TSLA also produced encouraging numbers. Let's see how large investors react today.
The general markets bounced after the "sell the news" type of move, but small caps stayed low for the rest of the day.
Small caps are now making lower highs and lower lows.
The Non-SP500 sector display a positive divergence here. Maybe a pair trade unwinding issue.
The NQ8 stocks pulled back, but still stay above zero.
On the energy front, we can see that the whole sector is indecisive.
Russian sanctions should not have any effect on oil prices as I believe that this news must be fully priced in. However, oil prices are moving higher.
Nat Gas producers were weak yesterday as PXD missed earnings.
Not a good time to buy the sector as Nat Gas prices still look to be under pressure. Probably a supply/demand imbalance.
The most popular ETFs: QQQ and SPY are now in a small trading range: sellers seem to have stopped selling and are now in a wait and see mood.
Conclusions:
Past years have shown us that small caps should underperform during August. However, we do not see much selling in the small caps MF pattern. Does this mean that large caps are being sold and as a consequence the small caps are bought due to the pair trades being unwound? Or is it a sign that small caps will outperform?
I believe that it is a pair trades issue and anyway, small caps can hardly outperform. They outperform due to the usual shorts covering frenzy only when the big caps are bouncing from oversold levels, which is not the case yet.
