Weekly S&P500 ChartStorm - 27 March 2022

Callum Thomas

Topdown Charts

The Weekly S&P500 ChartStorm is a selection of 10 charts which I hand pick from around the web and post on Twitter. The purpose of this post is to add extra color and commentary around the charts.

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. Correction Drivers: status check as the rebound plays through...

-EPOL (geopolitics): rebound has stalled, relief rally constrained by uncertainty.

-LQD (credit/duration): bond yields surging, but credit spreads contained for now.

-ARKK (tech burst): bounce also seems to be stalling.

(p.s. also note: “roundnumberitis” at 4550?)

Source: @Callum_Thomas

2. Bitcoin base = S&P500 based: If we think of Bitcoin as basically a barometer for the ebb and flow of risk appetite and liquidity, the apparent base in bitcoin (still needs to break out to the upside though) looks to be a positive sign for broader risk assets such as the S&P 500.

Source: @topdowncharts

3. Seasonality: Yes it is different this time, it is always different, but worth noting that April is historically the best month (highest average monthly gain, and 74% of all Aprils in history were positive).

Source: @topdowncharts

4. Seasonality “Yeah But”… But then again, mid-term election-year seasonality would suggest that any such April rally would be about it, short lived, followed by down-at-best through October.

Source: @EquityClock via @MikeZaccardi

5. Hedgers... hedging FOMO risk: Massive pivot from record shorts to now sizable longs. Long live the dip buyers? ¯\_ (ツ)_/¯

Source: @sentimentrader

6. ETF Speculators: Similarly, trading in leveraged long vs short US equity ETFs has ticked up towards the long side after a hefty rinsing-out of previous speculative fervor.

(albeit n.b. this indicator’s track record in signaling bottoms has been early/false-dawny before... e.g. most notably recently in late-2018)

Source: @topdowncharts

7. Yield Curve: A lot of talk on yield curves recently, as this chart seems to show, yield curve flattening/inversion (at least as measured by this version of the yield curve) is not so much an immediate issue... but basically presents a tell in terms of lateness-of-cycle. In other words, most of the time this was the kind of thing you saw later in the cycle, before a turn (but typically well in advance of the turn).

Source: @mark_ungewitter

8. Stocks vs Commodities: Inflation is an equity killer.

Peaks in the S&P500 vs Commodities index ratio have served well in flagging major market tops for stocks. (inflation (where commodities are a key proxy/driver) places pressure on margins, consumers, and drives central bankers to tighten policy)

Source: @exposurerisk

9. Living with Stagflation: So you've decided to move on with your life and just "live with stagflation". Here's what history says about where to allocate...

(n.b. past performance does not necessarily = future, etc)

Source: @AndreasSteno

10. Healthy Healthcare: Healthcare relative performance price ratio is bouncing off its very-long-term trendline: fairly reliable signal for a run in healthcare.

n.b. healthier healthcare relative performance is often actually an unhealthy signal for the health of the broader market (being typically a defensive sector).

Source: @CarterBWorth

Thanks for reading! Any feedback, questions and views are welcome in the comment section below.

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Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

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