Weekly S&P500 ChartStorm - 14 November 2021

MSFT, Johnson&Johnson and More Companies With Reports to be Released shortly

The 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.

Hope you enjoy!

p.s. if you haven’t already, subscribe (free) to receive the ChartStorm direct to your inbox, so you don’t miss out on any charts (you never know which one could change the whole perspective!)

Subscribe Now

1. Vacciversary: Can you believe, an entire year has passed since the Pfizer vaccine announcement. Markets had a strong immediate reaction, and since then have chalked up some 34% in gains. Of course a bunch of other factors are also at play, and we also had delta along the way, but you have to think at some level if there were no vaccine that the ride in markets might have been a little rougher.

Weekly S&P500 ChartStorm - 14 November 2021 - 1

Source: @LarryAdamRJ

2. Investor Movement Index: The IMX moved down slightly in October - this continues the pattern of movement downwards from the peak in optimism of a few months ago. This is typically not a healthy sign for sentiment indicators i.e. reaching an extreme and then leveling off.

Weekly S&P500 ChartStorm - 14 November 2021 - 2

Source: TD Ameritrade

3. Investment Manager Index: On the other hand, the Markit IMI rebounded further in November with risk appetite surging to multi-month highs and expected returns reaching a new (albeit short history - newish survey) high.

Weekly S&P500 ChartStorm - 14 November 2021 - 3

Source: @IHSMarkitPMI

4. Euphoriameter: Even my own Euphoriameter composite sentiment indicator has ticked higher so far in November as valuations and bullish surveyed sentiment remain high and volatility lulls back towards complacency.

Weekly S&P500 ChartStorm - 14 November 2021 - 4

Source: @topdowncharts

5. Investor Sentiment vs Consumer Sentiment: But not all sentiment indicators are at the highs: consumer sentiment has been decidedly less optimistic. I mentioned in a recent video that the UoM consumer sentiment indicator was perhaps overstating the extent of the decline, but the other 2 consumer confidence indicators I track for the USA have also started to drop off recently. This has left quite the divergence between consumer sentiment and investor sentiment.

A large part of this is probably down to the inflationary shock that is currently facing the global economy due to pandemic disruption to the global supply chain *and* unprecedented monetary + fiscal stimulus (remember: supply shortages/backlogs and the associated inflation surge don’t exist if there is no demand —> demand has been boosted by stimulus —> and stimulus helps stocks ——> gap explained).

Weekly S&P500 ChartStorm - 14 November 2021 - 5

Source: @takis2910

6. Real Earnings Yield: Another effect of the surge in inflation has been a plunge in the real earnings yield: again this can be squared up by noting that stimulus has been a key driver of the inflation shock and a key driver of the surge in asset prices —> surging asset prices (stock prices) leads to a lower nominal earnings yield (again: gap explained). So is this a problem? Perhaps, but one way or the other it will probably be transitory (if you can read between the lines a little there!!).

Weekly S&P500 ChartStorm - 14 November 2021 - 6

Source: @LizAnnSonders

7. Valuations: Valuations rising = risks rising... but then again it's a bull market, so POLR is higher (for now).

n.b. “POLR” = path of least resistance: basic notion that in markets and life when a force is set in motion an object will not change its motion/trajectory unless another force acts on it... That means a bull market will carry on until something changes e.g. a crisis, monetary policy tightening, recession, regulations/politics, (or a combination of all of those!).

Weekly S&P500 ChartStorm - 14 November 2021 - 7

Source: @mark_ungewitter

8. Household Financial Asset Allocations: We all know by now that equity allocations by households is at/near record highs. But one surprise: cash holdings have jumped and are apparently on par with debt (bonds etc) ...even as cash rates suck (and are even suckier when you consider the real interest rate). Probably an element of booking gains, stimulus payments, and precautionary savings. Recall though: the job of cash is preservation of capital (and optionality) vs generating returns, as such.

Weekly S&P500 ChartStorm - 14 November 2021 - 8

Source: @MikeZaccardi

9. S&P500 Constituents Return Distribution: I thought this was interesting - especially the tails of the distribution - a lot of heavy lifting being done at the tails. But also that ”s” — tails (i.e. big dispersion between left and right tails).

Weekly S&P500 ChartStorm - 14 November 2021 - 9

Source: @spglobal via @bernardiniv68

10. The Five Biggest Stocks: The bigness of the biggest stocks in the index is biggening more bigly. Serious though: the market is increasingly lop-sided, this means diversification may be diminishing as systematic risk will be increasingly driven by specific risk.

Weekly S&P500 ChartStorm - 14 November 2021 - 10

Source: @biancoresearch

Thanks for following, I appreciate your interest!

!! BONUS CHART: Leveraged ETF trading indicator

>> Click through to the ChartStorm Substack to see the bonus chart section


Follow us on:

Substack https://topdowncharts.substack.com/

LinkedIn https://www.linkedin.com/company/topdown-charts

Twitter http://www.twitter.com/topdowncharts

MSFT, Johnson&Johnson and More Companies With Reports to be Released shortly

Marc Chandler

Marc Chandler has been covering the global capital markets for more than 30 years, including stints as the global head of currency strategy for both HSBC and Brown Brothers Harriman. Chandler recently joined Bannockburn Global Forex as a Managing Director and Chief Market Strategist in 2018.

A prolific writer and speaker, Chandler appears regularly in the financial media. He is often quoted in the Financial Times, the Wall Street Journal, Barron’s, Bloomberg, and the Washington Post, among others. Marc also provides his insights and commentary on the markets on the most widely watched financial news channels, including CNBC, Bloomberg TV, CNN, and Fox Business.

Marc’s first book, Making Sense of the Dollar, was published by Bloomberg Press in 2009 and received a Bronze Award from Independent Publishers. Chandler's second book, Political Economy of Tomorrow, was published in February 2017.

Chandler is also an honorary fellow of the Foreign Policy Association and has been named a Business Visionary by Forbes.

Currently, Chandler teaches at New York University Center for Global Affairs, where he is an associate professor. He is also an honorary visiting professor at the Darden School of Business at the University of Virginia.

Though a Chicago native, and lifelong Cubs fan, Chandler currently resides in New York City with his wife, Jeannine, and son, Nathan.