Sentiment towards stocks in the MIA investment universe improved this week following 4 consecutive weeks of decline. The main UK indices, including the previously declining FTSE 250 and AIM All Share were slightly up.
It’s been a rollercoaster week, with sentiment influenced by big price movements in the US tech giants, and here in the UK another interest rate rise from the Bank of England and cost of living increases prominent in the news. The MIA Sentiment Index increased by 4 points but sentiment towards MIA stocks remains deep in negative territory. Recent sentiment history is shown in the charts below.
The MIA Sentiment Index remains in the Fear range, closing the week at 33.
Sentiment Indicators
The MIA Sentiment Index is driven by 3 underlying indicators:
Price Indicator: This indicator combines price strength, relative to 52 week highs and lows, and price momentum relative to the 130 day moving average.
Volume Indicator: This indicator measures the extent to which price movements are backed by the volume of trades.
Volatility Indicator: This indicator measures downside volatility relative to its 50 day moving average.
All three indicators increased by a few points this week, with the price indicator moving out of the Extreme Fear range.
Prices
Around 60% of stocks in the MIA investment universe are trading below their 130 day moving average and ~70% are closer to their 52 week lows than their 52 week highs. In addition, around a third of the stocks being monitored by MIA are trading at or very near to their 52 week lows, with less than 10% trading at or near to their 52 week highs.
Trading Activity
Almost 80% of MIA stocks have experienced net selling activity in the last 130 days as illustrated in the chart on the left below showing the relative strength of trading activity in MIA stocks.
The chart on the right below shows that downside volatility is above the 50 day moving average for approximately 75% of MIA stocks.
Is This A Turning Point?
Last week I wondered if the tide was about to turn based on slowing selling momentum. This week all three underlying sentiment indicators reversed direction, resulting in the MIA Sentiment Index increasing following 4 consecutive weeks of decline.
Selling momentum reduced compared to the previous week, but not by much, and the charts above show just how weak sentiment still is across the vast majority of MIA stocks.
Could this the beginning of a longer term change in sentiment? Possibly, but it was a choppy week in the markets, influenced by UK news flow and US big tech results. The next couple of weeks may be more revealing.
This article is intended for informational purposes only. It is not a recommendation to buy or sell shares or other investments. Always do your own research before buying or selling any investment or seek professional financial advice.