Market Overview

You Won't Be Able To Sleep After Seeing These Charts

Share:
You Won't Be Able To Sleep After Seeing These Charts

With each passing week, it becomes more and more clear that global financial markets are currently in unfamiliar territory. Three charts from a new report by Yardini Research’s Edward Yardini shows just how far off the rails the S&P 500 has gone in the past several months.

The first graph of the Citigroup Economic Surprise Index and the S&P 500 minus its 200-day simple moving average shows that the S&P 500 is currently trading at the highest point above its 200-day SMA since mid-2015. At the same time, the Surprise Index, which is an indicator of how much data from the past three months is beating or missing Bloomberg consensus estimates, is also at its highest point of 2016.

Since 2004, these two measures have roughly mirrored each other, and there hasn’t been any major divergence to speak of in recent months.

However, a look at a chart of the S&P 500 versus Industrial Commodity prices shows a huge divergence beginning in 2013. If commodity prices remain at their current levels, the S&P 500 would need to fall to around 1200 to regress to its previous correlation.

Related Link: Why Are Oil Prices Tanking 2 Weeks Before Potential Global Production Freeze Agreement?


Even more potentially scary is the final chart of the S&P 500 versus the YRI Global Growth Barometer. Prior to 2012, these two metrics had nearly perfect correlation, but there is now a massive chasm between them. Assuming the YRI Barometer remains near its current levels, the S&P 500 would need to fall to around 850 to re-establish this previous correlation.

So far this year, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.2 percent.

Disclosure: the author holds no position in the stocks mentioned.

 

Related Articles (SPY)

View Comments and Join the Discussion!

Posted-In: Yardini ResearchEducation Technicals Economics Trading Ideas General Best of Benzinga