Markets End the Week on Edge: Tech and Gold Remain Under Pressure as US Small Caps Shine

The week is drawing to a close with the same concerns that marked its opening. Earnings reports from the major technology companies have done little to brighten the outlook. On the contrary, weaker-than-expected figures from Alphabet and concerns surrounding Intel have weighed on the technology sector. Investors, however, do not appear willing to abandon US equities, as demonstrated by the performance of Small Caps and the resilience of the Dow. Global bonds are approaching a test of their long-term moving average, while gold remains weak. Today, the spotlight is firmly on the Eurozone, with October inflation figures and the preliminary estimate of third-quarter economic growth due for release (with France already delivering a negative surprise). Futures point to a flat opening in Europe and a weaker start for US markets.

Financial markets sentiment

Financial markets are currently showing a neutral sentiment. Intermarket analysis indicates a Market Health Score of 65/100. Our intermarket dashboards end the week continuing to signal a cautious stance among investors, with some indicators becoming increasingly pronounced. The S&P 500/VIX ratio remains around its long-term moving average, while the S&P 500/Nasdaq ratio is rebounding from the long-term moving average area, forming two higher lows and confirming the ongoing difficulties facing the technology sector. The Dow/Gold ratio remains near the highs of the period, although this signal reflects not so much a renewed risk-on environment as pronounced weakness in gold. The precious metal continues to be weighed down by inflation and interest rate expectations, while its safe-haven appeal has yet to come into play. Oil remains strong, as does the US dollar, with the corresponding ratios showing both assets trading near the upper end of their respective ranges. Long-dated US Treasuries continue their short-term recovery, with the Commodities/Bonds ratio returning to levels last seen at the end of September.

Turning to asset classes, we continue to view global equities as trading within a sideways range, while global bonds are approaching the most important test of this phase: resistance represented by the long-term moving average. It is also worth noting that the correlation between equities and bonds has declined further, moving closer to zero.

Our market weather map continues to indicate a neutral outlook for equities, with more fragile conditions in the technology sector and Asia. Gold remains in the weakness zone, while the US dollar and oil continue to dominate. Looking at weekly changes, US Small Caps stand out. Their seven-day score has increased by 17 points, including a seven-point gain yesterday alone. The Health Score is now above 70, reaching a five-year high and coming close to the all-time high for the entire series. This is a significant signal: investors are not selling the United States; they are selling technology. European equity markets also enjoyed a recovery over the week, particularly in France and Italy, which gained 14 score points over seven days.

Global Futures – Pre-Market Sentiment

Pre-Market Futures: Global futures point to a moderately risk-off sentiment (-0.45% on average), with US futures down (-0.82%), European futures slightly higher (+0.20%) and Asian futures marginally lower (-0.43%).