How To Play The Buyback Breakout

 | May 23, 2022 01:23AM ET

This post was originally published at TopDown Charts

  • Relative strength has been seen in the S&P 500 Buy Back Index

  • The index is heavy into financials and discretionary and comparatively light on staples, tech, and utilities

  • With the buyback blackout period winding down, companies will likely beef up stock repurchase activity which could help support stocks in the near-term

Corporate earnings season has come and gone. The daily noise of what’s happening at the company level along with macro takes from CEOs is in the rearview mirror for now. With the passage comes an end to the buyback blackout period. Generally, firms are restricted from repurchasing their shares for two weeks before the end of a quarter and for 48 hours after releasing earnings. Some research suggests, however, that buyback blackout periods do not negatively impact stock performance.

The bullish narrative now is that there will be a surge in stock demand considering companies have plenty of balance sheet liquidity and share prices are quite a bit lower from just a month or two ago.

Relative Strength in Buyback Stocks/h2

That could be the case, but it’s not an argument that warrants a significant asset allocation shift for investors, in our opinion. What’s interesting, however, is that there has been a pickup in relative strength among buyback stocks. According to S&P Global, The global equities for the balance of the year.

Featured Chart: Relative Strength in the S&P 500 Buy Back Index