Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Weekly S&P 500 ChartStorm: Risk-Driver Check; Small Cap Tech; Sectors And Bubbles

Published 04/10/2022, 01:51 AM
Updated 07/09/2023, 06:31 AM

The Chart Storm is a weekly selection of 10 charts which I hand pick from around the web (+some of my own charts), and then post on Twitter.

The charts focus on the S&P 500 (US equities); and the various forces and factors that influence the outlook—with the aim of bringing insight and perspective.

1. Correction Drivers Update:

  • iShares MSCI Poland ETF (NYSE:EPOL) (geopolitics proxy): relief rally stalled
  • iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) (credit/rates): new lows as bond yields spike
  • ARK Innovation ETF (NYSE:ARKK) (tech burst): lower highs, rolling over again

Thus, my overall sense: path of least resistance = lower

SPX:EPOL:LQD:ARKK Daily Chart

Source: @Callum_Thomas

2. Big Trouble in Small Tech: Seems small cap tech stocks are struggling to keep up. For that matter, small caps in general have been a picture of weakness, and tech still seems vulnerable. I would call this breakdown here a red flag.

Small Cap Tech vs S&P 500

Source: @adaptiv

3. Stock Correlations: Can deduce from this chart that the correction saw big rotation, whereas, however, the rebound floated all boats...

Correlations spike during times of panic selling and panic buying: especially when it's a generalized risk-on/off move, and especially accentuated by passive flows.

S&P 500 Correlations

Source: @DrewTheCharts

4. Recession vs Correction: "March 8th was likely the bottom unless we witness a recession." (J.P. Morgan's Michael Cembalest). So basically: tell me if we're headed into recession, and I'll tell you what the market's going to do...

Recession vs Correction

Source: @SethCL

5. Stock Market vs Recessions: Market seems to typically stall about 6-months before the official beginning of a recession according to this chart.

Stockmarket vs Recessions

Source: Bear Market Warnings

6. Earnings Revisions: It was always going to be hard to maintain the post-pandemic rebound momentum, but this looks like a fairly clear red flag for growth/earnings...

FY2 Earnings Revision Breadth

Source: @MrBlonde_macro

7. Big Stock Earnings Impotence: Seems like the top 10 stocks are no longer on top when it comes to earnings contribution to the S&P 500…

Weight Of Top 10 Stocks In S&P 500 vs Earnings Contribution

Source: @SoberLook via @jessefelder

8. Peak Profit Margin?

Profit Margin For Nonfinancial Corporate Business

Source: @MaverickBogdan

9. Sectors and Bubbles: Interesting thing to me on this chart is (not annotated) Energy basically had an echo-bubble in the late-2000's. One could argue that Tech is currently in the middle of an echo-bubble... (or maybe it's just the “new normal,” as many assert).

Sectors and Bubbles

Source: @SamRo

10. Space Investing to the Moon!!

Number Of Start-Up Space Investors

Source: The Space Investor

oh… that’s right, almost forgot!

BONUS CHART >>

Dividend Yield vs Bond Yield: as some have pointed out, the spread between the dividend yield of the S&P 500 vs the US 10-year Treasury yield has dropped to multi-year lows. But how unusual is this?

Not very: in fact, the existence of a positive yield spread is actually relatively unusual in the scheme of things, judging from this chart.

US Dividend Yield Vs 10Y Bond Yield

That’s not to say that rising yields are not potentially problematic for equities (i.e. rising yields squeezes the equity risk premium, presents headwinds to growth, and complicates things for longer-duration growth stocks).

So I think probably the more interesting thing in this chart is less about the spread, and more about the movement in yields. Bond yields are on the move as inflation shifts higher, geopolitical shockwaves ripple, and the Fed pivots into rate hikes and balance sheet normalization…

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.