Tag: Equities

Time to change equity position from underweight to neutral?

After being underweight equities for a while OSEBX has corrected down more than 20 per cent, together with other large drops in global equities following political indecisiveness on both sides of the Atlantic. The quick drop, however, changes the Risk/Reward consideration and it now seems prudent for longer-term investors to start gradually increase the equity position (in particular for strong bluechips) . As such I'm now changing my equity view from underweight to neutral.

The risks to the economy still remains high, but long-term there should be support in possible inflationary pressure (lets be real, the governments needs inflation to get out of the debt crisis) and a possible QE3 (depreciation in USD can only help the US) could contribute to equity buying.

Still underweight equities

The 11th of March (OSEBX close 435) I expected a correction to OSEBX, which reached an intraday low over the past few months of 409 the 15th. This was less of a correction than expected (but still down 6% within a few days). Since then the index has returned to trading in the narrow tunnel of 430 to 445, having difficulties breaching the barrier of the 76.40 fibb levels. Closing today at 436, virtually unchanged since the last update (and as such a better return for being allocated elsewhere).

The uncertainties regarding the peripherals in the eurozone, as well as increasing signals of weaker growth in the economies still support an underweight in equities. This is further supported by expectations of rate hikes which should make bonds increasingly attractive, and could reduce liquidity flowing into equities. In the current yield environment, however, the credit spreads found for higher rated debt instruments supports investments in Floating Rate Notes rather than bonds or equities.

In support of buying OSEBX we have a rising 200 daily moving average, currently at 417 (roughly 4.5 per. cent. down from today's close) which could prove a resistance level. But the risks in the economy in my opinion still provide a poor Risk/Reward.

Updated technical analysis of OSEBX:

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OSEBX in for a correction?

After having topped, and turned at the 76.40 fibb-level, OSEBX (Oslo Stock Exchange Benchmark) today closed below the support levels of the 45 day moving average, and doesn't have any new clear technical support level before the 61.80-fibb and the 255 dma. Are we in for a correction of 9-10 per cent? From a technical point of view if definately looks like it.

(click image for full size)

I personally consider this index to be overbought, and with the uncertainty that surrounds the equity markets alongside what looks to be a reduced risk of inflation for the time being, at least myself have already allocated my personal portfolio out of equities into short-term money-market instruments.