FYI | Oct 28 2010
By Rudi Filapek-Vandyck
A growing number of market observers is becoming increasingly uncomfortable with the overall bullish market sentiment that has continued supporting risk assets since August. Technical market analysts at Barclays are among these observers.
Since a few days, the team at Barclays has started to focus on more and more signs that risk assets may have outstretched themselves to the upside this month, which could result in a rather dour November.
Today the team highlights overall bullish sentiment towards the US share market has once again surged above 90%. Admittedly, reports the team, it has recently been as high as 93%, but still, such extreme sentiment readings are more often a warning sign and should best be treated as a contrarian indicator.
The technical analysts do not believe any pullbacks will mark the end of the upswing, but it would seem that risk for a broad based correction is on the rise.
Director of Currency Research at GFT, Kathy Lien, also believes the risks are now to the downside for risk assets. I interviewed Lien today in the Sydney CBD and intend to report about it in more detail in Monday's Weekly Insights.
On the other hand, Herston Economics' Clifford Bennett, who seems to be developing into the ueber-bull of the Australian share market, sent a message out this afternoon that he anticipates another strong rally for the share market over the next two weeks.
Bennett is targeting 4,810 or even 4,900 for the ASX200 on a two-week horizon.
The difference between these opposing views is that Bennett sees a very weak US dollar, which is about to endure another leg down, while Lien and others believe the short USD trade has now become tired and the USD is thus due for a temporary come-back.
