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The S&P 500 is challenging its all-time highs and is nearing a potentially big break out. While everyone keeps worrying about the recession that’s not coming, let’s take a look at some of the charts and what the market is thinking about the odds of a recession.
First, we will look at perhaps the most compelling ETF that suggests that equity prices are going higher is the ACWI ETF. This ETF tracks the MSCI ACWI Index. The ETF has been stuck in the trading range since February 2018 and has yet to return to its highs last seen in January 2018. That is changing as the ETF breaks out.
The ETF has failed multiple times at resistance around $75 since February 2018, but that all changed on Friday when the index rose above resistance, to close at $75.50. It is a big break out, and the relative strength index would suggest that the ETF can still rise because the ETF isn’t even overbought yet. Additionally, the trend for the RSI is higher, and it all indicates to me that the equity market, not just here in the US, but around the world is on the cusp of a significant move higher.
Taiwan Semi (TSM)
Also, signs of the “recession, that may never happen” continue to fade. Looking through Taiwan Semi’s earnings call, you can read all about the amount of increasing demand, and their need to raise CAPEX to meet this demand. Last time I check, rising demand is a positive for the economy and growth.
Then, of course, there is this chart of TSM. With an overlay of the S&P 500, which shows the strong correlation between the two charts. The relationship shows how TSM has risen sharply in recent weeks, and if acts a leading indicator, then perhaps it is yet another sign of an S&P 500 that is heading higher.
S&P 500 (SPY)
Then, of course, there is this chart of the S&P 500, which shows the 22 months of consolidation in 2011 and 2013, 2015 and 2016, and today. The most glaringly obvious part of the chart is the significant increase in the S&P 500 following the prior consolidation period. The index rose sharply by about 700 to 750 on each break out going back to 2009.
It doesn’t seem like the market see a recession on the horizon anytime soon.
Have a great day.
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