Callum Thomas — Weekly ChartStorm: The 2022 Bottom
A free Special Edition post-mortem: the charts and clues that, in real time, helped flag the 2022 market trough — surveyed in the chronological order they appeared, as a reusable bottom-spotting playbook.
One-line take: A purely educational retrospective — no specific tickers named (the only entity is the broad market / S&P 500, the index these indicators are aggregated for). Thomas walks back through the 2022 trough chart by chart, in the order each clue surfaced, to show how a bottom is identified in real time: it began as "here are some clues a bottom might be near," became "it looks like the bottom is in (but not 100%)," then accreted technical and macro-fundamental confirmation until it was "obvious." Each chart is shown as it appeared at the time (not updated), so the post is a process-development and preparation exercise for the next downturn rather than a stock call.
Talking points
1. IPO / SPAC activity collapsed — a market-cycle & supply gauge
- Equity-capital-markets activity (IPO + SPAC issuance) crashed below March-2020 levels by mid-2022. IPO activity is a reliable read on the stage of the market cycle — a symptom of where valuations, sentiment and liquidity sit.
- There's also a supply/demand angle: surging IPOs flood the market with new stock supply; collapsing IPOs choke that supply off. The same gauge helped flag both the 2021/22 peak and the 2022 trough.
- "When this indicator plunges towards 0%, that has historically been a sign that a bottom is close."
2. Valuations reset — forward PE came back down
- Valuation gauges measure investor confidence; the level matters but so does the change. A major forward-PE reset added evidence of a possible trough.
- US equities had fallen back into line with their own recent-history average (not yet cheap), while the rest of the world looked outright cheap versus its own history and versus the US.
3. Speculators crowded to the short side — a contrarian setup
- Speculative futures positioning plunged into net-short territory. Read contrarily: speculators are all-in near tops and crowded short near bottoms.
- A crowded short also is future buying — a rebound forces panic short-covering, adding fuel to the move off the low.
4. Margin debt dropped — the selling-climax tell
- Big shifts in margin balances matter: large increases signal greed; large drops signal panic as margin calls trigger forced selling and ultimately a selling climax.
- Once all the sellers have sold, selling pressure exhausts and the bottoming process can run its course. BofA flagged the margin-debt rate of change as a contrarian-bullish signal.
5. Seasonality worked — as a "consider the unthinkable" prompt
- Not because a historical-average Q4 rally was destined, but because seasonality prompts you to weigh the unthinkable (an upside rally) when the crowd is fixated on the bear case.
- "Sentiment is extremely bearish, so by definition there are a lot of minds that could be changed and in so doing drive upside."
6. Fund-manager cash allocations surged — bearish crowd, loaded dry powder
- Surveyed fund-manager cash levels hit their highest since 2001. That says two things at once: the crowd is bearish (often contrarian) and managers are sitting on dry powder — future buying power.
7. A bullish RSI divergence occurred
- A bullish divergence = a lower low in price against a higher low in the indicator (14-day RSI) — a prompt to consider that a new bull market may be starting.
- Flagged as an "intriguing 'what-if' setup" on the weekly chart.
8. 60/40 expected returns went "full circle"
- Forward-looking expected returns for the classic 60/40 portfolio swung from deeply negative in 2021 back to 2020 levels — driven by higher yields and reset valuations — hinting at upside.
- "Several rounds of shock therapy have brought the 60/40 portfolio investing approach back from the dead."
9. Retail cash allocations spiked — selling exhaustion
- Reported investor cash allocations rose to one of the highest readings of the past decade in October. Same signal as the fund-manager cash chart: pessimism/panic, but also future buying power and selling exhaustion.
10. Sentiment crashed and then turned up — the classic signal
- Topdown's "Euphoriameter" ticked up in October off its lowest point since 08/09. The classic bottom signal is sentiment plunging and then turning up — a contrarian bull tell.
11. Back above the 200-day moving average
- A later-triggering but lower-noise confirmation. The added condition — a material (6-month) period below the 200-day before crossing back above it — cut false signals and has historically flagged the start of new cyclical bull markets.
- "Nothing good happens below the 200dma."
12. Peak inflation — the key macro pivot
- The inflation surge was a big driver of the 2022 drawdown, so the peak in inflation was a key development plotting a pathway higher.
- "Seems like peak inflation is good for equities — unless it is followed by recession."
- Bottom line: in real time it was a process — clues that a trough was possible, then likely, then confirmed; obvious only in hindsight.
Key points & figures extracted from the public Chart Storm post (in transcript.txt) for personal study. Not investment advice. © Chart Storm / Topdown Charts for source material.