Weekly S&P500 ChartStorm - 11 June 2023

This week: breakouts, bull markets, Barron's, low VIX, sentiment signals, bank buyers, SMID valuations, murky macro, big tech is back, margin debt determinations...

Welcome to the latest Weekly S&P500 #ChartStorm!

Learnings and conclusions from this week’s charts:

• The S&P500 has secured its 4200 breakout and is now up 20% off the lows, spurring calls that this is a new bull market.

• Yet the S&P500 must still contend with the 4300 level +an ominous magazine cover from Barron’s (and still murky macro).

• Multiple sentiment indicators are turning towards the bullish side after a long period of deep pessimism (typically a positive sign).

• SMID cap stocks are cheap vs history and vs large caps.

• Margin debt growth is turning up after a period of significant deleveraging.

Overall, there seems to be more and more evidence building that at least in the immediate term the path of least resistance is higher. Maybe murky macro gets the last word, but for now the momentum is clear…

---

1. Arrival:  The breakout everyone has been waiting for finally happened, and on top of that the S&P500 has chalked up the arbitrarily yet mythically magical 20% gain off the low. By popular definition this means the S&P500 is now in a bull market (despite the fact that it has gone basically sideways since mid-2021). It’s definitely a development worth noting, and we need to listen to what price is telling us, but at the same time there’s still the matter of that other breakout (vs 4300) that needs to happen. In the meantime though, bulls rejoice.

Source:   @topdowncharts

Topdown Charts

---

2. The Barron’s Effect:  You probably wouldn’t use something like this as an actual timing indicator, but it is curious, interesting, and maybe even a little comical to note how the magazine cover matches the market moment. The implication of the latest cover being that the bullish reassurance is a harbinger that the 20% up “bull market” may not be as secure as it seems.

Source:  @fusionptcapital

---

3. What Could Be:  But if October really was the low and we really are in a new bull market, then this chart provides a sense of what could be to come.

Source:  @TimmerFidelity

---

4. Low VIX = Low Risk?  The VIX is often looked at as a contrarian indicator, with the implication being that very high readings are often good times to buy and very low readings are sometimes good times to sell. But like many contrarian indicators it works better on buy signals vs sell signals… and as effectively a sentiment indicator it provides momentum information as it moves through the range. I do agree with the notion that a low VIX signifies a certain element of complacency, but that signal is more powerful after a long period of calm and in conjunction with other topping signals like expensive valuations, transition from easy to tight policy, etc. And history shows that lower volatility readings like this are actually most often found during boring bull markets.

Source:  @mark_ungewitter

---

5. Active Manager Bulls:  This week the NAAIM exposure index moved above 90 — the highest reading since when the market peaked back in late-2021. Again, similar to the VIX pattern, such bullishness is more of a contrarian bear signal later in the process vs when transitioning from a period of bearishness to bullishness.

Source:  @ukarlewitz

---

6. Bulls vs Bears:  Another one along the same line — the smoothed monthly reading of the combined readings from the AAII and II surveys shows a clear turnaround in both bulls and bears and both from extreme readings. It kind of speaks for itself.

Source:  @topdowncharts

Topdown Charts Professional