• Comments for July 14, 2017

    Not much really happened yesterday. I noticed that the small caps were underperforming early in the day, but then bounced back at the end of the day.

    The emini shows a negative EV divergence



    The SPY and QQQ ETFs show continued selling by index followers.





    And the buy the largest/Sell the small caps pair trade tendency continued yesterday.





    Conclusions:

    The market is still technically bullish but value wise expensive. This is the reason why we see these divergences: fund managers need to be long but hedged, while individual traders are mostly afraid of high prices and prefer to book their profits.

    In other words, if you want to be in the markets, you need to be long, but protected against air pockets. You can also stay in cash, but bet on air pockets using put options.

    Below are also a few trade ideas for only short trades. Since earnings will be published in the next few weeks, the best is to trade these using options.