Waiting for the Fed – Fear of missing out leads to euphoria

The Nasdaq Composite is above 10’000 for the first time in history, meanwhile the OECD has just published a revised down forecast for the global economy.

Fig. 1: Nasdaq Composite is at all-time highs

The Merrill Lynch Bull-Bear indicator is still at a very bullish level, not reflecting the recent rally and first sings of euphoria.

Fig. 2: Bull and Bear Indictor is still in the buy area

Professional, investors have completely missed out the rally. The bull bear indicator, which also reflects the positioning of the professional investors, is still in in the buy area. However, the number of stocks trading above the 50-day average is very high. The RSI indicates an overbought situation. Trading platforms for retail investors are swamped with new clients. All signs point to the euphoria among these market participants.

Fig. 3: Retail investors beat Hedge Fund experts

Fig. 4: Hertz jumps from USD 1 to USD 5 driven by pure speculation

Companies like Hertz see their stock bouncing back after the company put themselves under chapter 11 protection, driven by pure speculation from retail investors.

Fig. 5: The Fed Balance Sheet and the S&P 500 rally

Today we expect the Fed to announce a continuation of its dovish path and a possibility to start with yield curve control in autumn. More stimulus is not expected, and we might see some profit taking after the press conference. We would not chase the rally now. We have seen a strong rebound, but it has happened in a very short time period and we see typical sings of euphoria. Nevertheless, professional investors have pressure to invest. We could therefore see some buying of the dip.

Published: 10/06/20 by Blackfort CIO Dr. Andreas Bickel

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