Subsequently all geopolitical risks seem to have been ignored, apart from in passing conversation, and the S&P 500 has hit an all-time high.
Well, here’s another angle on earnings season . Figure 1 shows sentiment derived from earnings-related articles is only slightly higher than before earnings season on a three-month view - but it’s still only around the neutral mark and not as high as it was last earnings season. There’s also been a massive drop in our 14-day measure of sentiment in the last two weeks.
The chart shows the 90-day relative strength index of earnings-related sentiment (red line) against the 14-day RSI (black line). The blue bars denote the number of earnings events detected, aka, media attention.
I’m no technical analyst but one could say momentum is on the downside . Translated, it means that earnings-related events in the last two weeks were weaker, sentiment-wise, than those in the first three weeks of earnings season. We’ll need to wait for the remainder of earnings season to decide whether the slump in the short-term indicator continues, pulling longer-term sentiment lower, or not.
Taking a broader view across all news sentiment, the situation looks even worse over the short-term . Figure 2 shows the RavenPack 14-day sentiment momentum indicator reaching its lowest point in a year. But the longer-term indicator has not dipped in sympathy yet, so, again, we’ll need to see if that short-term indicator turns higher soon.
Elsewhere, figure 3 shows
sentiment derived from US news related to Mergers & Acquisitions
doesn’t look so good over both short and longer-term horizons.
On the plus side, however, US analysts are very positive . No surprise given the earnings season so far. See figure 4.
In conclusion, news sentiment is not supportive of the recent market highs but the euphoria of earnings season’s empirical result - and that there’s nothing else to invest in - may continue to buy equities.
The sentiment Relative Strength Indicators are produced by finding the novelty-weighted sum of all event sentiment concerning the company each day and then calculating traditional 14-day and 90-day RSIs of this sum.
