Top 5 Charts 2023 | a cautious investor

The end of the year provides a natural opportunity for us as investors to look back and reflect on what we have learned over the past 12 months. I had a lot of fun thinking about how to tell the story of this market with just five charts. To be honest, there’s a lot more to the video below than that!

But while we love making things more complicated, careful investors know that simplicity is often the best approach. So I thought it would be a rewarding and at times eye-opening experience to summarize the year into five key themes and use this chart as a starting point to do a deeper dive into each.

You can access the full playlist of the top five charts on our YouTube channel.Welcome to ChartList, which I used during the video. You can find it right away. here!

Without further ado, here are the five charts I chose, along with their explanations and video links. We hope this serves as inspiration for your year-end processes and performance reviews!

Chart #1: S&P 500

As Ralph Acampora told me a few years ago, “Always start with a simple chart of the S&P 500.” It’s been a very exciting year, with each quarter providing a unique experience for investors, including numerous twists and turns.

Looking back, I am amazed at the sideways market we actually experienced through the end of May. The S&P started off with a strong January, but over the next few months it basically retested previous highs and previous lows, with no real signs of strength or weakness over the larger period.

The June breakout provided a perfect example of a bearish momentum divergence. That’s because negative momentum from the July high meant buyer exhaustion. I also found myself focusing on the October lows, which made me quite bearish at the time. That was definitely one of the main lessons I learned in 2023.It is especially important to recognize the marked personality changes in November.

Chart #2: 10-Year Treasury Yield

In January 2023, I was asked in an interview to identify the most important charts to watch in 2023. I responded to this chart: 10-Year Treasury Yield ($TNX) and Value vs. Growth. My argument is that many investors have not experienced a rising interest rate environment (including me!). So this could mean a painful lesson, as value has outpaced growth as interest rates rise.

As the chart clearly shows, the 10-year yield has risen from around 4% to 5%, completing a long journey from near-zero interest rates not long ago, but it hasn’t given value stocks the tailwind I was hoping for. What a beautiful testament to the benefits of including macroeconomic analysis as part of an overall investment approach and the importance of focusing on the evidence of prices themselves. If the chart shows that growth is performing better, I will continue to grow until proven otherwise.

Chart #3: Market Size

Breadth analysis is an essential component of my analysis process because it addresses issues associated with growth-oriented benchmarks dominated by a few large-cap companies.

This chart includes three breadth indicators: the S&P 500 Bullish Percent Index, the percentage of stocks above their 50-day moving average, and the McClellan Oscillator. If the first two indicators are at 80% and 90% respectively, this suggests a potential exhaustion point for the current uptrend, similar to what we observed in July 2023, November 2022, and August 2022.

Chart #4: Leadership Topics

I’ve been thinking of 2023 as a year of mega-growth, but this fourth chart is really about bigger than small, not growth over value. Examining the nine Morningstar style boxes, it’s clear that growth has indeed outpaced value, but overall it’s more about the big versus small stories.

Large-cap growth outpaced large-cap value by nearly 900 basis points (9%) but outpaced the mid-cap and small-cap style boxes by about 1300 basis points. Our benchmarks are rallying higher on the strength of large-cap growth, and one of the most important questions in 2024 is whether this dominance will continue.

Chart #5: Bitcoin

Higher highs and higher lows form an uptrend. And while Bitcoin ($BTCUSD) did not exhibit that typical pattern in mid-2023, it started the year strong and ended the year in a decidedly strong position.

Bitcoin has nearly tripled in value since December 2022, with a significant rally all the way to its April highs. However, from March to October, Bitcoin was basically in a range between 25,000 and 31,000. I remember having a game plan to follow the price momentum breaking out of that range. Sure enough, in October we saw a bullish reversal, inspired by renewed optimism about a potential announcement confirming a new spot Bitcoin ETF. The news hasn’t arrived yet, but the bullish upward trend shows investors are still eager about this huge potential catalyst.

During my time at the Fidelity Chart Room, I was often reminded that charts can tell the best stories about market history. And at the end of each new year, charts can serve as a fantastic report card on performance, a history textbook filled with practical lessons for years to come, and a reminder of the value of technical analysis to help identify opportunities and manage risk.

We hope that these discussions will allow us to have a thorough review session as we close out 2023 and an honest assessment of how we can improve our investment toolkit in 2024.

Have a happy holiday! Thank you for making StockCharts part of your process. We look forward to more great charts and conversations in the new year!

RR#6,

dave

P.s Are you ready to upgrade your investment process? Check out our free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.

The author had no positions in any securities mentioned at the time of publication. All opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.