Retail in the drivers´ seat

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01.06.2020 | 3 min lukea
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There are additional signs that it is the private investors and not the professional players that are driving the stock market right now. It is quite simply an advantage not to be stuck in old ways of thinking when the central banks pump out money in the system.

There are additional signs that it is the private investors and not the professional players that are driving the stock market right now. It is quite simply an advantage not to be stuck in old ways of thinking when the central banks pump out money in the system.


We still believe the that optimism is too high concerning the economic recovery, but the central banks manage to keep the market under their arms, which of course is good for the morale.


It is almost comical to see how the HYG ETF is trending along the upper Bollinger band, which means 2 standard deviations from the 20-day moving average. This at the same time as companies like Hertz are going bankrupt.

The reason is that the Fed now has begun actively to buy junk bond ETFs.


Above is a list of ETFs purchased by the Fed until May 19th. The ETFs track bonds with low risk but also note the large purchases in HYG and JNK tracking bonds with higher risk. It is also interesting that the Fed is being behind with its mandate in the purchases. This means that the Fed chooses to remain calm now when the market is still rising and can quickly accelerate if the market falls. It is a lifebuoy that the market expects as it continues to rise.

When it comes to bankruptcy, it is interesting to see statistics from American Robintrack that shows the number of customers who buy certain shares.


A normal course of action should look above where the Apple share is rising shown in red, which is attracting more and more buyers.


The above chart shows how the Hertz stock falls but where retail investors flock in search of bargains.


SPY is an ETF that follows the S&P500 and it is steadily attracting new customers. Those who sell are the professional investors.

The S&P 500 is currently trading above both Fibonacci 61.8 and MA200:


The weekly graph below, one may also see how the view up to the old peak is relatively free. What can go wrong?


Our advice is to stay cautious as fundamentals do not indicate continued stock market upturn. At the same time as the economy is reversing, the corporate profit margins are falling, giving hysterical high P/E figures.

The graph below provides important guidance on the development. It is the 1-hour-graph for the S&P 500. When the lower support line is intact, you can be long in the market. However, we do not believe in any rapid fall this time. Topping out is usually a slow process with times of sideways movements and negative divergences with the MACD. There should be time to get out of this rising trend in time if no major negative news hit the market.


The weakness that is visible in the market are found in tech stocks. Note how the Apple share is at a critical point, close to a previous top from February. The rising trend is being tested while the MACD is delivering a weak sell signal:


The FAANG index tests a similar trend with a weak sell signal in MACD. Breaking this trend line could create concern throughout the market:


The Nasdaq index as a whole works in a wedge formation that typically breaks out on the downside:


Over the past weeks the finance, industrials, real estate and utility sectors have seen the strongest performance on the New York Stock Exchange, while the service sector, IT and energy stocks have lagged the market.


As shown in the picture above, S&P 500 continues to act as a drawbar. German DAX is now testing the second gap. The first attempt was a failure:


The Swedish OMXS30 index did not manage to break above MA200 and Fib 61.8. Some new energy will be needed:


The Euro has gained on the USD as EU launched new funding for its member stats. The EUR/USD also closed Friday’s trading above Fibonacci 50. However, note how a scary looking inverted hammer was created:


Gold has gained some new energy from the weaker USD. A previous top from May serves as a first level of resistance. Note the negative divergence between the gold price and its MACD indicating that the risk can be found on the downside:


Brent failed to break above resistance around 37 USD/barrel. Momentum is fading illustrated by a flattening EMA9. A rising MA20 serves as support on the downside followed by MA50 and Fibonacci 23.6 around 29 USD/barrel:



This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.