Through the combined skills of my Scotia Capital team and the great people at Bloomberg, we have created a very interesting indicator: The Panic-Euphoria Indicator.
*ThePanic-Euphoria indicator is based on four factors including: the VIX index, S&P500 RSI, put-call ratio, and corporate credit spreads.
Here is the recent update (FYI):
The equity pullback continued yesterday with the S&P 500 retreating 0.6%.
Despite the recent decline, the S&P 500 is off 2.5% since its April 29 peak (1,363), our Panic-Euphoria indicator has yet to reach "panicky" levels. As illustrated in our Chart of the Day, the Panic-Euphoria is currently hovering in neutral territory.
The S&P 500 remains 7.8% above its 200-d moving average of 1,234, but the TSX and Shanghai A-share are hovering much closer. In fact, the TSX is standing 2% above its 200-d MA (13,094) and the Shanghai A-share is trading 0.8% above it. With China driving commodity sentiment, a break below its 200-d MA could spell further trouble for the commodity complex and commodity-related equities/indices.
*Entering this stage of the presidential election cycle, it is important to find indicators that one can track, and pair with other leading indicators, to help position ourselves for any upcoming corrections or, dare I say, Bear market directions... This particular study is interesting because we all try to remove emotion from our investment activity, and a great place to start is by looking at the emotional quotient of the overall markets... I hope to expand this indicator to other markets in the near future.
Best regards and safe investing.
E.
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