Mind the Gap! By Blackfort CIO Dr. Andreas Bickel
Mind the gap! The S&P 500 has after the ECB and FED announcements open a gap. This is quite common in Europe but seems a rare phenomenon in the US. Normally such gap is closed in the future, i.e. the index must fall below the starting level. It seems in roughly 45% of the cases such a setback is happening within the next 30 trading days. On the contrary breakouts or even all-time highs with an RSI below 70 (actual level 68) indicates that short-term we might see a continuation for the upward trend. Overall, central banks have indicated that they will do whatever it takes to support the economy to avoid a recession. With so many central puts around, I would argue that the pain trade i.e. higher equity prices and lower bond yields would last at least until mid-next year. Last but not least, yesterday the S&P 500 (and also the Swiss SMI) have both closed unnoticed by the press at another all-time high. Meanwhile, a local newspaper summarized the positioning of the local banks. They have after Q1 now for the second time reduced their equity allocation. There is no euphoria, this hated rally is still alive on ongoing. Having said that, at short-term a setback would be the most logical next bigger move… but nobody really can foresee that.
Published: 03,07,2019 by Blackfort CIO Dr. Andreas Bickel
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