Just a quick note concerning the global equity market meltdown.
Our short-term outlook, based on a variety of alternative and traditional data metrics, has turned broadly positive.
This is not to say that the global economic and health related problems will be resolved any time soon but that markets in general are primed for a short-term counter trend.
The nuance here is that conditions are not positive but beginning to trend slightly higher from a very depressed level. Given the equity market meltdown over the past month, we expect equity markets to celebrate slightly less negative sentiment and newsflow with a short-term rally.
We include all of the major equity market indices — DJI, SPX, NDX, DAX, FTSE, N225, etc.
Because of the risk involved, equity indices, blue chips, and broad ETFs are more appropriate at present. Having said that, stock pickers could do quite well in this environment given the across the board nature of the sell-off.
From a reward / risk ratio perspective, the conditions are ripe for a short-term rally. We do not know how large such a potential rally will be, our focus is on the conditions. And, our indicators show that the conditions have been so depressed that the current minor upturn should be strong enough to trigger a rally.
The focus here is on short-term indicators and outlook. The expected rally could only last a few weeks. If not a rally, it might resemble more of a consolidation but given the conditions we believe a continued equity price decline is unlikely.
Again, this is a reward / risk analysis.
Anything over this time frame, however, is questionable.
Our medium-term indicators still show considerable risk. In fact, our medium-term sentiment indicator, which focuses on multi-month and longer trends, provided an apt negative reading in 2019 warning of a potential sharp decline in equities, which we publicly posted on this site. This indicator continues to provide a negative reading implying equity markets could continue in a state of flux after our expected short-term bounce.
The current market is obviously risky. Please refer to the disclaimer on this site.