By the XLV/SPY ratio and several other indicators, risk is back on in the markets
- VIX: Deeply depressed from the hysterical April high, indicating complacency
- High Yield (junk) Spreads: Deeply retrenched and indicating complacency and speculation
- Market sentiment, as per below, is on its way back to unhealthy/over-bullish.
The happy feelings continue as Trump makes nicey nice with Europe on the trade front. The problem being, we were tracking counter-cyclical, economic “bust” indications long before Trump’s Tariff wax on/Tariff wax off routine. He is great for stock market traders, I’ll give him that.
On that note, this is a post about negative market sentiment/internal indications. But that is contrarian stuff, which can and usually does take longer to play out than you’d think. I am short not one single stock, market or asset. That gives you some perspective that I am not growling, perma-bear style. I am long what I call “bull stocks”, right along with precious metals and commodity/resources items.
The XLV/SPY ratio has declined further than it had in Q4, when over-bullish market sentiment was at nosebleed levels. Players (i.e. MOMOs and FOMOs) are rotating like crazy out of defensive postures in favor of broader positioning.
Here is the bigger picture of ongoing speculative behavior by casino patrons.
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I’d suggest the XLV today has been temporarily skewed by the under estimation of claims under the managed medicare programs, which makes the comparison to historical levels apples and oranges.
Could be, but its message is similar to several unrelated internal market indications.