We can see below that the 20Y Treasuries do not attract much selling, while the 10Y started to display a bearish EV pattern.
The Yen is attracting buyers. This indicates that there is trading speculation for a potential reversal to the mean (higher Yen and lower US rates.) This speculative activity has to fight the coming US tax deal, the Fed's intention to raise rates, the ECB's coming decision to raise rates and the continued BOJ's buying of US ETFs. This is a lot to go against, but high valuations point to the possibility of a fear or news based sell-off.
Such negative news could come from poor guidance by some of the NQ8 stocks CEOs. MSFT and GOOGL publish earnings today and tomorrow. However, for now, the NQ8 is still in an uptrend, even though the MF is reverting to the 0 level.
It is interesting to note that the NQ100 Futures display down spikes that are quickly bought, but it looks as if some downtrend is being triggered here.
The Russell 2000 Futures displays a bearish megaphone pattern, pointing to increased volatility that is more obvious on the downside.
We can see below that even though the QLD ETF displays a negative EV pattern, while the QQQ's EV pattern is still bullish. QLD is more speculative.
This simply indicates that big money is still buying US ETFs. I suspect that this is the BOJ and maybe Japanese pensions. This money has other motives than a return on investment. The BOJ executes the Japanese Government's wishes to support Trump (who has been tweeting much about how great the stock market is doing.) The Japanese pensions need a stream of income that they cannot get from Japanese investments.
Conclusions:
If markets were traded by humans, then I would say that we are in a battle between value and Central Banks provided liquidity. However, in the context of algos providing most of the trading activity, the battle is between early and late liquidity detection. This is why we have instantaneous sell-offs and reversals.
The EV patterns on all major ETFs shows that there is a flow of liquidity coming into US equities. This flow could reverse if there is fear of a Fed policy change, of poor earnings guidance and/or of the US Tax deal.
We cannot really preview these evolutions and as individual traders, we are by definition the slowest to detect a change in liquidity (even though the real-time money flow tools provide assistance for detecting liquidity changes.)
As of now, I believe that the Rates differentials have moved too high - too fast. I hence expect a reversal, simply on expectation that Japanese Pension funds will find it more attractive on a risk/reward base to invest in US Treasuries instead of US equities.
