• Comments for February 2, 2018

    We are facing a very interesting investment environment: the 10Y Yields continue to be pushed higher due to inflation fears combined to the QE unwinding process. This would be a natural incentive for investors to buy more of the US large caps compared to fixed income and the small caps.

    Same issue as yesterday.

    The US$/Euro continued to diverge from the rates differentials. Not sure when and how this divergence will resolve, but it will.







    The 10Y Yields are pushing on an almost parabolic move. This is not sustainable if you are a big borrower (US Government,) but if you can print enough, I guess that the value of your printed paper should decrease in time... At least against other printed papers, depending on expectations of what Governments will print versus borrow. Same story as in the past years, except that this time US rates are pushing higher because the Fed is a seller instead of being a buyer.





    The US/Japanese rates differential is pushing higher with the BOJ deciding to buy more paper. This will again push Japanese investors into US assets. probably the reason for the still bullish index investors (QQQ & SPY positive EV patterns - Not shown here)



    Another aspect of today's situation is the good earnings of some very large corporations (FB, AMZN, AAPL... not so good for GOOGL)









    However, the Futures do not show a similar positive price move. They only show that investors are buying weakness in the S&P500 and the NQ100 (Not so much in the Russell 2000)







    The Cumulative Tick does not show much accumulation here.



    Conclusions:

    The bonds rout seems to be extending into the equities. This is what the overnight situation is telling us as the good earnings of the largest caps do not seem to quell investors' fear.

    Yesterday, I bought back a half long position in BEAT, which has pulled back into support.
    I am still looking at CELG, but the EV pattern looks weak.



    Technically, QLD is a buy between 83.88 and 86.47. We closed at 84.98