S&P Stocks Beneath Their 200-day

I was talking to Ike about this Monday. This indicator looks like Hell, and in ordinary times, it would be indicative of serious distribution and would be very bearish.

These days, however, I think not. At the margin, a big chunk of stock demand is from sophisticated funds seeking a low risk, net positive return through hedged equities and derivative programs. Money is cheap to borrow, but conversely, there is no place besides the stock market to get a net of inflation positive return, with liquidity. Which is driver of the anomaly. These "investors" need very good liquidity in both the stocks and their derivatives. They're going to keep putting money into the market until rates rise, likely. But they're not going to be interested in the less liquid issues.

M

Hmmmmm isn't rates like the 10-year going from .50 to 1.60% a rate rise though?  This sounds more like fumes holding it up not solid fundamentals possibly, just curious?

Hmmmmm isn't rates like the 10-year going from .50 to 1.60% a rate rise though?  This sounds more like fumes holding it up not solid fundamentals possibly, just curious?

That's not where they're borrowing at, though. 3 month paper is yielding just 11bp. It really hasn't budged. And that's so little as be hardly be worth writing the paperwork up!

M

And they are willing to chase anything with a pulse....

Avis 1 min chart

 

Hmmmmm isn't rates like the 10-year going from .50 to 1.60% a rate rise though?  This sounds more like fumes holding it up not solid fundamentals possibly, just curious?

That's now where they're borrowing at, though. 3 month paper is yielding just 11bp. It really hasn't budged. And that's so little as be hardly be worth writing the paperwork up!

 

M

 

Awwww interesting, don't follow short term stuff to much but that makes sense!

Even my UN-sophisticated and UN-technical post a few weeks back is turning out correct.

So long as yield is net negative by more than 100 basis points compared to inflation, stocks will keep going up.

With stocks, you get favorable tax rate with long term gains and those gains can be deferred. With yield, you pay tax immediately with no favorable rate breaks.

Edited by pdx5, 02 November 2021 - 06:16 PM.