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Article / 07 January 2013 at 9:39 GMT

Overconfidence is the new black

Steen Jakobsen Steen Jakobsen
Chief Economist & CIO / Saxo Bank
Denmark

This week I have included several additional charts to illustrate a few points:

Fixed Income has confirmed its major trend change in the monthly data. This is NOT to be ignored - over the next week plenty of effort will go into claiming that fixed income offers relative value, but the fact remains that the charts do not lie.

30 Year US Yield

Furthermore, confidence and over-bullishness are at extreme levels. Here are a couple of measures:

  • The number of stocks above their 50 day moving average. (When above 80 percent this tends to indicate peak confidence as measured by major bond funds relative to stock funds.)
  • VIX volatility is also at an extreme, indicating potential increase in risk
  • Gold (GLD) and Apple (AAPL:NASDAQ) - normally two star performers continue to perform poorly

The percentage of stocks above their 50 day moving average:Stock Z 50

Confidence Indicator (Source: T-theory)

 Confidence indicator

VIX volatility:

VIX

GLD (Gold) and Apple (AAPL:NASDAQ) continue to perform poorly.

Apple has been the bull-market leader and its recent inability to follow the S&P Index and the  general market upturn is concerning. It is like when Barcelona has Messi out on injury - it is still a great team, but....

GLD is at critical support levels - which need to hold.

The selected charts from this week's Stress Indicators are: 

CB Balance sheets

 Monet still leaving

JGB

Basle III effect  

Safe travels,

Steen

 

Download document

Stress Indicators.pdf

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