The SC team once again producing a wide ranging report and a more bearish tone, short term, than the UBS technical report.
SC are sticking to their defensive themes and are expecting a deeper pull back post the US elections to sp500 1345. This would take price below her 200 d.ma. and would infer a be type reading for the Dow30 index. Nonetheless they see such weakness if it does play out to be a short term issue and therefore a buying zone on such weakness. It is worth noting that although sticking to their defensive recommendations they are now expecting Asia to out perform and copper to see strength. On top of this they see tech as being a sector out perform.
We must draw our own conclusions. For my own book some allocation to cyclical themes seems wise to me. The defensive sectors have come under pressure on this recent correction whereas there are some technical signs of a base in the cyclical themes and evidence of a bullish scenario for these sectors. There is also some convergence now across technical and macro views that relative strength is projected for these cyclical themes, at least in the next few months.Whether the strength can sustain is another matter but in view of the medium term strength its wise to shift allocations a little to respect this changing landscape.
As an overall comment we continue to see a slight improvement in economic data. Europe continues to struggle, Germany aside. It appears as though monetary actions world wide have averted the hard landing double dip that appeared to be underway.
Fund flows continue to be highly skeptical of equities. The last Lipper Flows report continued to provide little positive data in this respect with bond flows remaining positive in spite of their negative returns.European fund flow data proved a little more positive but its hardly a reversal of the market’s continued ‘love affair’ with the fixed income market.
Here the latest IMA report.
http://www.investmentfunds.org.uk/press-centre/press-releases/press-release-statistics0912/
The most equity bulls can cling to is that there are some signs of at least this skepticism moving to a neutral position and that the equity bull camp remains far from a crowded trade.
Following the recent sell off sentiment levels reached an extremely bearish levels on a parr with the highest level of bearishness for the year. From a contrarian perspective a bullish sign or at the least a sign that falls may be capped for now.
Have a good weekend all. Here the report.
Rich
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