Weekly S&P500 ChartStorm - 26 September 2021

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&P500 (US equities); and the various forces and factors that influence the outlook - with the aim of bringing insight and perspective.

Hope you enjoy!

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1. S&P500 and the 50-Day Moving Average: After a very close call there, the S&P500 has reclaimed its 50dma. So strictly speaking, at least for now, the well-entrenched habit of the past year of the S&P500 bouncing off the 50dma seems to continue. I would note though that much of the worry list that we were looking at in the past couple of weeks is still in play (Evergrande, Fed taper, corporate tax hike prospects, debt ceiling, delta, stagflation, etc).

chart of S&P500 and the 50-day moving average

Source: @Callum_Thomas

2. S&P 500 -- 50-day Moving Average Breadth: That’s a clear and compelling rebound in the 50dma breadth indicator from very familiar levels. As an oscillator this looks like a textbook bullish signal (bouncing from oversold). The counterpoint though is that as of Friday (despite the index being back above the 50) still only ~47% of stocks are above their respective 50dma...

chart of SPX market breadth

Source: @Callum_Thomas

3. (re)Reopening: Forget about Fed tapering, what I am more interested in is “Covid Tapering“ — we can observe a clear tapering of Covid cases. As such, we're starting to see the Reopening Beneficiaries outperform as the market prices in better covid outcomes. I believe this is a critical piece of information for markets - especially bonds (which are already on the move).

chart of covid cases and reopening stocks

Source: @MikeZaccardi

4. Sentiment: Investor sentiment has been properly rinsed out -- currently the bulls vs bears indicator (combined across the AAII and II surveys) is sitting 0.5 S.D. below long term average (vs previous extreme optimism). The open question though is whether this is enough of a reset, and too - whether this is simply a harbinger of further downside.

chart of investor sentiment

Source: @topdowncharts