Daily Chartbook #125

Welcome back to Daily Chartbook: macro market charts, data, and insights pulled from various sources around the Internet by a solo retail investor.

1. Oil prices. "Both professional and retail investors see higher oil prices over the next six months. Retail traders, in particular, are even more bullish than their professional counterparts".

2. Hike expectations. "Those surveyed by Goldman Sachs believe the first rate cut is most likely in the first half of 2024, defying expectations of it happening later this year".

3. End of cycle. "Historically, we've had a major financial failure or a credit event towards the end of a Fed rate cycle".

4. Earnings & valuation. "Can the Fed land the plane without crashing it? You can see below that soft landings (green arrows) have produced earnings growth slowdowns but not contractions. So, by definition these mini-cycles were all about valuation resets, just as the current cycle has thus far been".

5. Leading indicator (I). "The US Leading Economic Index® (LEI) fell by 1.0% in December 2022 to 110.5 (2016=100) and is now down 4.2% over the past six months—a much steeper rate of decline than its1.9% contraction over the previous six months".

6. Leading indicator (II). "Leading economic indicators are now 2x worse than when Volcker pivoted in 1981".

7. Market-implied odds. "Most asset classes have been steadily pricing out recession risks helped by China reopening, the collapse in gas prices in Europe and larger than expected inflation downshifting in the US".

8. Copper. "Both professional and retail investors identified copper as the most likely commodity to outperform when compared to oil, corn and gold".

9. Commodity ETF outflows. "Since May 2022 we have seen a continued drop in flows out of US Commodity ETFs".

10. CTAs long gold. "The CTA crowd has loaded up on the shiny metal. They are sensitive to any moves lower in gold".

11. Bond speculators. "If the 'all-in' bearish specs have a change in heart, there is an awful lot of short unwinding to do to that should fuel an explosive rally".

12. Bond vs. dividend yields. "Treasuries are currently providing an attractive alternative to S&P 500 exposure from an income generation perspective".

13. Treasuries split. "Hedge funds are bearish on US government debt, and asset managers are bullish. Last time asset managers were right".

14. Bond longs. "Aggregate bond futs positioning has moved sharply lower (in thousand contracts)".

15. Unemployment vs. S&P. Stocks tend to outperform when unemployment is elevated.

16. Global flows."The tends since November continues. Hate US, love EM/China'.

17. US outflows. "Scott Rubner writes that he hasn't seen 3 weeks of US outflows to start a year. Combined outflows are almost $15bn out of US stocks".

18. Equity flows. "Equity funds overall have not seen inflows over the past 10 months".

19. CTA equity exposure. "CTAs have $17.6B to Buy in a flat tape, a number which rises to +$31B in up big / and -$9B in down".

20. Sentiment indicator. Goldman's positioning indicator remains negative but has moved up from 'extremely light' to just regular 'light'. 

21. Hedge fund buying. "Hedge funds net bought US Info Tech stocks for a second straight week led by Semis & Semi Equip names (after being sold in 10 of the 11 prior weeks)".

22. Hedge fund shorts. "Hedge funds have been bearish on S&P 500 for quite some time, but even more so over past few weeks as net short positions for futures have increased".

23. Cyclicals vs. Defensives vs. ISM. "This chart is a big reason stocks aren't pricing in a downturn IMO - quite the opposite, they seem to be pricing in an acceleration in activity".

24. Market breadth (I). "The % of stocks above 200-DMAs provides a longer-term indicator of market breadth. Bearish divergences in late 2021 preceded the 2022 correction. Upside breakouts from 2022 bottoms and entering 2023 are positive and a potential bullish leading indicator for equities".

25. Market breadth (II). "The US top 15 most active advance-decline (A-D) line firmed up after hitting a new low in late December. This sets up a potential double bottom for this breadth indicator of actively traded US stocks by share volume. A decisive breakout would favor US equity upside".

26. EPS warning. "Our work shows further erosion in earnings, with the gap between our model and the forward estimates as wide as it's ever been. The last two times our model was this far below consensus, the S&P 500 fell by 34% and 49%".

27. Q4 earnings (I). "Four sectors are reporting a year-over-year increase in their net profit margins in Q4 2022 compared to Q4 2021".

28. Q4 earnings (II). "Four sectors are reporting net profit margins in Q4 2022 that are above their 5-year averages".

29. Beats & misses. And finally, “the S&P 500 is on track to beat EPS estimates slightly after the first full week of 4Q reports. Cost cuts are saving the day, with sales pacing a miss for the first time since early 2019. Stock reactions have been notably forgiving”.

Thanks for reading!

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MONDAY BONUS: Cheat sheet. Global markets week in review.