Since September, the US 10Y rates have pushed higher, gaining 0.3%. Japanese rates moved also higher, but only by 0.07%. This means that rate differentials increased by 0.23% in only two months (annualized = 2.7%). This is too good for Japanese pension funds to miss: any type of US asset that offers an income stream is bought indiscriminately, regardless of value.
We can see it in index linked ETFs:
We can see it in REITs and Utilities ETFs, despite the fact that these assets should lose value as the Fed raises rates.
We can see it in the 5Y, 10Y and 20Y Treasuries. (Note that bullishness is more apparent for short term Treasuries.)
Note also below how similar are the 10Y and the Yen price patterns.
Hence, Japanese pension funds gain on both fronts: exchange rates and a stream of income.This move would revert if US rates start to weaken together with US assets prices. For now, there is no sign of such a move.
What we see is that the NQ8 Money flow had a drop from the 2% level and that in the recent past, the NQ8 price experienced a flat trading range or a mild pullback when this occurred (except for the occurrences circled in pink, when dips where bought.)
We can also see that the small caps money flow is also experiencing continued weakness.
On the energy front, oil is at resistance, but the weak EV pattern tends to tell us that this $52-$53 level will hold.
It is interesting to note that the XLE EV pattern is positive because of the general liquidity moving into all ETFs, while the Money Flow calculated on each component is more bearish.
Conclusions:
The name of the game is still to blindly ride the liquidity inflow while trying to get an understanding of how the tax discussions will evolve.
Of course, an earnings miss by a big stock (GOOG, AMZN, FB, AAPL, MSFT) could trigger a negative reaction that could propagate.
