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Weekly Sentiment Survey: Fundamental Capitulation

August 27, 2017

This article reviews the latest weekly sentiment survey we conduct over on Twitter.  The survey measures respondents' equity and bond positioning/view - differentiating between whether the view is bullish or bearish for technical or fundamental reasoning.  The results showed a further move to the bearish side overall, with the fundamentals bull-bear spread showing a sense of capitulation after previously holding steady.  The technicals net-bulls on the other hand bounced slightly, in line with price, and potentially signalling a short-term bottom.  

 

However, the fact that bond and equity sentiment have both moved consistently (bonds more bullish, stocks more bearish - the two tend to move inversely), and the movement in the fundamentals sentiment, tends to provide some cause for caution.  Again, there's a few factors in the background such as high valuations, monetary policy normalization, and negative seasonality, that tend to give a bearish bias at the moment.  So it's worth finishing up by highlighting the last chart, which shows the VIX falling back down against sentiment becoming more bearish... we call this a divergence, and the gap will close, one way or another!

 

Fundamentals sentiment looks to be showing signs of capitulation after holding steady in a reasonably tight range for the past few weeks.  Technicals net-bulls have rebounded slightly however.

 

Equity and bond sentiment have been moving consistently (bond sentiment more bullish, stocks more bearish) - this reverses the previously bullish risk-asset sentiment seen in July.

 

Seeing a sharp divergence between overall sentiment and the VIX: the VIX has reverted back down, while sentiment has become more bearish.  This gap will close one way or the other.

 

 

For institutional grade insights on the global economics and asset allocation, and some more good charts you may want to subscribe to the Weekly Macro Themes.  Click through for a trial.

 

 

 

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