11/12/2017 Total market view: "There are a few cracks for the main indexes. VIX above a monthly pivot is fairly rare this year, and XIV fell back under a long term resistance level. Indexes themselves are in varying states according to The Pivotal Perspective: Dow between levels, NDX testing YR3, SPX still holding YR2, and RUT already dropping from YR1.
It is a week to be agile, because anything lower on SPX would invite a quick trip down to NovP at minimum. But if 2576-82 continues to hold and VIX drops back under NovP then might as well be more long.
If we put on our max pain hats we might think that 1) emerging market currency volatility will continue (because FXI, EEM, INDA have done so well this year), thus causing further pressure in most of these top performing names; 2) NDX will top out at or near YR3, and 3) the generally disappointing RUT and maybe XLF will rally off the recent lows."
Review - yes I am quoting 3 paragraphs verbatim because you know sometimes I am pretty good at this stuff.
SPX did drop to NovP and then rallied
Global markets bigger drop (but also impressive rally)
NDX topped on YR3 near exact
IWM rallied off lows; XLF did too but not enough to be impressive yet
SUM
SPX/SPY and NDX/QQQ have stalled under YR2 and YR3 respectively. SPX has been hanging around this area for the last 4 weeks, and NDX the last two weekly bars. Weekly charts on both have the look of 'weak advance' and as this is happening below resistance the market is inviting sellers.
In addition, the other usual elements of deeper pullback - highs tested with lower high on most main indexes, RSI divergence on daily chart, breadth deterioration already in play, safe haven strength still a factor with VIX still above its NovP.
Granted given the strength of the bounce from SPY NovP test last week it is hard to be too confident is a big drop heading into a holiday week. Also, XIV has done well as a tell and it fell below its NovP for only 1 day and recovered above all pivots. If no decline Monday or Tuesday I'll start thinking a low volume rally above more possible Wednesday and Friday.
Bottom line - This isn't a matter of shorting, it is to lock in gains from my earlier buys in August and pound the table buys in late September. Granted I have been in and out of a few different hedging ideas the last four weeks. Some have cost a little (SPY short hedges) others have gained (IWM, EWZ, UVXY).
PIVOTS
USA main indexes - SPX/SPY and NDX/QQQ both testing yearly resistance with similar structure does not happen so often. Market has been in a sideways range but don't be lulled to sleep.
Sectors of note - SMH on top of buy list 8/21 looks like time to lock in gains.
Safe havens - VIX still above NovP but XIV above all pivots 'mostly long' for risk assets. GLD and SLV perking up and yes I do have a bit there but lack of GDX and highs already on NovR1s are some concern.
Global indexes - SHComp 2HR2, Q4R1 rejection and below NovP. I don't trade this too much but like to watch. Otherwise FXI and EEM like USA indexes starting to see selling from highs.
Currency - Recent DXY highs 10/27 - 11/7 all on YS1 which acted as resistance. Back down to test Q4P. If in metal longs better to see DXY break Q4P and thus fall under all pivots.
OTHER TECHNICALS
New highs new lows along with MCO still seeming to be pointing to more than a -1.4% tick to tick drop on SPY.
VALUATION AND FUNDAMENTALS
SPX maintaining above 18X forward earnings on a real time and moving average basis the last several weeks. I continue to think this is solely due to corporate tax cut plan by Congress. Any noise about that not passing this year should reflect in SPX valuation.
SENTIMENT
Some extremes last week worked off by drop mid-week.
TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.
September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event
October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low
November dates
11/13 mild (non event?)
11/19-20 risk off
11/22 risk on