Market analysis: Normalization in process

Market phase: Normalization in process

Our Market Pressure Index (MPI) stands at 39/100, rather stable and still pointing to a "risk-on" zone, coupled with a limited positive spread momentum for the S&P500 (+22) and the Stoxx600 (+7), while the VIX stands at 22.

A strong start to the week was led by hopes about covid-19 treatment as U.S. regulators authorised the use of blood plasma as a new medical option, while the U.S. government was considering fast-tracking the AstraZeneca experimental vaccine. The major European indices and the Dow Jones led the rise, driven by cyclicals such as automotive and chemicals, as well as aeronautics and airlines. The technology sector was the weaker spot, especially the internet segment which benefits the most from the covid-19 crisis. Some profit taking could take place on these segments, and allow a rotation towards the most battered sectors such as Tourism and Aeronautics. However, long term trends should continue after the covid-19 crisis on themes such as cloud or e-business while it will take years for Aeronautics and Airlines to get back their pre-covid profit momentum. Therefore the rotation will likely be a non lasting one and could represent an opportunity to jump in high growth stocks at a better price.

For the moment, it is still another rotation attempt amid renewed hopes for a treatment/vaccines but with few new enter long signals so far. The rally must therefore to continue for a while to confirm the rotation in process.