Thanks Windoze 8/12/22

[fxfox]

11 minutes ago, PullMyFinger said:

Lee, 

I start my question with a confession. I am both a Technical Trader and Liquidity Trader subscriber. I read TT voraciously the minute I become aware it is out. With LT, I am not as faithful of a reader--I think it is a great product and someday hope to understand it better, but for now I sometimes struggle to intuit the stuff. 

Because I don't read LT as closely as I should, I don't know how or how much you track international capital flows. Maybe it's in there plain to see and I don't get it.

But here is my question: is it possible that this rally has been fueled in significant part by international capital flows into the U.S. stock market? Could it be "smart" money getting out of Europe ahead of civil unrest and war that is likely to spread further as early as next year? And also capital moving out of China given the bank and real estate debacles that are happening? 

Very interesting question. Since the USD went up very significantly it is most likely the case that US based assets were/are bought by foreigners. Take Emerging Markets: The problem they have with a rising USD is that their debt is denominated in USD. Their currency devalues, in USD denominated intefest rates rise, so the debt of EM economies gets bigger and bigger. So people from those economies try to bring capital to the US and buy US assets like stocks. Those economies reacted with capital controls in the past, but if they do they get kicked out of MSCI and other indeces and when that happens those economies become impossible to invest in by fund managers from western countries.

There are other factors to take into account: The home bias seems to be not as big as it was in the past. For example in Germany the MSCI World became THE ETF to invest in, not an DAX ETF. So that creates further demand for US stocks, since circa 60% of the MSCI World are US stocks. In the 80s for example it was VERY uncommon for a German to have US stocks, it was very complicated to buy them and so on.

Never forget thst the US stock market is THE market. The whole world investest in it. The German and French markets are a complete joke in comparison.

I said it years ago here: No one on earth can track all international money flows. It is impossible. Quite likely that even Russian money found its way to the US shores in the past few months. How? Hard to say, dark channels?

[fxfox]

It is very critical here:

- consumer discretionary vs consumer staples ratio is about to break out

- Rusty vs S&P 500 ratio is up too

- corporate insiders are buying, thea are usually right

- we closed the week above the 50 fibo

- PutCall and sentiment were at absolute extremes in June

- the downtrend is just a few dozen points away

 

This rally has to stop now, this week. A monthly close above tbe 50 fibo and the downtrend wiuld be a catasttrophe for bears.

If you look at various indeces it looks as if that doenmove this year was just a successfull test of the EMA 50 monthly.