ChartBrief 121 – Euphoriameter Moves Into A New Phase

The Euphoriameter rose again in July, with the combined sentiment reading for the S&P 500 lifted by rising forward PE ratios, a low VIX, and rising levels of bullish sentiment in the surveys. The chart will probably trigger memories or comparisons to the 1990’s because aside from the surge coming out of the early 2000’s bear market, the last time we saw such levels was the late 90’s into the tech bubble.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Indeed, usually you look at sentiment indicators as a source of contrarian signals, but bullish sentiment can feed on itself and produce a powerful dynamic which creates the momentum that ends up taking the market to even higher highs. But as I've said before, as valuations move higher and bullish sentiment builds, implicit in this is increasingly higher expectations, and the more bullish the expectations the greater the risk of disappointment.

The Euphoriameter has risen decisively to a new post-crisis high on the back of ever loftier forward PE ratios, falling VIX, and rising bullish sentiment.

This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery

D1 CapitalThe first two months of the third quarter were the best months for D1 Capital Partners' public portfolio since inception, that's according to a copy of the firm's August update, which ValueWalk has been able to review. Q2 2020 hedge fund letters, conferences and more According to the update, D1's public portfolio returned 20.1% gross Read More

Bullish and neutral sentiment have been a mirror image, and time will tell if more of the neutral camp become converts - indeed that will also have a large bearing on how the bull market plays out from here.


For institutional grade insights on the global economics and asset allocation, and some more good charts you may want to subscribe to the Weekly Macro Themes. Click through for a free trial.

Follow us on:



Article by Callum Thomas, Top Down Charts

Previous articleQuants Vs Algos
Next articleNew Leak Reveals Galaxy Note 8 Camera Features
Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.