Smart Money Sells As Rates Pick Up

This is an abridged version of our Daily Report.

Smart money keeps selling

The Smart Money Flow Index is not improving, as late-day sellers continue to show up. Assuming that means large, “smart” money managers are getting out (an iffy conclusion), it’s a warning sign.

The only time in 35 years it was this bad with stocks so near a high was in 2000.

Backup in yields has hurt stocks

Bond yields have risen substantially in the past three weeks and are near a multi-year high. That has caused trouble for stocks in the past, with the S&P struggling over the next two months. Bond yields themselves have usually continued to rise.

Staples aren’t very stable

The Optimism Index on XLP fell below 8 due to Thursday’s large loss, and the fund is not looking good.

Rate troubles

Perhaps due to concerns about rising rates, investors yanked money from rate-sensitive funds heading into Thursday. ETF outflows were dominated by Financials (XLF) and bond funds (LQD, HYG, and JNK).