Valuation:

Following the sharp selloff in Europe at the beginning of 2016, the Sigma European valuation score increased from '3' (neutral) to '4' (attractive).

In US, the Sigma valuation score improved from '2' (unattractive) to '3' (neutral) during the same period. Unfortunately, with the sharp bounce back in US equities during the last 5 weeks, the Sigma valuation score moved back to '2' (unattractive).

Sentiment:

The spread between bulls and bears slightly decline but there is no major signal at this stage. Nevertheless, it is important to notice the level of uncertainty is very high at this stage because more than 40% of investors are 'neutral' -> this could imply sharp moves in any direction if those 'neutral' investors decide to move in the same direction.

Technical analysis:

The number of companies trading above their 20 weeks moving average (gray curve) sharply increased since mid-February. This situation underlines that the rally is healthy: it is led by lot of companies and there is a high level of participation in this market.

Looking at the new 105 weeks lows (red curve on the first chart), we can notice a sharp decline on this chart. The red curve is close to its zero line.

It is also interesting to notice that new 105 weeks highs are slightly rising week after week. This means some stocks are already able to print new long term highs. Those stocks are the ones to detect because they are the new market leaders.

The technical score remains at '2' (unattractive) in Europe and at '3' (neutral) in US.

Looking at both the Sigma Whole Europe Index and the Sigma Whole US index, we can notice those indexes are close to major resistances. We don't believe they will be able to break those resistances without a consolidation. The rally seems overextended at this stage.

Conclusion:

After Mario last week, Janet was also able to boost the market with some dovish comments. Nevertheless, this dovish statement had a major impact on the forex and this put some selling pressure on European equities.

The pullback we have been waiting for a couple of sessions didn't materialize but we don't change our view: the rally seems overextended and we need some kind of consolidation.