S&P 500: Week in Charts

Week of July 31 - August 3 

Takeaways:

• SPX does not appear to be over-extended in the longer timeframe.

• Price action this year has oddly close seasonal characteristics to 2019 when compared.

• Short term price action indicates more selling is possible.

The SPX is Not Appearing Overbought

One method to look at whether a equity is overbought or oversold is to look at the long term moving averages. In this case we see peak highs in the SPX and its distance from the 200ma. 

At 15% the current market is hardly showing overbought long term in context with the previous measurements.

Market Breadth is still indicating a bullish bias. With 62% of stock still above their 50MA 

From a seasonal perspective, the 2023 SPX has a very similar cadence to 2019. 

• Strong start to January almost identical to 2019

• Then a 4 month divergence 

• Another almost identical 2 month uptrend to end up nearly 22% starting in June. 

• August looks to be starting very similar as well.

Short term, intra-week, the SPY broke below the previous day's intra-day low. 

• Typically this price action sets up for lower price discovery. 

• Friday was characterized by a strong morning then a sharp high volume selloff second half of the day.

Another interesting technical feature was there have been only two other times since March where the SPX ticked below 1500. In the few occurrences this year, it has been followed by and uptrend. It is a possible signal of capitulation.

Shocking Charts Show Inflation Is Still Red Hot

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CPI is a broad average number that means more to economists and politicians than the average person. There are many items that still more expensive than ever or still have a blistering rate of increase in prices.

Start with the basics: Food and shelter...

Rent +8.5 Y/Y

Increasing at rates not seen since 1980. This rapid rise in pricing has not been seen in 40 years. The pandemic created a massive shortage in housing and unaffordable prices in housing driving more people than ever to rent driving up demand.

Source: BofA Research

BofA chart confirms Fed data showing a massive gap in average inflation of rental prices and prices remaining high.

Electricity  +6% Y/Y

Although the rate of increase as dropped dramatically in the past year, electricity has not been risen at this pace since January 2009.

Groceries, Food at home +5% Y/Y

Prices have dropped considerably over the past year but increase rates are at 2012 levels.

Water, sewage and trash services +5.75% Y/Y

Beginning in 2019, prices to remove trash, provide water and process sewage have been soaring at a rate not seen since 2013

Have a car? 

Thats expensive too:

Auto Insurance Premiums +10.5% Y/Y

Insuring your car is more expensive than it’s ever been.

Gasoline Prices have been surging in July approaching $3. More expensive than a year ago

Discretionary Items. 

Having fun? That's expensive too.

Restaurants, food away from home +8% 

Eating out has not been this expensive since 1982, a massive increase.

Alcohol +4.5% Y/Y

Alcohol has not been this expensive since the early 90’s

Movies, theaters and concert tickets +6% Y/Y have not been this expensive in 20 years.

Source: Stubhub

Want to see Taylor Swift this summer? Good luck. Tickets are going for nearly $800 for nose-bleed seats - behind the stage.

Need vitamin C?

Orange prices are up +176% in 3 years. More expensive than in 30 years.

Sources: FRED (Federal Reserve Economic Database), Trading Economics, Stubhub

SVB Cracks Appeared Long Ago (TA chart analysis)

Silicon Valley Bank's stock ($SIVB) reached a low of $100 Friday as a result of a depositors run on the bank and inability to secure enough cash from bond investments to maintain solvency. After failing to cover deposits the FDIC took the bank over.

A technical view of $SIVB shows cracks in the foundation going back to January of 2022.

1. Bearish Divergence

The stock peaked in Oct of 2021 and attempted to reach another high in Jan 2022 but fell short. A bearish divergence in RSI is when the stock reached a high but the RSI showing a significant weaker reading.

Divergence example:

2. 3 Phase Stock Collapse

Selloff 01 - Occurred in Jan 2022 falling below the 50ma. After failing upon a retest of the 50ma the stock went on a months-long selloff. 

Selloff 02 - In Sep 2023 the stock fell below the 200ma and retested. This resulted in a massive volume 2 week selloff. 

Selloff 03 - Depositors begin to make mass withdrawals. Because of poorly valued treasury investments the bank was unable to secure enough liquidity to cover the withdrawals. The bank's stock completed an 86% fall from its peak before being halted.

Low Short Interest

Short interest according to FINVIZ was actually quite low and reasonable with a ratio of 2.11

Sector Fallout

The ETF that holds the largest banks printed a 9% loss last week as a result.

What's more concerning when you look at $XLF holdings is Charles Schwab ($SCHW) printed a -23% loss for the week. The stock has reverted back to Jan 2021 levels. Clearly affected by the SVB failure but how remains to be seen.