markets.
6. Oil Shock: Just as central banks were already beginning to take the punchbowl away, oil comes in and dumps all over the earnings/economic outlook. To be absolutely clear (and the chart kind of speaks for itself): the surge in oil prices is a headwind to economic growth, earnings, and the stockmarket.
7. Energy Tho: Albeit, energy is of course a very different story.
(“stockmarket” vs market of stocks)
8. European Equity Exodus: European equities (understandably given direct geopolitical risk, not to mention indirect/direct economic + financial spillover risk) have been *heavily* sold... much much worse than during the pandemic panic.
9. Also European Equities... Pockets of value out there, especially relative value.
10. The Theme Age.
Thanks for reading!
Founder and Head of Research at Topdown Charts
Any feedback, questions and views are welcome in the comment section below.
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