• Comments for July 20, 2017

    The move of the past days was entirely related to lower rates, since Yellen informed us of no more rate hikes.





    We can see that the VXX ETF started to be accumulated, but then was heavily sold as soon as Yellen spoke.



    On the equites front, small caps rallied back up together with the rest of the market.



    The smallest S&P500 stocks are catching back up too.



    Even index investors feel like they need to buy.





    TIP and municipal bonds followed a similar move, but in this case, investors are taking the opportunity to sell (Non inflation fear, but concerns regarding municipalities debt)





    We can see that the Market Weighted total effective volume - which measures the buying mood on more than 1000 stocks - has been very negative since the start of this year. This was probably due to scepticism about Trump's ability to pass his program through Congress, in a bearish rate environment.



    We can see below that the IWM/SPY ratio is sill very close to its 5MA and well within the envelope. This indicates no urge to buy a growing economy or to sell weakness.



    Conclusions:

    Yellen is pushing back everybody into equities, as fund managers are worried to be missing out on a great run. This is called a bubble.

    In such conditions, buying small cap puts is not advisable anymore.

    I also want to point out the selling pattern on gold miners. It could be a short trade that is worthwhile to take... It all depends on the possibility that the US$ will bounce from here. The ECB will talk today, which will move currencies.



    Below are a few stocks that are under accumulation and still within interesting buy areas.