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May 24 • 5 tweets • 3 min read
Going thru charts, these 5 stood out:
1. Hearing comments like "rates are only at 1%. Wait til the Fed really tightens." But that doesn't capture what's happening now. @NDR_Research Monetary, Fiscal & Exchange Rate Policy Index is dropping at fastest rate since at least 1974. 1/5
2. FY22 #earnings estimates have finally started to drop as analysts accept reality that double digit EPS growth will be hard to achieve amid a slowing economy, tightening policy, rising wages, and high inflation. 2/5
3. By quarter, EPS #estimate decline more in Q1 and Q2 than Q3 and Q4. In last 3 weeks, Q1 21 SPX #EPS estimate -$1.75 (reporting now), Q2 -$0.88, Q3 -$0.34, Q4 -$0.28. So...risk remains to the downside. 3/5
4. Technically, the market is deeply oversold. $SPX 14-day stochastic hit lowest level since 12/24/2018. Just an observation, not a recommendation (I don't like catching falling knives.) 4/5
5. @NDR_Research Trading Sentiment Composite in extreme pessimism zone, but it's worth noting that it has not fallen to levels seen in at Ukraine invasion in Feb, let alone March 2020. 5/5

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More from @edclissold

Ed Clissold Profile picture
May 16
Going thru charts, these 5 stood out.
Getting questions about waterfall declines. Conceptually, a waterfall is a persistent decline over weeks with brief rallies, often driven by short covering.
Is this a waterfall? Was Thurs it? Some data say yes. Others, no. @NDR_Research 1/5
Timewise, yes. The avg waterfall lasts 40 calendar days. Mar 29 - May 12 was 44 days.
Magnitude wise, no. The DJIA fell 10.1% vs an avg of -24.6% for waterfalls. The SPX (-15.1%) and Nasdaq (-22.3%) were closer. 2/5
A volume spike is also missing. On avg, 10-day NYSE volume jumps 111% from the pre-waterfall low to the waterfall high. NYSE volume is up 32.4% this cycle.
The Nasdaq is the epicenter of the latest decline, but even there, volume has risen but not to panic levels. 3/5
Read 6 tweets
Ed Clissold Profile picture
Apr 25
Going thru charts, these 5 stood out:
1. Friday was an 11:1 down day (declining volume 11x advancing volume). 1st 10:1 down day since 11/30/2021. Doesn't necessarily negate the March breadth thrusts, but burden of proof is back on the bulls. @NDR_Research
2. Signs of extreme pessimism. Equity ETF flows the worst in over a year. Some of mentioned selling to pay capital gains taxes? Regardless of the reason, Friday felt like forced selling. 2/5
3. The broader @NDR_Research Daily Trading Sentiment Composite (~30 indicators) reentered its extreme pessimism zone. Strongest contrarian signals have come at more extreme levels, so perhaps something to watch as the week progresses. 3/5
Read 5 tweets
Ed Clissold Profile picture
Apr 18
Going thru charts, these 5 stood out:
Main theme: leadership is a mess.
1. Last Monday, I showed that Transports had been underperforming. What happened last week? Transports outperformed in a down market. (indicator still on a sell for stocks vs bonds). @NDR_Research 1/5
2. Small-caps continue to ignore their high-beta roots. R2000 > R1000 in a down market. Last year, $RUT warned of a narrowing market, and unperformed as market rolled over in Jan.
Since then, R2/R1 has moved inversely with SPX. 2/5
3. Meanwhile, large-cap Growth has become more cyclical. In early 2021, R1000 Growth/Value ratio moved inversely with SPX bc mega-cap Growth was stay at home. Since then, R1000 G/V moved in lock step with SPX. 3/5
Read 5 tweets
Ed Clissold Profile picture
Apr 11
Going thru charts, these 5 stood out:
1. 2 types of indicators have turned negative. 1st are economically sensitive areas. Transports have been a good "real-time economic indicator" for stocks vs bonds, and they've gotten crushed (they're bouncing today). @NDR_Research 1/5
2. The 2nd type of indicator to turn negative for stocks are initial signs of economic stress. Credit and Liquidity Risk option-adjusted spreads have started to rise from low levels. Not every widening leads to an economic event, but these are cracks in the armor. 2/5
3. Rate-sensitive areas are underperforming. Homebuilders, autos (less so), and Brokers have rolled over (like Transports, some are bouncing today but in the context of relative strength downtrends). 3/5
Read 5 tweets
Ed Clissold Profile picture
Apr 4
Going thru charts, these 5 stood out:
1. If you weren't exposed to commodities, Q1 was tough. For 1st time since Q3 1981, US large, US small, int'l developed, emerging, LT Treas, corporates, and REITs fell. Good news, only 1 fell >10% (Treasurys). @NDR_Research 1/5 Image
2. 2nd round of breadth thrusts (after 3/19 initial signals) just missed. 10-day advances/10-day declines got as high as 1.885 (threshold is 1.9). Back to 1.1, so need another big rally.
Overall, good, but not great bounce off March lows. 2/5 Image
3. 1 reason 2nd round of breadth thrusts didn't fire is small-caps stalled. There are more small-caps than large-caps, so breadth thrusts need small-cap participation.
On relative basis, Russell 2000/1000 ratio hit old resistance and peaked on 3/10, 2 days after market low. 3/5 Image
Read 5 tweets
Ed Clissold Profile picture
Mar 28
Going thru charts, these 5 stood out:
The main point is when yields are low, speed matters!
1. 10yr is highest since May 2019. More important the pace has quickened. Regression indicator implies stocks have been able to withstand the rise but maybe not for long. @NDR_Research 1/5
2. Speed matters at the short end too. In 1st year of fast tightening cycles (Fed hikes at most meetings), SPX -2.7% on avg. In 1st year of slow cycles, SPX +10.5% on avg. Powell and fed fund futures on fast cycle path (for now). 2/5
3. Example of speed being more important than level. Remember Greenspan's "Fed model" comparing earnings yield to T-note yield? It would have kept you in the market for the entire 2007-09 bear. 3/5
Read 5 tweets

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