Sentiment towards stocks in the MIA investment universe has fallen for the 4th consecutive week, reaching another new multi month low. The FTSE 250 and AIM All Share indices both continued their move downwards.
The MIA Sentiment Index fell by a further 7 points in the last week after a pause for breath in the previous week. The index has now fallen by 22 points since the start of the year, the biggest fall since late November / early December when the Omicron variant hit the news. Sentiment towards MIA stocks has now been in negative territory for the last ten weeks, only briefly recovering to a neutral position before the latest fall, shown in the chart on the right below.
The MIA Sentiment Index moved deeper into the Fear range this week, falling to a low of 27 mid week before recovering slightly to close the week at 29.
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.
The price and volatility indicators both fell by several points this week, with the price indicator edging into the Extreme Fear range.
Prices
Around two thirds of stocks in the MIA investment universe are trading below their 130 day moving average and 72% are closer to their 52 week lows than their 52 week highs. In addition, almost half 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 80% of MIA stocks.
Is The Tide About To Turn?
While the MIA Sentiment Index fell sharply again this week, the underlying Volume indicator only fell by 2 points. This is an indication that selling momentum is still increasing, but may be slowing.
The underlying price indicator has now edged into the ‘Extreme Fear’ range. This is an indication of the breadth of market selling and suggests that it has become more indiscriminate. Companies that may not previously have been overvalued can become available at attractive prices when selling becomes widespread.
The overall Sentiment Index has moved closer to the ‘Extreme Fear’ range, but is not quite there yet. It may or may not get there, but for those that are willing to look, opportunities are starting to present themselves.
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.