• This market has room to move higher

    I had been expecting a weak Friday close as the max pain levels for SPY/QQQ were slightly lower than the close of the previous day. However, as can be seen below, the last half hour of trading attracted good money.



    We can see that the 20DMF still displays a negative divergence, but this is hardly a reason for turning short, simply because the Money Flow is still well above the 0 level.



    As a reminder, short signals are issued when the Money Flow crosses below 0. They are not issued when the Money Flow turns weaker but still in positive territory.

    As an example, we can see below, displayed with Red arrows, the genuine short signals on the S&P500 Money Flow. The Blue arrows represent Money Flow topping patterns. These topping patterns only indicate that on a 20 days base, the Money flow is still positive, although slightly less than before.



    Likewise, we see a similar negative divergence pattern on the NQ8.



    The Money Flow on the small caps if more worrisome as it fell in negative territory.





    Another interesting observation can be made by comparing for the last two Years the Money Flow on the small caps to the Money Flow on the NQ8 stocks.

    We can see below that the MF for the small caps has been negative for the past two years (Blue line almost always below 0,) while the MF for the NQ8 has been almost always positive.





    I believe that this is a sign of pair trades: for risk reasons, funds are long the most liquid very large stocks and short the non-S&P500 stocks. This has been going on for a very long time, even during quantitative tightening.

    Conclusions:

    In the current situation, neither the 20DMF nor the Money Flow on the S&P500 indicate that we are close to a short signal. This market has room to move higher.