Practically all indices are back to early December levels. If you fell asleep in late November and woke up now, you would think not much has happened, but as we all know, every global index has had huge moves.
Major indices on our screens are reaching rather important levels here. Just as it was easy to get fearful at Christmas lows, it is becoming clearer that people are increasingly frustrated to have missed the low print and are now showing signs of greed.
The SPX is hitting the negative trend line from October highs as the index hits the 100-day average. Note the 200-day average slightly higher.
NASDAQ is trading right at the 100-day average as well. Note the 200-day average slightly higher.
“Boring” Eurostoxx50 has had a huge move higher from lows but is hitting the negative trend since last summer as well as the 100-day average.
Do you chase longs here, do you wait for a pullback or do you short it here? Coming few days will be important as market needs to decide which way is next.
For now, investors are calm and hate the VIX. Not many want to focus on possible risks, but just as a slight reminder from a risk investors used to pay attention to is the Italian implosion. We have mentioned it a few times over past sessions, here and here. Today Bloomberg writes:
Europe’s most dangerous stock of public borrowing—some 1.5 trillion euros ($1.7 trillion)—is concentrated on the balance sheets of banks in Rome and Milan. But a rout could quickly sweep in lenders in Frankfurt, Paris and Madrid—the main banks in the rest of Europe are holding more than 425 billion euros of sovereign and private Italian debt…Although Italy’s economy slipped into recession in the fourth quarter, markets are calm for now. But a budget standoff in the fall showed how swiftly sentiment can turn. And if markets should turn south, no one knows exactly where the tipping point will come.
Source: charts by Bloomberg