30-Year Vet Shares 5 Indicators Showing Weakness

• The S&P 500 finished 2021 up 27%. 
• But Jon Wolfenbarger is warning the party could be over as the macroeconomic outlook shifts.
• He shared 5 indicators that tell him stocks are in a dangerous spot.

Coming off a year in which the S&P 500 returned 27%, 2022 has given investors a tough pill to swallow so far. 

Amid all the uncertainty around COVID-19, effects of the Federal Reserve’s monetary policy, and rising inflation, the index is down more than 3%, while the tech-heavy Nasdaq is down 6.5%.

But things could be gearing up to get even worse.

According to Jon Wolfenbarger, the founder of BullandBearProfits.com and former Allianz Global Investors securities analyst, stocks are showing signs of weakness ahead. In a commentary piece last week, he listed a plethora of bearish indicators. 

For one, the VIX, which reflects expectations for

volatility

in the market, looks set to spike as its Percent Price Oscillator turns positive. This indicates a heightened risk appetite among investors, Wolfenbarger said.

Keeping with investor sentiment, Wolfenbarger pointed out that positioning is still at levels more extreme than during the dot-com bubble, according to the Rydex Asset Ratio. It compares the assets invested in money-market and bear funds to those in sector-linked and bull funds. 

Then there’s the shrinking pace of growth in the money supply.

“The Fed and banks increased the money supply by over 40% in the wake of the initial Covid panic. As this chart of our Austrian Money Supply measure shows, money supply growth has slowed dramatically to only 7%,” Wolfenbarger wrote. “This suggests the economy will slow going forward, particularly with the Fed tightening this year.”