Investment

Jump in SKEW, small caps, financials, and material stocks – Investment Watch

by Troy

Bounce in SKEW



A wall of cash continues to movement from market to market based mostly on the favored narrative on the time. 6 months in the past it was “tech does nicely below corona”, so everybody rushed headlong into tech shares. Now it’s “vaccines are good for the financial system”, so everyone seems to be dashing into small caps. Outcome: small caps jumped larger at this time whereas the NASDAQ fell.

Within the meantime, SKEW‘s 3 week common continues to rise. SKEW measures the danger of a black swan occasion, so merchants often interpret excessive SKEW readings = bearish.

skew 3 week overlap

Up to now, such excessive readings have been one thing to be involved about, however didn’t all the time end in a right away correction.

  1. October 2017: shares rallied for an additional 3 months earlier than VIX spiked and shares fell.
  2. July 2018: shares rallied for an additional 2 months earlier than shares fell in This autumn 2018.
  3. January 2020: shares rallied for an additional 1.5 months earlier than the crash in March.
  4. September 2020: shares fell instantly.

Be careful for SKEW within the coming months.

Bounce in small caps, financials, and materials shares



Small caps, monetary shares, and materials shares popped larger yesterday. 36% of the S&P 500 jumped above their higher Bollinger Bands:

spx breadth

Lately this typically led to brief time period pullbacks, however weren’t constantly bearish after that.

spx 1

Equally, a big % of economic shares jumped above their higher Bollinger Bands:

finance chart

Quick time period bearish, bullish over the subsequent 6-12 months:

finance stat 2

Right here’s supplies:

materials chart

And right here’s small caps:

rut breadth

As soon as once more, that is only a brief time period concern:



rut 1



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