Technical Analysis

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  • 1.  Technical and Macro Indicators

    Posted 05-20-2023 16:36

    Hi All,

            The attached OBVvsS&P.png plot is the On Balance Volume plotted against the S&P 500. What it shows is that recently up volume is about same as down volume.
    By up volume it is meant that today's closing prices was higher than yesterday's closing price, so today's volume is added to the running total. Down volume means today's closing price was lower than yesterday's closing price so its volume is subtracted from the running total. On balance volume is the red curve. S&P 500 is the green curve. So recently the up and down volume are roughly equal, and the S&P 500 is in an uptrend pricewise. This means that most of the S&P advance is concentrated in a few issues or there is not much market breadth.

          The MacroIndicators.png plot has the Leading Economic Indicators, GDP, Fed Funds Rate, and Yield Curve plotted together. What it shows is that the Leading Economic Indicators are down just as they were before the 2000, 2008, and 2020 crashes and recessions. GDP has not yet gone down much. But it tends to lag the LEI curve, Fed Funds curve, and Yield curve. Usually, GDP goes down and the Fed begins to reduce rates in response. The Fed Funds is high just as it always has been before every recent crash/recession. The yield curve is highly inverted. This is the curve labeled T10YFF which is the 10 Year Treasury minus the Fed Funds. Its more inverted than it was in 2000, or 2008. Will we have a bull or bear market this year. It depends on expectations. Everybody expects a recession. If it's in line with expectations meaning the recession is mild, then the bull might continue. If the upcoming recession is more severe than expected, then the market will crash again.

    What does everybody else think?

    [Jim] [McClean]

  • 2.  RE: Technical and Macro Indicators

    Posted 05-21-2023 11:31
    Edited by BARRY JOHNSON 05-28-2023 10:58

    James, thank you for compiling these data points.

    They help us see the similarities between (A) the levels and trends of macroeconomic environment leading indicators  (LEIs) and (B) the conditions that precipitated prior market downturns and recessions in 2000, 2008, and 2020. 

    Several recent WSJ articles have described similar observations.

    Two of my brokerages have also pointed out the similarities between the economic environment today and the economic environment preceding recessions since 1945.

    These sources all see timeframes of 3 months (2Q23, 3Q23) to 9 months (4Q23) from now. 

    NONE of these sources, even the Federal Reserve FOMC, say a recession will NOT happen.

    A huge difference today and prior periods is the level of political uncertainty filling the void in all national leadership institutions that place party ideology over national priorities being manufactured solely for political posturing.

    The current indecision on addressing raising the debt limit may bring this eventuality forward.