US Japanese rate differentials continued to narrow, forcing Japanese investors to sell US assets.
The Cumulative Tick reflected continuous US equities selling.
Some of this cash is moving into safer assets such as XLU, defensive stocks and US Treasuries.
This is interesting as we are only days away from a FOMC decision regarding QE. I believe that after the poor employment data that was due to the Texas hit hurricane, the newest IRMA hurricane could have even a larger impact. In other words, the Fed will delay any hawkish decision and the Congress will free newly printed money in order to help both Texas and Florida.
This is the reason why we have the sudden change of heart regarding safe US assets that are now being bought with both hands.
The Nasdaq and the Biotech sectors still look relatively strong here.
Non SP500 stocks were also displaying a positive MF yesterday.
As a side story, gold is still moving higher.
This is only a side story, because in Euro currency, gold has been stable for the past year, even though the Euro gained 15% against the US$. The only intrinsic gold bullishness was the NK fear related bounce on the past weeks.
Conclusions:
I believe that the two consecutive hurricanes hitting Texas and then Florida will prevent the Fed from being hawkish next week. If we add the Trump/democrats deal making aimed at freeing short-term money, then it is not a surprise that we see a weak US$ and weaker US rates.
This situation has also pushed back a possible tax deal (Republicans will greatly resent the Trump/Democrats deal), which was behind the US equities strength of the past Months.
Furthermore, as Japanese investors continue selling US ETFs, I believe that there is little hope for a big push higher in US equities.
