That was quick. We’re back in panic mode, according to Citi’s Panic Euphoria model.Citi: Our Panic/Euphoria model declined into Panic territory last week after revising the data and remained in Panic this week. This week’s Panic/Euphoria reading was -0.28; last week’s number was revised to -0.24.
[image url="http://static.businessinsider.com/image/4b39f78d0000000000ec0732/image.jpg" link="lightbox" caption="" source="" alt="Pnc" align="left" size="xlarge" nocrop="true" clear="true"]
Whatever the term one wants to use for the current level of sentiment, if we compare the model to itself, then on a relative basis it remains far weaker than 2007. Weak readings are meant to be positive for stocks from a contrarian perspective and given this plus other factors Citi remains cautiously bullish.
Citi: Markets should benefit from a backdrop of earnings recovery first determined by the moderation of inventory de-stocking leading to some inventory re-stocking, a better (though still subdued) employment environment, and the consumption benefits of some restored wealth via higher financial markets. All of these dynamics should bolster equities initially, especially if money flows begin to chase returns as has often been the case in the past. We believe gains in 2010 are likely to be uneven and the S&P 500 could spike above 1,200 during earlier parts of the year and then back off.
(Via Citi Investment Research, ‘The Pulse Monitor’, Tobias Levkovich, 28 December 2009)