Our Confidometer assesses global risk conditions using a mixture of sentiment, option prices, investment flows and margin debt data to help determine if investor sentiment is excessive or not (thereby raising a green or red flag). Our analysis focussed primarily on the S&P500 which serves as the bellwether equity index for most investors. For a daily update of these indicators and much more with commentaries and actionable content, consider a free trial to the Bentin Daily, our premium research service. For brief daily review, please check our regular blog posts.
Besides the vix that has stopped being a relevant global risk gauge,there are not many positive signals enanating from the confidometer today, starting with the jump into risk aversion, the continued rise in EM FX volatility (and further weakness), the cratering in the smart money index (suggesting ever more weakness on closing vs. the opening hour and coordinated adverse moves in the economic surprise index for most economies.
The continued inversion trend in the US yield curve and the strong decline in core European yields suggest that the ECB might actually never be able to normalize rates at least not in this cycle (as opposed to the Fed) and suggests all round market concerns, boding poorly for the euro (speculators are still fairly long the euro without a good reason, according to the latest COT report). The sharp decline in gold and silver (not appearing here) will provide opportunities to purchase cheap protection and was likely orchestrated on the paper gold market and on option delivery day to free the obligation of having to deliver physical gold in a tight market.
With EM weak, safe havens rallying and banks weak and weakening liquidity in most categories, there are reasons for concern. The s&p and nasdaq are holding well (with fang shares even serving as safe havens...) which is what keeps sentiment from being too tilted on the bear side.
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