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A Reversal Day in US and a Sell Signal in Europe

Thursday's reversal in US was another sign that the momentum is fading in the equity market. On top of that, disappointing results from both Microsoft and Google after close won't help to improve the investor sentiment.


Europe:

The Sigma Whole Europe Index remains close to its horizontal resistance. Nevertheless, as our daily quant model generated a fresh sell signal on the European market (have a look at 'Quant Europe -> Daily - Mean reversal'), we labelled Thursday's high as "c?". We believe the selling pressure will increase in coming sessions.

Sigma Model

Sigma Whole Europe Index


USA:

The Sigma Whole US Index is close to a major resistance and we have some early sign of reversal. If the market declines below its pink horizontal support, this will increase the probability that the pullback/correction is underway.

Sigma Whole US Index


Conclusion:

The momentum is weakening, and we don't expect this situation will reverse soon. We keep our short positions (SPX, NDX & CAC) and we still consider the best trade at this time (on a risk/return basis) is short NDX (Nasdasq 100). The weak results from both Google and Microsoft are 'good news' for this trade because those stocks are among its heaviest components.

 


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