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JP Morgan: "Start fading the bounce within days"

After having correctly called the January plunge, JP Morgan’s "due of doom" consisting of Kolanovic and Matejka predicted a modest bounce. "Clearly, equities are unlikely to keep falling in a straight line, with periodic rebounds likely. However, we believe that one should be using any bounces as selling opportunities". 

Today Matejka followed up his call by pointing out that: 

  • Equities rebounded from recent lows, with SX5E moving up 6%, to be back above 300 and SPX is back above 1900. We argued two weeks ago to look for a tradeable bounce, as most technical indicators were flashing oversold, and as policymakers were opening the doors to further stimulus. It is encouraging to see that equities are responding to these supports.
  • The technical oversold picture has not completely changed, but indicators are in "Buy" territory anymore. RSIs have moved to high 40/s, from sub 30. VIX has fallen back, bull-bear sentiment indicator has rebounded from -28% to -10%. The S&P500 put call ratio has come off, as did equity skew. Positioning still appears tentative, though, as HF beta remains in negative territory.


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