Those that follow my personal account on Twitter will be familiar with my weekly S&P 500 #ChartStorm in which I pick out 10 charts on the S&P 500 to tweet. Typically I'll pick a couple of themes and hammer them home with the charts, but sometimes it's just a selection of charts that will add to your perspective and help inform your own view - whether its bearish, bullish, or something else!
The purpose of this note is to add some extra context beyond the 140 characters of Twitter. It's worth noting that the aim of the #ChartStorm isn't necessarily to arrive at a certain view but to highlight charts and themes worth paying attention to.
So here's the another S&P 500 #ChartStorm write-up!
1. The Floor and The Ceiling: First up is the same number 1 chart from last week, with the distinctive pair of lines: the down trend line in the blue and the as yet still upward sloping 200-day moving average. Basically this is the equivalent of the market getting backed into a corner, or to use another cliché - the spring is coiling. And when it breaks either one of these lines it will probably keep going - this is one of the best and mos practical uses of technicals as defining objective risk management levels and triggers.
Bottom line: The market has been backed into a corner and will soon lash out.
2. Korean Peace Summit: Speaking of being backed into a corner, the Korean peace summit was probably the most positive (and bullish) story of the week (decade?). Should things go smoothly with the Trump-Kim summit too it will steadily erode at least some geopolitical risk premium, so on balance it is a bullish development. But as Sentimentrader points out in the chart below, the timing is... "interesting".
Bottom line: The last two inter-Korean summits took place around major market peaks.
3. Speculative Futures Positioning: This chart shows something I have been talking about previously - how the substantial net-long speculative futures positioning has hardly budged throughout the correction. This may just be a rotation among traders (some squaring up while others buy the dip), but either way it shows there has been very little in the way of resets on this indicator.
Bottom line: Speculative futures positioning remains substantially net long in the S&P500.
4. Stock Market Margin Debt: Speaking of leverage, the next chart shows the build up in stock market margin debt. There's not much more to add on this one except that it remains still very close to a record high.
Bottom line: Margin debt remains close to a record high.
5. Total Net Stockmarket Leverage: The next chart shows a more aggregate, but also netted out view of US stockmarket leverage. This one not only includes net-margin debt, but also net leveraged ETF assets under management, and net speculative futures positioning. Over the past circa 5 years there has been a $400B build up in leverage, which by any measure is substantial. As I noted elsewhere, leverage like this can quickly evaporate, and trigger a price cascade, so it is a background feature worth noting.
Bottom line: Overall stockmarket leverage remains near record highs.