In the table, black lettering means the signals were the same now as they were heading into the 2020 top. Where there is green lettering, it means that we don’t know yet if they will be the same – they still could be.
Finally, red lettering indicates measurements which are somewhat different between 2020 and 2021.
Before discussing some of these, I want to direct your attention to the one highlighted in yellow – the NYSE cumulative Advance-Decline line. That A-D line made a new all-time high on Feb 20, 2020; $SPX had made a new all-time high the day before. This is proof positive of what I have been saying for a long time – it means nothing if the cumulative A-D line is making new all-time highs along with the stock market. It is not predictive. The only use is as a negative divergence, which there was not in this case. In fact, two days later, one of the biggest routs in history was on. I don’t know why so many technical analysts try to say that the cumulative A-D line is predictive. It is not. When both it and $SPX are making new all-time highs, it means nothing in that case. There are other major market tops where similar things occurred.
While we’re on the subject of the cumulative indicators, it is interesting to note that both “stocks only” cumulative AD-line and CVB (also based on “stocks only” data) were on negative divergences for over a month before the market broke, having last made new all-time highs on Jan 16th and 17th, 2020, respectively.
Similarities
All of the following indicators are essentially in the same place today that they were a year ago: $SPX chart (holding above the January highs), MVB sell signal, realized volatility sell signal, equity-only put-call ratio charts, breadth oscillator sell signals, and an aging $VIX “spike peak buy signal from late January, whose profitability was already guaranteed because the calls had been rolled up from when the original signal took place.
There is one other similar one – new 52-week highs vs. new 52-week lows. Both then and now, there was a long streak of dominance by new highs. The one difference, as noted in the above table, was that in 2020, the number of new lows was running at a reasonable level – roughly 80 new lows per day. At the current time, there are less than 10 new lows per day. That is a discrepancy, and it indicates that this indicator in 2021 is more strongly bullish than it was a year ago.
Differences
That leaves only a handful of $VIX indicators, all of which are different now from where they were a year ago. First is the level of $VIX itself. In 2020, it had been between 12 and 17 for several months, indicating an overbought condition. When the crossover above the 200-day moving average came, it was with $VIX near 16. Today, the level of $VIX is much higher, and so one cannot say that it’s overbought in that classic sense. Moreover, while there could be a crossover above the 200-day MA, it would occur at a much higher level of $VIX today.
Also, regarding the construct of volatility derivatives, $VIX futures were trading with a very small premium back then and easily inverted when the market started to fall. Now, these $VIX futures are trading with very large premiums, although they could still easily invert if the market began to fall sharply (green lettering in the table).
Summary
There are considerable similarities between the signals, and the timing of the signals, in 2021 and 2020. This is true for the charts as well as the put-call, breadth, and certain other data. Overall, the $VIX data is the biggest difference between 2020 and 2021. And, in my opinion, it is probably telling us that 2021 will not be a repeat of 2020. However, $VIX today is certainly influenced by knowing what happened a year ago – an advantage that traders didn’t have as we approached the end of February 2020.
In any case, there are enough similarities to give one pause – and to keep one from being complacent. Add to bearish positions as sell signals arise, and especially if $SPX breaks support levels. But there is no reason to give up on the current bull market until those things begin to happen. They will happen; it may just not be next week, as it was a year ago.