Review
11/13 Total market view: "Sum - 4 of 5 USA mains are above all pivots (QQQ lagging, below NovP). 2 of those have cleared YR1s, which were resistance from August on. At the same time, safe havens TLT and GLD are collapsing while both VIX and XIV have said all clear from 11/7 on. This is all very bullish and must be respected no matter what you think of upcoming politics.
".. But after a big move like we just had, the most likely thing is some digestion and consolidation."
"Bottom line - USA indexes look great, most especially DIA and IWM among mains, and XLF/IYF financials among sectors. Safe havens look terrible. This is very bullish action for USA stocks. But the positioning was fast - you had to cut some and buy others to make the most of markets. If market looks more bullish per scenario above, we want to add on some pullback on the leaders. If not, then try to protect some gains and wait for the next setup."
Result
USA main indexes continued to add to advances, thought most in slower fashion. There was not much of a pullback as two indexes paused at YR1 on 11/14 then rallied above on 11/15.
Sum
Risk on has been the clear choice from 11/9 on. VIX gave screaming buy as all USA main indexes recovered or cleared pivots, as other safe havens TLT and GLD collapsed through long term support 11/10-11.
But a move from near NovS2 to NovR2 on SPY in about two weeks is quite a lot, and the most likely thing from there is digestion and consolidation. With multiple indexes on monthly levels, sentiment getting toppy and the timing window 11/18-21 we may see some trading high here (trading meaning a turn that holds for 1-4 weeks). At the same time, I don't think this is a major top which I would define as definitive for the quarter or beyond.
Positioning (this may become a separate post in near future)
The key factor for gains 11/9+ was seeing that previous second half leadership of technology and global stocks were not participating in the TrumpIt move, and that financials, INDU and USA small caps (IWM) were outperforming. If you cut QQQ and bought financials even on 11/9 (The Pivotal Perspective highlighted XLF and IYF as two of the best looking entries before the jump) then you are doing quite well. At the same time cutting the notable losers EEM, FXI, INDA, even 2016 favorite EWZ, has avoided more losses or lost gains.
If you have gains, the question is whether to hold without adjustment, hedge, or take money off the table and look to re-enter. I wrote this week that I would start to mention more short setups, anticipating larger volatility in markets. When this works it works great, but it can sting - for example, if USA longs pullback and global stocks rebound, then you lose on both sides. So there is a difference between hedging and short trades. A hedge should have correlation with your underlying long; others are simply shorts. For shorts, I would prefer long term weakness (ie below yearly or half year pivot) and think that it should at least be below a quarterly pivot to consider as a short.
I've also been mentioning DXY strength for several weeks. If you play Forex then that is easiest but if not there are ETFs. The issue with most currency ETFs is that they take up a lot of capital for a relatively smaller percentage move. Factor DXY strength into possible EUR short idea, commodities, and USA main index selection (ie, IWM over DIA for longs).
Bottom line
If you have caught the move in the current leaders of USA small caps and financials, then I think likely best to hold those as they are likely to benefit from year end positioning. Given monthly levels, sentiment and timing, I will look to reduce or hedge other index longs if we see more weakness early this week.
Pivots
USA main indexes - Very healthy, with SPX set, INDU set, RUT set and VTI above YR1s. Tech lagging, below NovP. Levels to watch this week are the YR1s that recently cleared on SPX, INDU and VTI (more bullish if they hold as support) and SPY NovR2, DIA 2HR1, QQQ NovP.
Safe havens - TLT and GLD weakness is bullish for stocks. VIX below all pivots & XIV above all pivots confirms risk on. TLT still may have chance at bounce in this low area Q4S3 - NovS3, and this still may work as a hedge for financial longs.
Global and other - Elephant in the room is USD strength, which has already weighed on several global ETFs that I track and may start weighing on the Dow.
Other technicals
Advancing volume thrusts like the recent one usually mean higher highs even if the market consolidates in near term.
Valuation and fundamentals
With Citigroup Economic Surprise Index back above zero, I view these combined as mild positive for the market. Last week upgraded to mixed due to valuation, and before that for several weeks I called them both "headwinds."
Sentiment
One of four meters I track at extremes. When we start to see others (especially watching for ISEE daily spikes that close 125+) then that will help create a trading top.
Timing (proprietary timing model)
November dates (published 10/29)
11/1 - non event, middle of drop (major low 11/4 not close enough)
11/18-21 - possible turn with several asset classes on monthly resistance / support levels (SPY, QQQ, SMH, DXY, TLT, GLD)