Weekly S&P500 ChartStorm - 27 August 2023
This week: correction update, technical check, sentiment, seasonality, liquidity, valuations, earnings vs multiples, company ages, listed vs unlisted, long-term margin debt trends...
Welcome to the latest Weekly S&P500 #ChartStorm!
Learnings and conclusions from this week’s charts:
Seeing some short-term signals that the sell-off may be done for now.
Some suggestion that September seasonal weakness simply came early.
Yet also, seeing medium-term (sentiment, liquidity, valuation) signs that the correction could go deeper yet.
The average age of Fortune 500 companies is 90-years (!).
More and more companies are getting taken out by private equity vs listing on public exchanges (PE-backed outnumbered public by more than 2-to-1 in 2023).
Overall, slight improvement in the short-term technicals, but still a murky picture on the medium-term macro-fundamentals. Nothing left to do but get in the arena and try stuff. Some will work, some won't. But always learning.
Chart Of The Day? — I’ve been piloting a free daily chart post series, partly in response to requests by some for more frequent updates, partly as a discipline to challenge myself to come up with more ideas, partly to help drum-up interest in Topdown + the ChartStorm, and overall as a useful avenue for parking both timely updates + timeless ideas… Check it out
1. Correction Drivers: I thought it would be useful to update this chart from last week, examining what I reckon are the key drivers of the correction/sell-off (rising yields — TLT, Big Tech boil-over — $NYFANG, and energy price resurgence — using the relative performance of XLK (Tech) vs XLE (Energy)). On all counts the lines in the bottom 3 panels are looking distinctly less bad. I wouldn’t give it the all-clear just yet as all 3 do still look to be trending down, but the initial base is promising and confirms the pause of declines in the index too.
2. Over? Last week I cautioned that we may need to test that blue line before any resumption of onwards and upwards (or otherwise, should it be broken!). I still think it’s an important support line, but the market does seem to be clinging to the 4400 level at the moment. Also, 50-day moving average breadth has reached minor oversold levels, but similarly, a more clear-cut “buy the dip” signal would come if it reached more washed out levels (around 20%).
3. Bear Bounce: Bearish readings in the AAII + II surveys have bottomed but barely bounced, leaving the question as to whether that move so far is “enough”. For a short-term contrarian buy signal I would want to see it spike a bit higher… in the meantime though, arguably it is presenting more of a medium-term contrarian sell signal (in that it reached extreme lows and turned higher).
4. Stockmarket Seasons: I’ve previously documented the tendency of volatility to rise around this time of the year, and also referenced that this is essentially the flipside of the tendency for seasonally weak market performance. The chart below shows how stock markets globally tend to travel month-by-month. And while August is not usually the best month by any means, it does raise the question as to whether the seasonal weakness of September came early this year…
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