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Friday, March 29, 2024

ENOUGH SELLING ALREADY – TIME TO ASSESS THE DAMAGE?

ENOUGH SELLING ALREADY – TIME TO ASSESS THE DAMAGE?

Courtesy of The Pragmatic Capitalist

By Data Diary:

Risk appetite has beat a hasty retreat over recent weeks (it’s come a long way – see our recent snapshots here and here).  It’s unlikely to push further without some fresh impetus. Suggest then that a pause is likely with good odds of some sort of retracement.

1) Elevated volumes are generally followed by a period of reflection while markets assess the damage:

SP500 volume and price 400x242 ENOUGH SELLING ALREADY    TIME TO ASSESS THE DAMAGE?

2) Similarly the CBOE PutCall ratio has moved very quickly from historical lows:

10 day avg put call ratio1 400x253 ENOUGH SELLING ALREADY    TIME TO ASSESS THE DAMAGE?

3) And our risk appetite index, that measures the relative pace in the change in risk appetite, has blown out to levels not seen since Lehman’s ventured into the hadron collider:

Risk appetite index1 400x233 ENOUGH SELLING ALREADY    TIME TO ASSESS THE DAMAGE?

With technical reversals in the USD and WTI overnight, and momentum waning in gold’s advance, the indications are that risk markets will at least consolidate and perhaps even test their legs against the recent trend.  However, with Chinese equities still on the nose and the CRB plummeting overnight, we have no all clear signal to re-enter the risk trade.  As equities are still in overvaluation territory, and with credit spreads digesting the deteriorating risk environment, there is no need to rush back into the fray. 

 

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