Market analysis: Normalization in process

Market phase: Normalization in process

Our Market Pressure Index stands at 37/100, the lowest level since the Covid-19 crisis and pointing to a "risk-on" zone, coupled with a limited positive spread momentum for both the Stoxx600 (+6), and the S&P500 (+24) while the VIX stands at 23. The participation to the rise is positive but still short of a "risk on" pattern that implies a spread momentum above +40.

Market sentiment remains mixed, after FED comments on the US recovery uncertainties, especially concerning the swift rebound in employment seen in May and June that had likely slowed and that additional substantial improvement in the labour market would hinge on a broad and sustained reopening of business activity. Nothing new, but investors remains cautious on the recovery strenght in a context of rising tensions with China and a risky presidential election while the outbreak seems to have peaked in the US.

The interesting move was the profit taking on EUR/USD and Gold, after FED comments that fail short to confirm a coming policy change on the 2% inflation target, and little consensus to adopt an inflation-targeting regime.

The Stoxx600 remains neutral as well as the Dow Jones, but not its components as an accrued fragmentation between stocks in strong bullish momentum and stocks in strong bearish momentum took place while the % of stocks in neutral situation (minor bullish or bearish reversal) is now only 20%.