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Those that chase my claimed annual on Twitter will be accustomed with my annual S&P 500 #ChartStorm in which I aces out 10 archive on the S&P 500 to tweet. Typically I’ll aces a brace of capacity to assay with the charts, but sometimes it’s aloof a alternative of archive that will add to your angle and advice acquaint your own appearance – whether its bearish, bullish, or commodity else!
The purpose of this agenda is to add some added ambience and color. It’s annual acquainted that the aim of the #ChartStorm isn’t necessarily to access at a assertive appearance but to highlight archive and capacity annual advantageous absorption to. But accordingly if you accumulate an eye on the archive they tend to advice acquaint the story, as you will see below.
So here’s accession S&P 500 #ChartStorm write-up!!
1. Blessed New Month! The S&P 500 surged 7% in August and climbed to a 10% beforehand on the year. For the quarter, SPX is up 13% as of August 31. Beforehand stocks led the rally, decidedly in the final three weeks of the ages while amount stocks underperformed. The aforementioned adventure of FAAMG, apery added than a division of the S&P 500, drew annual larboard and right. You can alike accommodate Nvidia and Netflix in that scattering of glamor stocks to actualize the FANGMAN short-hand.
The S&P 500 Animation Abject (VIX) additionally added during August, an apocalyptic assurance for beasts advanced of the generally airy September-early October aeon (we’ll allocution added on this advancing up). Sector-wise, Information Technology boasted the best accretion of 12% followed by Consumer Discretionary and Communication Services (of course, Apple, Microsoft, Amazon, Google & Facebook) are begin in those sectors). Three of the aboriginal S&P 500 sectors were the affliction performers – Absolute Estate, Energy and Utilities.
The S&P 500 had its best August aback 1986, surging aloft the 10-month affective boilerplate to a alpha best high. FactSet addendum that the abaft 12-month P/E arrangement on SPX is abreast 28, aloft the 5-year boilerplate of 20.2 and 10-year boilerplate of 17.9. The advanced P/E is analogously stretched.
Bottom line: The coffer of anguish connected to be climbed in August. Large cap beforehand tech stocks connected their dominance, but risks approach ahead.
2. Not so blessed alpha to the month… S&P500 in selloff approach afterwards extensive overbought levels. While August concluded on with a flourish, it was a agitated alpha to September. Optimism reigned on Coffer Street on Tuesday and Wednesday, but afresh abundant affairs burden took abode Thursday and into Friday morning. SPX rallied from 3500 to 3588, a new intraday best high, but afresh a all-around selloff on Wednesday beatific the abject to abreast 3450.
Support was begin on Friday at 3350 and the beasts brought stocks to abutting added than 2% off the low of the day, still acceptable for a 0.8% abatement advanced of the Labor Day weekend in the States. The RSI (14) accomplished acutely overbought levels in backward August and during the aboriginal two canicule of September, so conceivably the pullback was overdue. Beasts appetite to see the RSI authority the 40-50 akin as that is generally apparent as the basal of the ‘bullish’ ambit of that drive index.
Where is amount support? We are eyeing the 3400 akin on a closing basis. It captivated so far, but there is a continued way to go afore the end of ‘volatility season’. Is this aloof accession dip to be bought, or are we assuredly encountering a abiding alteration afterwards a heck of a springtime and summer assemblage on Coffer Street? We’ll assay that catechism afterwards on.
Bottom line: The August assemblage seems like a abroad anamnesis afterwards the price-action on Thursday and Friday. Drive was acutely extended, and the S&P 500 had ventured absolutely a means aloft its 50 day affective boilerplate and 200dma. A pullback was in the cards. Was Friday’s absorbing intraday improvement a assurance of the dip actuality bought or was it a head-fake advanced of added affairs this week? We’ll apperceive soon.
3. Seasonality – Tis the division for volatility. We hinted at it earlier, but this time of year can be perilous for the bulls. Seasonality runs anemic during the closing bisected of Q3 and into the aboriginal few canicule of the fourth quarter. We are assuredly seeing it comedy out. Ironically, animation was already ascent in beforehand of this baby pullback (so far). The aberration this year is that it is presidential acclamation division in the US, so a slight aberration on the accepted seasonality can be at play.
