– The trend from the last two weeks reversed as Treasuries rallied and risk assets declined.
– Old trends re-emerged – the worst performing ytd sectors and factors sold off the most last week, and those best performing areas held up the best.
– 2/3s of economists in a WSJ economist survey expect recovery to begin in Q3 with 9.6% unemployment rate by December.
– Gold rallied last week, but so did copper. Copper prices have been steadily rising and signaling reflation.
Archive
Market Outlook – Psychology Hits Bear Rally Killer Threshold, For a Day
– Market Risk Index climbs, still above 75%.
– Daily Psychology point total dropped under -100 points on Wednesday, for a day. It’s reversing now.
– Good breadth, then bad breadth. Mixed Signals and extreme moves.
– Valuations are discounting a return to full employment.
– And, this week’s best charts
World Wrap
– Another broad weekly gain for risky assets that culminated with the jobs surprise on Friday. Treasury prices were weak.
– Last week was best for the most beaten up sectors. All the sectors that are down ytd bounced 8.4%, while the positive returning sectors bounced 2.8%.
– Last week’s rally was broad – 44 of 45 countries that we track all moved higher.
– The US dollar broke below a trading range that has held since March. Inflationary bets are increasing, and long duration Treasuries are selling off.
Market Outlook – MRI Back Above 75%
– Shortest Peak to Peak Cycle for Equity Put/Call data ever. Insiders Selling Again. Psychology likely to deteriorate further.
– Breadth improves, but breadth works better with support from monetary conditions and valuations.
– Jobs report could market the end of recession, but the recovery is largely discounted in equity prices.
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Market Risk Index
Market Risk Index scales from 0 to 100%. Higher readings correspond with higher risk markets. Scores below 25% are bullish. Scores between 25-75% are neutral, and scores above 75% are markets vulnerable to major drawdowns.
Model Category Readings (Percentiles)
- Psychology 99.7%
- Monetary 87.2%
- Valuation 99.3%
- Market Trend 9.8%