Spectrum comments on year-end bounce in sentiment on securitized derivatives venue

Rick Steves

“We tend to see a bump in bullish activity around October as investors look for markets to recover after what is often a quieter period during the summer, but this year it came in during December. This could be due to the global crisis and volatile markets, with many investors feeling unsettled and entering the market a little later than usual.”

The SERIX sentiment data for European retail investors for December reveals a year-end bounce in sentiment towards all European and US equity indices.

The indicator of retail investor sentiment marks bullish sentiment when its number is above 100. A number below 100 indicates bearish sentiment.

80.5% on indices, 7% on commodities, 10.8% on FX, 1.6% on equities, 0.1% on crypto

Spectrum Markets processed 116 million securitized derivatives trades on its platform last month, with 36% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

80.5% of the traded derivatives were on indices, 7% on commodities, 10.8% on currency pairs, 1.6% on equities and 0.1% on cryptocurrencies, with the top three traded underlying markets being DAX 40 (24.4%), S&P 500 (20%) and NASDAQ 100 (16.4%).

Looking at the SERIX data for the top three underlying markets, the DAX 40 shifted from a bearish 96 to a neutral 100. S&P 500 shifted from 98 to a bullish sentiment of 103. The NASDAQ 100 saw a similar turn from a neutral 100 to a bullish 103.

Executives at the European trading venue believe such trading was likely driven by an expectation of a ‘December bounce’ and short-term profit-taking.

December bullish activity may indicate unsettled investors entered market latter than usual

Michael Hall, Head of Distribution at Spectrum Markets, said: “We tend to see a bump in bullish activity around October as investors look for markets to recover after what is often a quieter period during the summer, but this year it came in during December. This could be due to the global crisis and volatile markets, with many investors feeling unsettled and entering the market a little later than usual.”

“A few weeks before the end of the year, many forecasts had predicted a rally in the run-up to Christmas and some economic data in early December also came in better than expected. Despite persistently high inflation in Europe and the US, corporate earnings expectations have remained stable, leading some commentators to hope that the coming recession will be milder than originally thought.”

This combination of factors likely contributed to some of the bullish exposure Spectrum saw retail investors taking towards equity indices in December, though there was also some profit-taking on the short plays, as investors benefitted from downward price swings during the month.

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