Daily Chartbook #243

Welcome back to Daily Chartbook: the day’s best charts & insights, curated.

1. Fed balance sheet. "Total assets on Fed's balance sheet now decisively through low prior to banking stress in March; lowest since fall of 2021."

2. Fed funds rate vs. loan standards. "If banks help do the Fed’s work by tightening lending standards as rates are rising, it’s very difficult to engineer a soft landing."

3. Global chip inventory. "Semis inventory is at the highest levels since 2001."

4. Recession fears. "Internet searches for 'soft landing' increased as fears of a deep recession faded."

5. National Activity Index. The CFNAI "edged down to –0.32 in June from –0.28 in May, suggesting little change in economic growth."

6. S&P Global Flash PMIs (I). Manufacturing activity increased more than expected (49 vs. 46.2 est) while services activity fell short of estimates (52.4 vs 54 est). The composite index fell to its lowest since February.

7. S&P Global Flash PMIs (II). "On the price front, elevated cost pressures continued to be led by the service sector. However, manufacturers saw a renewed rise in input prices, and services firms reported a slower uptick in operating expense."

8. Commodities rebound. "Commodities showing some signs of a rebound as nearly 75% have positive monthly returns ... down from 81% last week but still elevated relative to past year."

9. Oil price forecast. "We expect Brent prices to increase into the $80s in 3Q23 and exit the year at $86/bbl."

10. USD shorts. Institutional investors increased net short positioning against the US dollar by 18% last week to a record 568,721 contracts.

11. Bond flows. "Global bonds saw their 17th consecutive week of inflows, reaching a total of $1.4bn for the week to July 19th…primarily driven by $1.2bn inflows into the US market."

12. CTAs vs. bonds. "Our simulated CTA models suggest that from an extreme net short position, there’ll be as much as $219bln of US bonds to buy over the next month as fixed income rallies."

13. Sentiment Indicator. Goldman's equities sentiment and positioning indicator declined slightly but remains in stretched territory.

14. Euphoriameter. The Euphoriameter (combo of forward P/E, VIX, and bullish sentiment) has rebounded off extreme pessimism.

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15. Options volume (I). "Call volume is outpacing put volume significantly of late, in yet another sign of exuberant market expectations."

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16. Options volume (II). Call volumes have been strongest for MCG+Tech, Defensives, and Financials.

17. Momentum indicator. "Momentum correlation indicator suggests one of the sharpest rises in Momentum crowded risk in several years...approaching August 2018 and February 2021 levels. Both of these periods preceded two quick and strong factor rotations in the market."

18. SPX vs. 200DMA. The S&P 500 "is severely overbought/overextended, at more than 12% above 200-DMA, but, but, but...Since 1970, of the 12 times its been 12% above 200-DMA, 8 of 12 times it rose to 20% above 200-DMA."

19. Equity positioning. Aggregate positioning rose to the 82nd percentile driven by a sharp rise in discretionary investors.

20. Sector positioning. Investors are most overweight Staples, Communication Services, and Tech. They are most underweight Materials, Healthcare, and Utilities.

21. Exposure laggards. Hedge fund and mutual fund exposure to equities remain relatively low.

22. HFs vs megecap tech. The hedge fund long/short ratio in megacap tech has bounced to the 51st percentile since 2018 (up from 39th ahead of Q1 earnings).

23. HFs vs. industrials. "US Industrials were among the most net sold sectors in Goldman's Prime book last week, driven by long sales outpacing short covers (2 to 1)...With the latest selling, the US Industrials L/S ratio now stands at 1.59 (vs. a YTD high seen in late Feb of 2.01), at a new 5-year low."

24. Diverging breadth. "NASDAQ 100 (blue) has seen % of new members making new 52w highs climb well into double-digit territory this year, while Russell 2000 (orange) hasn't yet gotten into double digits."

25. Magnificent 7 vs. Bottom 493. "The seven largest stocks account for 28% of the market cap and…trade at an NTM P/E of 32x vs. 20x for the aggregate index. The remaining 493 firms trade at 17x."

26. Concentration. "The recent rise in market cap concentration had been the steepest on record in 60yrs."

27. NTM P/E vs. real yields. There is a growing divergence between S&P forward P/E and real yields. 

28. Earnings revisions. "Earnings revisions breadth has decelerated over the past 2 weeks and is now back in negative territory (meaning more downward than upward revisions for the out year)."

29. Bottom-up earnings. "The 2023 bottom-up consensus EPS estimate has also resumed its decline over the past couple of weeks."

30. Unusual reactions. And finally, “earnings beats are underperforming earnings misses. This has never happened before (since 2000).”

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