REVIEW
3/19 Total market view: "Last week's basic point is that bullish configuration for stocks but upside limited and range more likely. That is playing out and I think will continue. As of 3/1 I said SPY YR1 or DIA YR1 should be "a decent top" and so far this has been quite correct on the SPY area YR1 with near enough tag and exact tag on the related ES1 contract. ... Upside for stocks likely limited, but pullbacks will be bought. This has been the view all of March. ... If next week plays out more bearish I may reduce to 70-80% long via XLF or other exit, or hedge."
Last week went lower as preferred, and portfolio reduced exposure as XIV broke under YR2, one of the levels to watch.
SUM
Rally has stopped as the SPX set YR1 / 1HR2 / Q1R2 / MarR1 cluster (YR1 2407 not tagged, 1HR2 2400 tagged exact, Q1R2 2399 reached and exceeded on daily close only 1 day). However, the drop thus far has found support on SPX set MarPs, and is relatively mild -2.75% thus far.
I don't have a strong opinion as to what "should" play out in the coming week. The market is near areas that typically bounce - monthly pivots on SPY, DIA and VTI (bit further away for QQQ); and and rising daily 50MAs testing or near testing on the same SPY, DIA and VTI (again bit futher away on QQQ). This is enough for a bounce. But if the bounce doesn't happen, or seems weak then fades, a flush lower cannot be ruled out.
The market is 5 trading days away from close of quarter which means we can start to anticipate new quarterly & monthly bars and especially new 2nd quarter pivots. At this point, it looks that IWM will open below its Q2P, and TLT may open above its Q2P. This would be a significant change from the market themes most have anticipated for 2017. So it is likely that Q2Ps will have interesting things to say but I am getting ahead of things, as they won't be finalized until the 3/31 close and even that will involve a special manual calculation; for most asset classes they will be available as of 4/3 open.
Bottom line
Portfolio has exited some positions to free up cash for new setups especially based on the new Q2 pivots. Currently 80% net long; if SPY, DIA and VTI monthly pivots break next week then it would be appropriate to have even less exposure. If monthly pivots hold and most USA indexes are on track to open above Q2Ps with safe havens weaker, then back up to 100% or higher.
Positioning
Take meaningful action when pivots are speaking loudly - on 3/21, VIX YR2 rejection, IWM MarP break and XLF MarP break early in the day. Recent moves here.
PIVOTS
USA main indexes - watching MarPs on SPY, DIA and VTI.
Safe havens - TLT & AGG both testing MarP also an interesting tell for the next move, as well as MarPs on VIX & XIV.
Sectors of interest - Financials (can measure on XLF, IYF or IXM) all testing MarS1s. IWM also testing MarS1s. Very funny primary Trump rally beneficiaries were these sectors, and currently weakest positions compared to most other risk asset classes. Global stocks and tech doing best.
Global stocks - Above all pivots are ACWI, EEM, FXI, INDA, RSX and SHComp. Not above all pivots - EWZ. (Note: I don't spend too much time on Europe and Japan as they tend to be correlated with USA stocks and fewer choices for maneuvering.)
Currency and commodity - DXY back under MarP, Q1P and clear resistance at the 1HP. Still above YP, barely. Despite DXY weakness, oil also weak; continuous CL1 contract under MarP, Q1P and 1HP.
OTHER TECHNICALS
VIX lifting from quarterly Bollinger band (never tagged before this quarter) and quarterly close low of 11/26. In my view, this adds to possibility of risk-off as next major market move.
There will be a lot more to say about various asset quarterly and monthly charts next weekend.
In addition, Advance Decline volume difference negative throughout March despite the near high test on 3/15.
VALUATION & FUNDAMENTALS
Fully valued and some professional selling at 18x forward earnings as expected. But fundamentals supporting stocks.
SENTIMENT
True extremes reached mid December, and on the higher side end February / beginning March (put-call low 2/24, NAAIM high 3/1, AAII relative highs 2/23 & 3/2 weeks). Sentiment measures drifting lower in March; far from bearish extremes but they aren't necessary on every pullback low.
TIMING
(Proprietary experimental work in progress model)
3/3 - So far stock high 3/1, but I don't count -2 days as a hit. DXY high 3/2 FWIW.
3/20 - Non event, but QQQ & EEM price high 3/21
3/24 - Stock low?
April dates next week.