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Takeaway: If correlations serve us correctly, we're due for a big drop in the S&P 500 rather soon.

The Manheim Index is a used car index that essentially values what used cars are worth. The company is the largest buyer of used cars in America, which it then auctions off. An index reading of 100 corresponds to January 1995.

If you look at the chart we’ve posted below, there appears to be a correlation with the S&P 500 vs the Manheim Index. In periods when the index went negative in terms of year-over-year growth (the black dips), the S&P 500 dropped hard and fast. This occurred back in 2001-2002 (dotcom bubble), 2007-2008 (credit crisis) and if we look at the chart now, it appears the S&P 500 is about to turn along with the index. This could be a sign that we’ve peaked at the 1400 S&P 500 level.

Correlations are just that, but we think this one has legs. It’s rarely discussed in the media and we think that it’s only a matter of time before stocks drop.

Is The Manheim Index Signaling A Market Crash?  - manheim SP500

Is The Manheim Index Signaling A Market Crash?  - manheim spx