Small caps continued to outperform the rest of the market in moves that seem exuberant. It is as if hyperinflation had been detected as the final destination, while what we have is simply a rush out of Treasuries.
Note that the small caps Money Flow was weak yesterday, compared to the 20DMF.
The NQ8 were also weak yesterday. Hence, we could also have a reversal of the long NQ8/Short Small caps type of pair trades.
Will the MF/Price divergence continue much longer?
Note below that most of the sectors that belong to the retail group show negative Money Flow.
The whole retail industry group looks also weak.
On the currencies front, US$ strength was not bought yesterday, while Euro continued to feel the pressure. Even though I believe that the US$ will be stronger later this year, for now it looks certainly overbought against most other currencies.
CATO and CROX are two interesting short ideas.
Conclusions:
It is very difficult to bet against a powerful move. I believe that this market is going into overdrive exuberance. I increased my January/February small caps Puts as higher interest rates will be felt very badly on the small caps.
There are no safe long trades for now as most markets are overextended to the long side.
