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Sentiment 10/2018

The first cracks on the indexes seen in September turned into sell off all assets during all October.

May  we recognize in these  sales a first cyclic inversion signal ? The doubt remains for several reasons that we will see below.

First of all, due to the quarterly results of the US corporations which showed convincing increases in profits and because, after similar corrections, there is usually a rebound of the courses before pointing to a more significant fall.

So far, general reasoning;  let us now examine our usual indicators.

- SP500 (Annex 1)  many times we have indicated the  index levels to be observed  to interpret the possible changes in the share framework. It is evident  as  index has tested with absolute precision an important dynamic support from which, at the beginning of November, a good rebound still started. The downturn has also reduced the euphoria of the market (All.2), bringing it back to more interesting values ??for a potential long return.

We can affirm that the uptrend will last as long as there is the holding of the important support  at 2490 points;

- SOX (All.3) the sector index, which contains the Technological stocks , led the October fall also on the other indices. The resemblance to  devastating  2000 bear market  is impressive. Even if we could see a rebound, the break or no  of the maximum in March will be decisive considering its weight on the main American indexes;


- Recession Indicator  (All.4) the action taken by Fed is impacting the yield curve with the spread, between long and short term rates,  in continuous decline. The risk of a recession is present even if not immediately. We can estimate the beginning of a new phase in the first months of 2019;


- M.Q. Index (Annex 5) as repeatedly written , this indicator anticipated the main inversions on the SP500. The graph, as the evaluation parameters are set, is now close to a possible turning point that must be confirmed with the next monthly closing.


We conclude with a brief reference to the Italian market. We know that Italy has been under observation for some time because of the deficit and the absence of economic growth. The trend of the domestic  list will therefore be de correlated by the other indexes.

We therefore reiterate our vision "Neutral" on the stock market with indication of "Over weight", for now, on the US market and "Under weight" on the remaining markets.

Giorgio Giovannoni