There’s something about 16%, apparently.
Although I’d be inclined to file this away in the “random, meaningless factoid” folder, I suppose it’s worth mentioning given that US equities came into the week perched at new records, leaving bears flummoxed at the persistence of a rally that’s pushed valuations beyond dot-com levels on some metrics.
In the pandemic era, the S&P has a propensity to sell off whenever the gauge trades at a 16% premium to its 200-day moving average. This little kernel of possibly useful information was unearthed by Bloomberg’s Kriti Gupta on Monday. The figure (below) shows that the 16% premium was attained in and around pullbacks in September, December, January and February.
As of Monday, the S&P traded right at the same 16% premium.
This comes as the Dow celebrated a meaningless “milestone” (can you use “meaningless” and “milestone” next to each other in a sentence, or is that too much of an oxymoron?).
Specifically, the index hasn’t seen a loss of 1% in more than 30 sessions (figure below). That’s a first for the post-pandemic world.
That actually is notable for at least one reason. The Dow is obviously chock-full of assumed reflation trade winners. So, this uninterrupted streak of relative calm is in some ways a reflection of the prevailing economic narrative, even as April’s under-the-hood action in equities has actually seen many manifestations of the pro-cyclical trade underperform as a reprieve from the bond selloff boosted tech and secular growth anew.
Meanwhile, shorts are sitting near a 17-year low (figure below).
As one person who spoke to Bloomberg for a Monday article put it, “no one wants to get their head ripped off by a short anymore.”
Since milestones are set by humans, milestones can indeed be meaningless.