• Comments for July 13, 2017

    Yesterday was an interesting day: markets gapped up on Yellen's comment that she is about done with raising rates. I translate it by "Now, we will start reverting QE."

    The S&P500 broke above its magic blue line.



    However, we can see that the previous move of investing in pair tardes continued yesterday: smaller caps were being sold against large/the largest caps.







    If we look a different industry groups, it is clear that Tech/NQ100 were attracting money against many other groups such as retail/financials/energy.











    While index investors continued to sell the largest ETFs.





    The IWM/SPY ratio stayed neutral, indicating that the move of yesterday was a relief move more than hope for a growing economy or for a fiscal package.



    You can also note below that the US/German rates differential are accelerating down (meaning that we should expect a stronger Euro and hence, money moving to the EUrozone) much more than the US/Japanese rates differential.





    Conclusions:

    I might be the only one to have noted that Yellen did not tell anything about QE unwind, which means that it is still on the agenda for September. Yellen only confirmed what we knew: another rate hike in September is unlikely.

    In other words: there was nothing new, but algos/large investors took advantage to adjust their position.

    I believe that the market is now playing strong earnings from the biggest companies but could start worrying about QE unwind starting in September.

    On the Money Flow side, Yesterday's money flow did not support the market moving higher and the rates differentials favor money flowing out of US assets. However position adjustments (back into tech/mammoth stocks) ahead of earnings might not be over yet.