Yesterday was another ugly close that came right on cue. The NASDAQ Composite is the only major index to hold up under what looked like panic selling.

Those mega-cap names, along with other very large cap stocks, have become de facto havens. Interestingly, Wall Street pros continue to dismiss these names and urge investors to avoid them.

The Problem

The “Herd mentality” works both ways.   It’s easy to point to unlocked value in the most unloved sectors and stocks.

It’s true, the winning names are expensive using traditional metrics, but it is also true these are giant cash machines that aren’t worried about interest rates.

The Heat Map  

The equation is simple: higher yields = lower stocks. Remember, this works both ways.

New lows continue to dwarf new highs but to a lesser degree than last week. Earnings are ramping up – now the fun begins.

Today’s Session

The market edged higher on earnings, which for the most part have been stronger than expected this morning.

The stage is set for some kind of short squeeze, but the big names posting results this week will need to blow away the Wall Street consensus.

Hedge funds have a monster short position (see below), and active managers are sitting on a lot of dry powder.

In the afternoon note, we’ll have more details on Microsoft (MSFT) and Alphabet (GOOGL), which report after the close today.