“I’ve gotten so old I can’t remember the names of those ladies at the Old Howard, but I can remember that all you got was a flash of this or that, before they waltzed off. Stock market tops are like that. You know it’s there somewhere if you squint hard enough, but you never quite see it, so you keep waiting for more. And then, in the end, as the curtain comes down on the bull market you realize that the one rule about tops is not that they provide this or that signal, but that they come before anyone is ready.” ~ Justin Mamis
Good morning!
In this week’s Dirty Dozen [CHART PACK] we cover 2nd half momentum market stats, record aggregate inflows into stocks, yields still working off their overextension, the case for a lower equity vol regime, and finally bitcoin sentiment plus a crypto-miner with a killer chart, plus more…
Let’s dive in.
***click charts to enlarge***
- @MacroCharts out with the stats on SPX’s performance historically following a +10% first half.
- @NautilusCap provides the counterpoint of what too much of a good thing can sometimes mean, writing“ #SPX H1 year to date momentum ‘IS’ typically a good indication of continuing rest of year momentum (no revelation there as many technicians; including us monitor this closely.) So the study below offers an interesting ‘twist’ on potentially excess momentum…”
- BofAML points out that the last six months have seen their largest annualized inflow into equities ever, indicating an increasing willingness by investors to up their risk.
- But I’m not much of a fan of annualized numbers. And the smoothed aggregate flows into major equity indices show that yes inflows are picking up but they are still nowhere near the large consecutive inflows that preceded the last two major tops.
- Yields have been a bit of a head-scratcher lately and I probably closed out my long bond position too soon. If the past is precedent, then 10-year yields probably keep making their way back towards their 40-week moving average.
- Our main yield indicator is so far giving weight to that idea.
- This chart is pulled from a report I wrote up a couple of weeks ago for the Collective. It shows how oversold growth is relative to value. It has so far rebounded as expected. And with the breakout in tech and yields staying low, I expect this period of growth outperformance to continue.
- BofAML published some great charts on CAPEX (CAPEX is key to the Levy-Kalecki Equation). Apparently, our capital stock is old and aging. CAPEX guidance remains elevated, and the CEO survey bodes well for rising capital expenditures in our future.
- Here’s another development that suggests we’re entering a late 2017’esque like market regime. Cue lower equity vol and talk of “Goldilocks”!
GS writes “the reset lower in equity vol is consistent with the signal from our volatility regime model, which aggregates macro, macro uncertainty and market indicators. The model suggests that a continuation of the high volatility regime that characterized the past year is unlikely from here… Our economists’ expectations for the level of growth to remain at healthy levels in 2H are supportive of lower volatility, and we think markets could consolidate in a ‘goldilocks’ scenario…
- And here’s a look at vol across assets (chart via GS).
- 11. Bitcoin has failed to show much oomph off its recent lows, which isn’t a great look. Sentix shows that while “short-term” sentiment has turned sour, providing a contra signal. Bitcoin’s “strategic bias” continues to trend downward which is not a great look for the bulls.
- If the crypto complex is able to turn things around here then some of the beaten-down miners may offer a good way to play the upside. The chart below is of the Canadian-based digi miner HUT 8 Mining Corp (HUT). The chart is setting up nicely for a run (h/t Kulok).
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Thanks for reading.
Stay safe out there and keep your head on a swivel.
