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Hi, Markets have been cruel to us. I present below several indicators that shall help you to gauge where the sentiment in the market is at the moment. Of course, you have figured out by yourself that the sentiment is very bearish but how much bearish, how does it compare to previous episodes based on market data and what does it imply in the near future? This is the question I am trying to answer for you. Stock market are in the 8th month of corrective action. Fear and bearishness is very diffuse and have risen to a high a level. A contrarian approach, is more often than not , yielding good returns in this kind of situation. The only missing ingredient is a spike of volatility. That makes likely that more weakness is possible in coming sessions but also that when volatility will rise furthermore (i.e VIX >40), the stock markets will be pricing a too dire outlook. At the end, it’s not as often “ the end of the world as we know it” than stock markets assume. Sure enough, I find the outlook quite worrying due to a not abundant enough liquidity and rising deflationary forces but even in the worst bear markets, stock prices don’t drop without respite from top to bottom. My belief is that we are to start one relief period that is likely to start within the coming 5 sessions and should a multi month rally toward April-May. Risk is becoming cheap and is to be bought not sold at this level. Risk/Reward is tilting towards a good proposition The following charts are attempting to show the intensity of selling that occurred and the stock market reaction following such episodes. 1) Sentiment derived from market internals or breadth World Sentiment Vs MSCI World US Sentiment VS S&P500 EU Sentiment Vs SX5E EM Sentiment Vs MSCI Emerging Markets 52 week lows Vs S&P500 S&P500: Distance from Strategists’ target S&P500 Vs ARMS Index 2) Sentiment derived from volume US - % of volume in declining stocks Vs S&P500 SPY vs S&P500 SDS Vs S&P500 3) Sentiment derived from surveys American Association of Individual Investors – Bull readings % AAII Bull /Bull+Bear Institutional investors : check the following link http://www.yardeni.com/pub/peacockbullbear.pdf National Association of Active Investment Managers: check the following link (click on NAAI exposure on the left) http://www.naaim.org/naaim-survey-of-manager-sentiment-now-known-asthe-naaim-exposure-index/ 4) Sentiment derived from Put/Call ratio What happens if the S&P500 drops to 1800 or lower and the VIX jumps to 40? The SPX/VIX ratio would drop to 45 or below 2 STD below the mean. A quite rare event where important bottoms were made. I hope you find this useful Kind Regards, Maurizio