The Swiss team’s latest report is out early this week. They are sticking to their call that this is a consolidation before a another push higher in major equity indexes. The S&P500 to target 1490 1520 and Europe to out perform.
The concern remains the material, cyclical sectors which rely on the China story. All eyes to the Shanghai, Chinese stimulus, etc. For now we have defensive themes bouncing back strongly and far from many breaking down as the team thought they have pushed still higher.(Remember the Shanghai will be closed for much of the next week due to Chinese holidays).
They don’t pick up on the fixed income and or precious metal themes this week but to be fair little has changed so refer on this matter to last week’s report.
To my mind the issue for traders is a sector allocation issue right now rather than a directional issue. We have seen in the report’s divergence between the Standard Chartered team and the Swiss team. For now its advantage Standard Chartered but the issues far from decided so we keep monitoring. Do you go for the beta or continue to hold and trade more defensive issues? Of course price, as always, should be the lead. Until China and the Shanghai provides some clear price evidence of a base I am sticking with more defensive themes and an under weight allocation to the cyclical sectors. Its always exciting to try and pre-empt price and jump in early to a sector rotation but its a dangerous practice so I would continue to nibble at value cyclical themes but i wouldn’t jump in with both feet until we get more meaningful technical confirmation.
Here the report:
All the best Rich
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