Both the NQ8 stocks and the small caps have been attracting money.
The Futures tell also a rather bullish story.
We can see below that there has been a strong divergence between the Money Flow of the small stocks section of the S&P500 compared to the large stocks section of the S&P500. This tells of reluctance from large funds to part from their investments in the most liquid largest stocks of the S&P500.
This move is probably due to the relatively non attractiveness of the 10Y Bonds: investors are selling the 10Y and need to find large enough equities were to invest the proceeds.
Even though the 10Y bounced yesterday, large investors did not buy,
while they bought both the 5Y and the 20Y.
It is interesting to note that the US$ has been very weak for the past two months even though the 10Y rates have been steadily increasing and even with the strength in the US/German rates differential.
Large investors point to what the rates differential is telling us: the US$ should be stronger against the Euro... and foreign money will chase US assets.
Conclusions:
We all know that the Covid epidemy could worsen before a vaccine is made available early next year. This means that we will continue to evolve in a depressed economic situation that will be punctuated by regular hopeful vaccine announcements.
Since the markets always danse between reality based valuations and hope based price expectations, the best strategy will be to buy weakness and sell strength.
All the NQ8 stocks bounced back up yesterday, but the 'at-home' related stocks such as FB/NFLX/AMZN should be more volatile compared to more neutral stocks such as GOOGL/MSFT/AAPL
