• Comments for February 6, 2018

    After such a large general market drop as we had yesterday, it makes little sense to post Figures that show selling. What we need to do is try to think about today and the rest of the week.

    Yesterday, the 20DMF showed for a second consecutive day a Money Flow that was 500% larger than the past average 10 days. In a second day, this is a clear sign of capitulation. But are we over yet? We can see below that the Oversold level of 0B0S at -70 was almost reached. Hence, we are oversold enough to get a bounce at any time.



    Note below that the ratio of sectors on a buy signal wait mode is still well below interesting buy points.



    The S&P500 and most of equities future indeed show that after an after hour continuation drop, all indices bounced off overnight.



    They are however some interesting Figures that tell the same story:

    For example, the IWM/SPY ratio displays two consecutive candles with SPY weaker at the start of the day and IWM catching up. This tells us that the selling was mostly in the large caps. The small caps were also pulled down, but the trigger cam from the large caps.



    The selling in the large caps triggered a reversal in the Hedges, which were basically a short US Treasuries trade and inverse ETFs such as SDS.

    Both Hedges had to be covered yesterday.



    The Treasuries Buying pattern was rather violent, although Treasuries have come down overnight. This points to large funds using automatic trading algos.



    Note also the Japanese Yen spike, which indicates a carry trade reversal - since US Treasuries went up, the rates differentials plunged and automatically, algos unwound their long equities/short Yen positions.



    The above Figures send some interesting messages:
    - Algos are fast to unwind positions and hence continue to pose a risk to the market stability.
    - Large funds that were fast to raise cash will certainly wait before returning to the market. This raised cash is NOT available for now.

    The second interesting aspect during a selloff is that it makes it easier to spot strength.

    Defensive sectors were indeed stronger yesterday (but this is probably due to the Hedge unwinding process too)





    Materials however attracted money (Mostly base metals and steel)



    The education group was also relatively stronger



    The NQ8 sector still displays a Money Flow that is positive. This is strange in a market that is sharply down.



    If you indeed look at the main components of the NQ8, AAPL is mostly showing a very negative EV pattern, while the rest does not display strong selling. This tells us that the selling was mostly an index based issue (Everything-must-go).















    Conclusions:

    The NQ8 stocks have been a clear market leader and we can see that they are not really under big selling pressure. It is clear that the group will bounce. Hence, buying the QQQ is probably a good idea here.

    Of course, more selling could be in the cards as index investors could continue to be shaken down, even after an overnight bounce.

    The filter below shows many BUY oversold ideas. The oversold stocks will bounce together with the market. If the market continues down, they will follow. This type of divergence filter works best in a generally flat/indecisive market

    http://www.effectivevolume.com/conte...20D-price-loss