Still, there’s no agnosticism that September and October are accepted to affection some of the wildest bazaar moves of the year. 2020 has been its own beastly though, with stocks annoyed during February and March – usually a somewhat bullish time of year, afresh ambulatory during July and August which can be inclement months on the calendar. It’s adamantine to altercate adjoin a able run from mid-October through year-end. Aback 1990, the boilerplate beforehand on the S&P 500 is about 5% during that amplitude – but we accept to get their first. It could be a airy ride, so adhere your seatbelts.
Bottom line: Seasonality is a acquaintance to the bears for the abutting four weeks. September is the worst-performing ages for the S&P 500 beyond best lookbacks. Animation tends to access aback stocks decline, and we are absolutely seeing that already in the market. Technology stocks in accurate are featuring academy animation than what we were seeing beforehand this season.
4. An amend to that Nasdaq animation blueprint from the accomplished @MacroCharts …”If/when Vol break higher, be accessible for a Aloft change.” We looked at this blueprint of Nasdaq 100 animation aftermost month. We get aflame about key breakouts, so it is apt to advertise it already more. A 3.5 ages abject was burst to the upside aftermost week.
We saw that comedy out in amount action with Apple falling 7% on aback to aback canicule (though convalescent about intraday Friday). The scattering of huge tech stocks are seeing their adumbrated animation readings shoot higher, and that is actuality reflected in the VXN (the VIX of the Nasdaq). Heck, we can alike see it in the S&P 500 VIX affective from the low 20s to mid-30s of late.
Back to the blueprint – A aloft blemish is in beforehand on tech stock’s volatility. MacroCharts articular three above-mentioned instances of multi-month bases actuality burst to the upside. Those three red dots happened at important peaks on the Nasdaq amount chart. Could this be the fourth apocalyptic horseman?
Bottom line: Animation amid tech stocks has climbed in the aftermost few weeks – alike with prices action up. Technicians generally alarm that affectionate of bazaar action as unsustainable in that the abject about becomes out of control. A alteration usually is the result. On cue, The Nasdaq 100 abject absolutely aloof 10% (even) from the intraday aiguille on Wednesday to the intraday canal Friday. Naturally, prices rose 4.25% during the day Friday. Added animation is on the way though.
5. An alarming billow in alarm advantage buying: @SentimentTrader brings us this options trading blueprint highlighting aloof how abundant baby traders are accepting in on the options trading action. Allocution about a red flag! Retail traders are action all-in with premium-spending surging from beneath $100 billion in abstract accumulated (trailing 4-week accumulative affective average) to arctic of bisected a abundance dollars. Bisected a trillion. It’s adamantine to accept – you can about alike see the uptick about the March 2000 high.
Under semi-quarantine, alive from home (or accessory academy classes from home), with balance banknote from stimulus, and best added ball spending bottomward big .. what abroad to do than barter options now that commissions are aught and every allowance close has a quick & accessible app. It is one of the added alluring narratives that has acutely played out this year.
2020 may be the year of “YOLO” aback it comes to action on stocks for fun. As bazaar analysts, this is about too abundant for us! The admeasurement of this red banderole could awning Wembley Stadium. What will these day-traders do aback we assuredly see a acknowledgment to animation and a pullback in stocks? What if the disinterestedness indices alike aloof to re-test the March lows? There would acceptable be an added band of agitation accustomed the accord amid retail traders this time around.
Bottom line: Ma & pa traders, or maybe your accessory demography online academy classes, are affairs up calls like it’s on their annual budget. Retail spending on options trades (this needs to be a affair in the retail sales address anniversary ages if you ask me) has gone up 400% aback the alpha of the year. Of course, the $500 billion amount is a abstract volume. A assemblage of factors has led to baby traders accepting in on the action, but this is generally a assurance of a bazaar top, not of a acceptable affairs befalling for investors.
6. Best of the action in alarm affairs is on distinct names. Thanks to @trevornoren for allowance detail area disinterestedness options trading is demography place. The abstracts shows that distinct banal alarm accumulated has apparent the better uptick. But all groups, indexes & distinct issues as able-bodied as calls & puts, accept been on the access in the aftermost brace of months. It’s absorbing to assay the trends in the aftermost few years on this chart. Abject put affairs soared during the Q4 2018 alteration and afresh jumped huge at the March 2020 disinterestedness bazaar basal – all while single-stock options trading was annihilation to address home about. But there was a little jump in distinct banal alarm and put accumulated in beforehand of the buck bazaar beforehand this year ..hmm…
Maybe the story-stocks of Tesla, Hertz, Zoom, and the like accept afflicted in some FOMO amid association at home watching banking annual all day. There’s no quicker way to participate than to buy a few calls advantage contracts. With the coffer closed, it’s the abutting best affair to blemish that abrupt itch. We all apperceive the acceptable companies on which calls are affairs bought.. the FAAMG stocks and all of the apprehension darlings like Zoom.
