Sentiment 06/2018

The equity markets in June continued the route to the south marking new lows . Some indices, moreover, are officially  in a "bear market".

Situation has further deteriorated in the last week by a powerful sell off, which complicated the immediate scenario.

Fortunately   SP500 index ,showed stability, closing a difficult month unchanged  despite the political and economic pressure on custom duties.  Just  on the strength of this index we have always developed our analyzes, together with the signals provided by our indicators here updated.

SP500 (all.1): this monthly chart  has often been published to make the point of index trend. As is evident, the trend continues to be positive and all the supports have contained the declines. Now it is again near to absolute maximum, well positioned in the upper channel whose natural target is 3100/3200 points;

M.Q.Idx (all.2): the indicator is constructed monthly with the macro and quantitative data referring to the US market. Since we created this instrument, we have appreciated its reliability in identifying the inversions of primary trends. Even if the parameters of the M.Q.Idx show signs of slowing down, for now not  suggests a next inversion;

Indicator of recession (all.3): it is the signal that more worries for the effects on the economies. The graph, which refers to USA market, is clear and highlights how the spread between short and long-term rates continues to be below the barrier of 0.50. Historically, the signal announces the probability of recession in the next months at most one year, but no the intensity of the same. It is therefore necessary to appraise the consequences of custom duties war on the intensity of the recession which, however, will come.

We reiterate our moderately positive view on the stock market, although  we may have high volatility as recorded in June, while we confirm opportunity to invest in 10Y  and even 30Y UST bonds.

Giorgio Giovannoni

07/13/2018