Weekly S&P 500 ChartStorm: Russian Market Mayhem

S & P500 defending support for now…

Major drivers of weakness:

-RSX = Russian stocks (geopolitics)

-LQD = credit / duration (rising yields / Fed)

-ARKK = … (tech bubble burst)

Somehow I do not think any of these resolves quickly, but this chart at least presents some barometers or indicators to track for signs of further strength / weakness.

Source: @Callum_Thomas

2. Strategic Mistake: Russian assets are imploding.

Tree in Bears: Since 1998, whenever investors got this bearish 1yr forward returns were positive 69% of the time, with a median gain of + 21.6% (albeit for the 31% of cases where returns were negative, the average loss was -24%, and worst was -39%).

4. Sentiment basically as bad as the covid crash.

(but then again, you have to ask: is this 2020, or is it 2008? ie sentiment goes like this in a short / sharp dump, but also goes like this during the transition to a bear market)

5. Bargain Hunting ?? For some context, the US CAPE valuation ratio is down -9.5% from the peak in Oct, but is still 112% higher than its long-term average…

6. IPO Boom & Bust: This chart gives a sense of the magnitude and scale of the US IPO boom (and bust). Notably, IPO filings increased exponentially through the second half of 2020 into 2021. More recently though, IPO filings have plunged back to “normal” levels.

7. Get Shorty: Nasdaq (QQQ) short interest surging.

Bear markets are known for sometimes having a series of short, sharp, face-ripping rallies … and this is exactly the type of precondition that fuels them.

8. Biotech Stocks: Amid a major global health crisis, Biotech Stocks …

* checks notes *

… are performing the worst since 2001.

9. Fund Flows: As such, investors are dumping biotech and pumping … abio-tech.

10. Automatability: the robots are coming …

Source: Automation and Reshoring

BONUS CHART

The Stockmarket vs The Economy: seems like investor sentiment has completely disconnected from economic sentiment.

This chart tracks investor bullishness from a composite of surveys and economic sentiment, likewise from a composite of surveys. The intent is to overweight signal vs noise, and what a signal…

It’s not unusual for the two to disconnect, and indeed, investor sentiment – fueled by movements in the market, often moves faster and more erratically than the economic cycle. But investors have been “right” in the past in terms of guessing the direction (if not the magnitude) of the twists and turns of the economic cycle.

For now, though, we can objectively say that investor sentiment is wildly disconnected from economic sentiment.