Learning About the S&P500 from Studying the US IPO Market

The US IPO market shows a familiar ebb and flow to the stock market price cycle.  Studying the trends in IPO activity can yield interesting sentiment signals and provide extra context on the overall market environment.
This article talks through US IPO trends, and includes some of the insights from a discussion on US IPO market statistics in the latest Weekly Macro Themes report.
The key chart shows US IPO market activity (filings and withdrawals) against the S&P500, and here are a few things worth noting.

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The graph shows 3-month smoothed IPO filings and withdrawals activity vs the S&P500.  There is a clear cycle of action on filings, with activity surging around market climaxes and dropping off after periods of turmoil and volatility.  Similarly withdrawals tend to spike after a market correction.  Overall these patterns or cycles tend to line up fairly well with that of the stock market.
From a practical standpoint both series seem to function as contrarian indicators. That is, withdrawals usually spike around a market bottom, and filings surge during the up-phase of the market; basically a sign of confidence. When filings rollover from booming levels it's typically a bad sign.
At present withdrawals have dropped off and filings have surged.  It's another sign of the times of a bull market that is steadily maturing, but is yet to show signs of a turn. I'll be watching IPO filings for any signs of extremes to the upside or a slacking off in activity; likewise I'll also be keeping an eye on withdrawals for signs of anything stirring...
This article originally appeared as a submission at See It Market

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.