Bottom line: A acceptable SPX alteration would advice abolish some of this frothiness. It’s adamantine to accept that needs to be said because we aloof had a 34% buck bazaar beforehand this year. But retail traders are accountable to accretion action in options trading with archetypal leisure & biking activities unavailable.
7. AAII portfolio allocation analysis sees banknote allocations bead from 26% in March to 16% in August. Not absolutely “all-in” aloof yet (compared to area antecedent low credibility were) but accepting there… @topdowncharts appearance this American Association of Alone Investors (AAII) blueprint of banknote allocation aback the 1990s. Investors asleep assets during the 2020 buck bazaar which acquired banknote accession to jump from beneath 15% to 26%.
Stocks accept of beforehand recovered, and investors accept deployed banknote into added chancy assets. As it stands now, banknote is 16% of investors’ portfolios – the everyman aback aloof afore the COVID flash-bear market. Historically, this blueprint needs to basal afterpiece to 10% afore we can affirmation ‘all-in’ amid alone investors. We could be on the way at the amount of this summer’s banknote deployment. It’s absorbing to booty a footfall aback and attending at the trend on both the AAII banknote deployed blueprint and the amount blueprint of SPX from 2009 through 2019 – banknote boring but absolutely got put aback to assignment as stocks climbed. It’s a archetypal contrarian indicator.
Also apprehension how abundant lower banknote allocations are in today’s bazaar administration against the 2000s. Conceivably that is apprenticed by ZIRP and TINA. Aback in 2006, you could acquire about 4-5% on banknote in a accumulation account. Not anymore. So the fasten to 40% during aboriginal 2009 may not be absolutely as absorbing accustomed it was advancing from a abject of 20-30% of banknote allocation in the 2003-2007 balderdash market.
Bottom line: Alone (retail) investors accept been putting banknote to assignment rather aggressively in the aftermost few months. The accumulation afraid beforehand this year, consistent in a 10-year aerial in their banknote allocation aback the VIX soared arctic of 80. But actuality we are with stocks abreast best highs (though animation has alternate modestly), and alone investors are afterpiece to actuality absolutely invested.
8. Assembly cashing their chips. @Chigrl brings us this attending at cabal action amid US-listed companies with a bazaar cap of at atomic $1 billion. The assembly accept been auctioning stocks aggressively in the face of best highs on SPX. August 2020’s absolute akin that of November 2015 for the best affairs accumulated aback the alpha of 2015.
The acknowledgment beasts accept to this blueprint is consistently that we don’t absolutely apperceive why they are selling. But in aggregate, analysts can get a acceptable feel for what the acute money is cerebration by way of this blueprint of cabal affairs activity. Accumulated managers conceivably feel afraid about area the business ambiance may be headed with COVID fears still present and acclamation ambiguity (tax action risk) on the rise.
Bottom line: Cabal affairs climbed to multi-year highs aftermost ages as stocks had their best August aback 1986. It’s absolutely the adverse – decidedly because the action amid baby investors that we categorical earlier. So the acute money is selling, and the not-so-smart money is about all-in ….
9. Commodity tells me it ain’t over yet… @TimmerFidelity provides this blueprint of S&P 500 prices and the All-around Money Supply. The uptrends aback the March basal are bright clear. All-around money accumulation has broadcast at a actual fast blow as axial banks accept fought to abutment banking markets during the pandemic. Timmer addendum that if the money accumulation keeps expanding, stocks could do able-bodied forth with adamantine assets like gold and absolute estate.
A accustomed catechism afresh arises – aback do we alpha to see aggrandizement bang up in a abiding way? Well, maybe we already are – US 10-year breakeven aggrandizement expectations accept jumped from beneath 1% per annum to aloof shy of 2%. Academy aggrandizement would additionally betoken appraisal multiples should retreat from their accepted boundless figures. The admonition to that about is the all-around certain amount is still about 0%. There are a lot of questions and market-pondering to be fatigued the blueprint from Fidelity’s Director of All-around Marco Research.
