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Sentiment 02/2019

 We ask ourselves , in light of these first months and after the heavy losses recorded last year,  if the up-trend is back.

Let us clear up  the doubts about  world economies health. The signs of  growth  slowdown  are weighing on the main economies that, in some cases, are already in recession.  Aware of difficulties in which economies struggling, including rising debt and falling economic indicators, central bankers  will have  to review their restrictive monetary policies.

So why  we see  a sudden change in investor sentiment?

Market, as we know, moving with other parameters and understanding how current quotations  discount future scenarios is an academic exercise. We must be realistic and then we  use our usual tools, suitable to understand if this is time to return to invest.

So we will use our  models  more suitable in this stage.

Sentiment index (Annex.1) -  it's clear how the index is in "comfortable" area far away by first  alert zone;

SP500 (Annex 2) -  the index trend  is very technical. After has tested the tightness of  key levels  revises now  the dynamic resistance at 2817 and it could take time to try a new attack of the absolute maximum. We do not exclude the achievement, within the year,  the important target of 3200 points that we consider a top;

M.Q. Index (Annex.3) - even in the absence of some data that feed the indicator, cause shut down at the beginning of  year, it is clear that the first alarm signal goes back while the second alert condition has never been triggered;

C.O.T. (Annex.4) -  we finish with the  positions by the different operators on SP500' futures. As we wrote in the Report section the Commercial Traders (blue line), the real market movers, are back in the purchase  reversing the position from net short to net long. On the other hand we point out the position of the Small traders (red line) that from perfect contrarians are back in short position on the market minimums.

In conclusion, while confirming our February rating of the markets, we believe there are still opportunities to invest in the equity markets  keeping in mind a bit of volatility.


Giorgio Giovannoni