The big issue will be the US budget in the context of a tax deal and the will of the Fed to unwind QE.
Markets had their usual buy-the-dip type of bounce yesterday, although the cumulative tick showed a negative divergence.
The Yen/US$ continued to strengthen as Japanese investors continued to search for safe havens.
Rate differentials continued to weaken, indicating US$ weakness against the Yen and the Euro.
The S&P500 still looks high and certainly does not reflect the weakness in rate differentials: money should leave US assets. I drew a yellow support magic line that I believe could be tested.
The NQ8 stocks were weaker yesterday, while small caps are just hanging on a neutral money flow.
The IWM/SPY ratio touched its upper envelope, where IWM shorts have been profitable in the recent past.
I found it interesting that even though US rates were lower, defensive sectors continued to be sold.
This is mostly due to the selling in REIT stocks. I added the XLRE (REIT) ETF Money Flow to the S&P500 section.
We can also see below that the big money is out of the Industrials sector in full force. Is there any reason for this? Chinese trade war issues? Hurricane issues?
Among them the Rail and Transport sectors have been under negative Money Flow for a rather long time now. Does this mean that nobody believes in America being great again: building things and transporting them?
Conclusions:
The only real positive about this market is its resilience. It should have been down a long time ago and the fact that it is not tells us that it probably will not drop unless there is an unexpected negative event such as a stray NK missile or a Congress revolt against a poor budget.
