S&P500

[Pascal]

Just to give a little perspective on how this market might move in the next weeks, I am posting below the comparison of the MF activity between the 250 largest S&P500 stocks (in Black) and the 250 smallest (in Blue.)

We can see that more money goes to the largest caps.

The second point is that once we reach the overbought level, there could still easily be one month before the next short signal. Also, it will be interesting to see how the blue group performs.



Pascal

28537

[gapcap1]

pascal,

i have techs and small caps out-performing dividend stocks...

[Pascal]

pascal,

i have techs and small caps out-performing dividend stocks...

Sure, small caps almost always outperform large/dividends stocks in a market uptrend, because of inertia.

I was only pointing to the difference in Money Flow: The S&P500 is by definition the 500 largest companies. The largest 250 of them attract more money (proportionally to their capital base) than the smallest 250. This is strange, because investors know that the smaller caps will outperform. Hence, the objective of that money is probably yield seeking more than stock price appreciation.

I think that what happens is that investors are front running a big wave of European QE money that will move to seek yield in the US markets. This means large cap dividends stocks, Utilities, REITs,... but this goes well as far as the Fed does not increase rates. Yesterday, we all could read that Fed members want to look at excuses NOT to raise rates.

Of course, I could be wrong and the Fed could raise rates quicker than everybody expects.



Pascal

[gapcap1]

thanks for the explanation, my friend!

[Pascal]

thanks for the explanation, my friend!

The real issue with that type of analysis is that it does not offer an executable trading idea. It just says "stay long" for now because money is coming our way, but when this indicator will signal that it is time to short (Red arrow on the right side,) we will already be on our way down.



Pascal

[ilonaross]

If the US dollar is declining vs the Euro, why would anybody want to put their money in US stocks when they can put the in Europe?

[ilonaross]

Could that be why money is flowing into sp stox, which presumably make money globally, so they'll get a shot in the arm from a dropping dollar?

[Pascal]

If the US dollar is declining vs the Euro, why would anybody want to put their money in US stocks when they can put the in Europe?

Funds have to respect investment ratio by region/sector in order to be able to show low general risk profile. This is mostly the case for heavy regulated funds such as pension funds. Hedge funds and individual traders will do as they like, but they do not chase after yield.


Pascal