US: Exposure to US Equity markets 100% / Cash 0% (unchanged)
Europe: Exposure to European Equity markets 85% / Cash 15% (unchanged)
After a 15% correction led by GAFAMs, the Nasdaq looks ready for a rebound in the wake of renewed infection cases in Europe and uncertainties in the politic situation in the US. GAFAMs and "stay at home" stocks could recovering their safe haven status for sometime. At the opposite side, after a 3 months trading range, European indices looks weaker led by Financials and Oil & Gas stocks while the participation to the bearish momentum (43% of stocks within the Stoxx600) overtook the part of stock in bullish momentum (41%). The Stoxx600 banking index is now back to march lows, closely followed by Insurance, Oil& Gas and Telecoms while Autos, Industrials, Construction and Chemical are so far much more resilient and keep on their bullish or neutral stance. After 15 days of Europe catching up the gap and an early rotation towards cyclicals, the situation has once again reversed but all these rotations mainly reflects uncertainties and could continue, depending on progress on a new fiscal support package in the US, health situation and first debate for the US poll especially as a Biden victory should boost stocks related to global trade and renewable energy, while if Trump prevails, it could benefit fossil fuel and defense companies. The volatility is so far limited despite uncertainties but may come back especially as markets are much less directionnal than it was the case in last few months. Therefore we stick with our view to favor strong areas and sectors coupled with quality stories, while a "buy the dip" opportunity may take place in the coming weeks.
Our Market Pressure Index now stands at 42/100 (-2), into the "risk-on" zone (below 58).
The market participation/density is neutral/positive. There is 41% (=) of major bullish configurations for the Stoxx600 and 50% (+3) for the S&P500, while major bearish trend configurations are 43% (=) for the Stoxx600 and 33% (=) 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 +17 in the US). During risk-on/bullish market phases, the spread is expected to be > 30.