If markets are linked then the sentiment should also be linked. We have seen American VIX bottoming at a similar time with Nifty VIX. There are high correlations between Put Call Ratios around derivatives markets and sentiment indices around the world. If prices are linked, sentiment should not be far behind. Highs and lows are witnessed together across markets. First it was 2000 high, 2002 lows, 2008 highs and then 2009 lows and now. Prices, sentiment, valuations are connected. When it's time for euphoria, markets rise globally together and vice versa. Though there is relative performance between assets, sentiment indices in one market can give absolute cues above other markets.


Here we have illustrated sentiment indices in the Romanian market for 1 month and 6 month periods calculated by Prognosis. Survey indices are also classified between investors and experts. On one side the expert 1 month sentiment was heading toward bearish extreme early Feb while on the other end, the 6 month expert sentiment is still at an all time bullish extreme. What it means that though on a short term markets were oversold and bound to bounce, on the longer term the negativity is far from over. Sentiment indices work on a contrarian basis. When sentiment rises to a bullish extreme, it's a time to sell and vice versa. Let’s see how far Romanian Sentiment Indices have cues for India and the world equity.

Mukul Pal, CMT, Orpheus Capitals, Global Alternative Research