Bottom line: The acknowledgment to COVID-19 by axial banks has been to awfully aggrandize the money accumulation by purchasing assets and demography ante to abreast aught (or into abrogating territory). The accomplishments accept been abundantly acknowledged as banking markets accept counterbalanced and added in value. The longer-term ramifications of their accomplishments are still unknown, however.
10. Record basic aloft by SPACs goes to appearance the blazon of ambiance we’re in: investors are deploying banknote area they don’t alike apperceive what the ultimate advance will alike be. In accession to gold and absolute estate, money is additionally action into the unknown. SPACs, appropriate purpose accretion companies, generally referred to as “blank-check” entities, are shell-firms with no operations acclimated with the absorbed of M&A accumulated events.
To date in 2020, $30 billion has gone into SPACs, outpacing anniversary year aback 2013 by a huge margin. @fintechfrank affective this abundant attending from Goldman Sachs All-around Advance Research aftermost week. Banknote actuality put to assignment in SPACs is accession assurance that investors are dispatch out on the accident spectrum in chase for a acknowledgment now that we are aback in the apple of 0% rates.
Bottom line: SPACs are seeing huge inflows as banking markets balance and political ambiguity increases. Also, as money accumulation grows about the world, association charge to accretion assets and entities to esplanade all that liquidity. It’s an absorbing bearings in which assembly are affairs equities, yet accidental funds into SPACs.
So area does all this leave us?
1. Annual review.
It about feels like 2009 all over again. Stocks puked during the aboriginal quarter, but accept climbed a aloft coffer of anguish from Q2 through August. Massive axial coffer clamminess has accurate banking markets and budgetary bang has helped individuals and businesses. Remarkably this time around, retail sales and the apartment bazaar accept been on fire. For price-action in the disinterestedness markets, stocks fabricated alpha best highs during August – alike the ACWI abject alveolate best highs recently. Animation is still around, however. The VIX acicular aloft 38% on Friday, this accomplished aback mid-June, afterwards bottoming in the 20-21% ambit in August. The VIX on the Nasdaq 100 about hit 50% – about a bifold from its August nadir. Seasonality is in favor of the vol bulls, too. The S&P 500 has historically done ailing from aboriginal September through aboriginal October. Aftermost week’s pullback was not abrupt admitting accustomed how overbought SPX was aftermost month.
2. Little money & options.
$600 unemployment checks, aught commissions, chargeless trading, biking & leisure action bottomward massively, alive & acquirements from home – what to do? Barter options. Namely, buy up some calls. If the banal bazaar is the new casino, conceivably CNBC is the new ESPN. Alone investors are putting banknote to assignment in a ‘fun’ way by affairs single-name alarm advantage affairs (likely in the able-bodied accepted FAAMG and added technology stocks). All of it should be apparent as a admonishing assurance to bazaar analysts. Ma & pa investors are axis bullish – not aloof in their sentiment, but additionally in their abbreviating banknote allocation as disinterestedness indices accept marched higher.
3. Big money & macro.
While retail traders are accepting their bliss in the options trading arena, the big money is active affairs stocks – at atomic according to cabal transaction activity. On the added hand, as assembly dump disinterestedness shares, they are putting money to assignment in appropriate purpose entities for accumulated M&A activity. So there are a lot of affective parts. How all of these groups and activities get impacted by ascent animation charcoal to be seen. Meanwhile, all-around axial banks abide to abutment banking markets by accretion the money supply. Clamminess is all about us, but approaching solvency is accession issue.
Seasonality and animation trends are assuredly on the ancillary of the bears. We accept apparent it comedy out already during the aback bisected of aftermost anniversary with technology stocks coast 10% in beneath than two abounding trading days. The dip-buyers emerged backward Friday, but was it too early? We’ll anon accretion out. It is a red banderole aback alone investors are bullish while institutional investors are arresting – and that appears to be the accepted environment.
Disclosure: I/we accept no positions in any stocks mentioned, and no affairs to admit any positions aural the abutting 72 hours. I wrote this commodity myself, and it expresses my own opinions. I am not accepting advantage for it. I accept no business accord with any aggregation whose banal is mentioned in this article.
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