US: Exposure to US Equity markets 100% / Cash 0% (unchanged)
Europe: Exposure to European Equity markets 85% / Cash 15% (unchanged)
Yesterday trading session was marked by a sharp sell-off on the Technology segment, led by Apple (-8%) which is the follow up of the rising volatility for some days, in a marked divergence with US indices course coupled with an overbought Technology segment in the wake of Apple and Tesla splits. This is the worst trading session since March for tech stocks, and while we consider this as a clear warning on the sector, it is still too early to call for the end of the bullish momentum on the growth/techs segment even if the odds of a short term correction are clearly on the rise. The move looks much like profit taking amid an overbought pattern rather than "risk off" one, as there was no rally on the USD, and European markets outperformed.
The most tangible factor remains the volatility level, which after 2 months of stability is surging again (VIX at 33.6). Therefore, markets may be less directionnal with higher volatility in the following weeks, unless a more lasting rotation to take place if economic data and outbreak situation continue to recover. Our system let the % exposure to Equity/Cash unchanged for the moment in both the US and Europe, and we have for now no exit signals on Techs stocks.
The pattern taking place from now -follow up of the sell-off or stabilisation- will be key and should not be anticipated in our view.
Our Market Pressure Index now stands at 54/100 (+9), back into the "neutral" zone (between 50 and 70).
The market participation/density is positive. There is 41% (-3) of major bullish configurations for the Stoxx600 and 53% (-2) for the S&P500, while major bearish trend configurations are 39% (+1) for the Stoxx600 and 28% (+3) for the S&P500. Therefore the density analysis reflects a neutral to positive momentum in Europe and in the US (spread now at +2 in Europe and +25 in the US). During risk-on/bullish market phases, the spread is expected to be > 30.