Meanwhile, the Citi strategists have also produced the scariest chart I have seen in a while. For many years, Tobias Levkovich, the bank’s chief U.S. equity strategist, has been keeping a “Panic/Euphoria” index. This is based on rigorously quantitative and unchanging criteria all of which are rooted in market prices (the NYSE short interest ratio, margin debt, Nasdaq daily volume as a percentage of NYSE volume, a composite average of Investors Intelligence and the American Association of Individual Investors bullishness data, retail money funds, the put/call ratio, CRB futures index, gasoline prices and the ratio of price premiums in puts versus calls). It is a contrarian indicator. When the market is in panic, you should buy. In euphoria, you should sell.
Incredibly, the market is now euphoric:
This is a mind-blowing statistic. The market is plainly behaving as though it is ready for a strong post-Covid recovery — and there are good reasons why this might happen. But the notion that the market is in a state of euphoria, now of all times, is alarming.
No comments:
Post a Comment