REVIEW
4/2 Total market view: "As usual I will let pivots be my guide - if the majority of stock indexes are above Q2 pivots, or test and hold, then it is correct to stay bullish on risk assets. But if stock indexes open below Q2 pivots or break, as safe havens are above Q2 pivots, then it is correct to be defensive. We'll see what happens."
Result: Most USA stock indexes are above Q2Ps, but not XLF & IWM. Safe havens strengthened last week, leading to portfolio's more defensive positioning.
SUM
SPX ralled 15% from 11/4 low to 3/1 high over 84 trading days, an impressive rally in both gains and duration. Since 3/1 there was a -2.75% drop (measured from high tick to low tick; measuring on daily close levels would be less of a decline), thus far over 18 trading days. This is a very mild pullback and thus far a healthy slowdown of a great rally. But I suspect the digestion period is not over yet; either stocks will go lower than the -2.75% drop, or the market will have more sideways than just 3.5 weeks.
Stock indexes continue above most pivots. USA main index leader QQQ remains above all pivots and from this measure it is valid to stay mostly bullish on the market. 3 others, SPY DIA and VTI, are above Q2Ps. Of the USA mains, only IWM is below the Q2P. Global indexes, while not quite as strong as the start of last week due to EWZ & RSX drop, are still looking good too.
However, at the end of last week safe havens perked up in a way that we haven't seen since before the election: VIX closed above a quarterly pivot, XIV closed under a monthly pivot, and TLT also closed above a quarterly pivot. If we ignore 1 day fractional break on XIV, then none of these have happened since before the election. In mid-March GLD tested and held its YP and since then rallied to be above all pivots as well. I think the combined effect of strength in safe havens increases the chances for further declines for stocks, or at least will limit upside.
Though at this point expect further declines or limited upside for stocks, sentiment is already quite bearish with 2 of 4 meters reaching fairly low levels. This may limit declines to one day bear wonders that quickly reverse.
BOTTOM LINE
Portfolio switched defensive last week with VIX jump above Q2P and further XIV confirming trouble on 4/7. If safe havens back off and SPY jumps above AprP, then green light to lift hedges and return more long. If safe havens stay strong and stocks decline further, portfolio is nicely positioned as long as IWM participates in the drop. I'm a bit concerned about the IWM short hedges given bearish sentiment.
POSITIONING
Staying long risk with hedges that can quickly be covered, should the warning signals given by safe havens diminish.
PIVOTS
USA main indexes - leader QQQ above all pivots so one cannot be too bearish.
Safe havens - yet some strength in all safe havens that hasn't happened since before the election.
Other sectors of note - XLF below Q2P means most popular Trump trades, XLF and IWM, below Q2Ps.
Global stocks - Week started out with all 7 global indexes above all pivots. That has weakened a bit with RSX and EWZ below Q2Ps.
Currencies and commodities - DXY just had massive hold of YP and near tag of D200MA, and since has rallied back above 1HP, AprP and currently testing Q2P, even fractionally above. This likely puts lid on global stock strength.
OTHER TECHNICALS
RSX quickly turning into the weakest index I track, below Q2P and below weekly 200MA. Possible short.
VALUATION AND FUNDAMENTALS
SPX fully valued near 18x forward earnings at the highs. Fundamentals positive but losing momentum.
SENTIMENT
On 2 of 4 measures, crowd already quite bearish. This tends to limit damage and duration of stock declines and adds possibility to short squeezes.
TIMING
(Proprietary experimental work in progress model)
April dates
4/6-7 - possible stock low & safe haven high of stocks up week of 4/10
4/10 - TBD
4/19-20 - looks bearish for stocks, positive for safe havens
4/26