Key Takeaways
- Market volatility remains elevated, but the volatility index has been trending lower, suggesting a more nuanced picture beneath the surface.
- Extreme fear is building, with sentiment indicators pointing to further downside before a possible market washout.
- Sector rotation continues to favour energy, utilities and staples, while materials, financials and discretionary names are showing weakness.
Market sentiment weakens as investors turn defensive
Markets have seen no shortage of volatility, but according to Bruce Campbell, the underlying signals are sending a more complex message.
In this episode of Markets in Motion, Campbell looks at the volatility index, the CNN Fear and Greed Index, key moving average levels and sector rotation trends to assess where markets may be headed next.
While sentiment has shifted firmly into extreme fear, Campbell notes that markets may still have further to fall before reaching the kind of washout conditions that often mark a bottom. At the same time, defensive areas such as utilities, staples and energy are gaining relative strength, reflecting a more cautious tone across equities.
He also highlights two chart setups worth watching closely: the TSX versus the TSX Global Gold Index, and the S&P 500 versus healthcare, both of which could signal important changes in relative leadership.
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