Total market view

REVIEW
5/14/2017 Total market view: "...there are other technical signals that often precede weakness such as weekly RSI divergence on USA mains excepting QQQ, weak advance decline volume difference, and daily 50MAs rolling over to flat or slightly negative slope on DIA and IWM. Bottom line - I've mentioned that markets are a toss up two weeks ago, and last week decided that chances of powering up were slim so reduced portfolio from 120% long to 70% long on 5/9, and back up to 80% on 5/11. Part of this decision was the poor choice of vehicles on 4/20 & 4/24.... Trends are up, but indexes at resistance and so far there has been mild selling on all USA mains except tech. I still think markets are a toss up. We'll see what happens."

Result
NDX exceeded YR2 by 2 days then fell back under the level. SPX came within 2 points of YR1 2407 and dropped significantly the next day. However, several signs of strength returned on Friday 5/21.

Sum
Market has had some drop from NDX YR2 and SPX YR1 as I have indicated possible the last several weeks. Now the big question is whether this is just a pause in uptrend or a turn as significant as 2015 Q3 lows or 2016 Q1 lows, which were both double bottoms on long support support levels on SPX.

Valuation and fundamentals have both not helped the market since late April. Based on these, no chance that indexes return to a trend up move. However, indexes could remain in a sideways range without going significantly higher or lower for a considerable period. 

NDX / QQQ is in the middle of epic run with closes outside monthly Bollinger bands. While only one of these in the past has been a major top, often there will be a pause to fall back inside the band - this is soon becoming the more likely move. More on this point here. 

At the same time, I cannot be too bearish with 3 of 5 USA mains above all pivots, VIX below all pivots and XIV back above all pivots. Color me a cautious and somewhat disbelieving bull. I think markets are due for more of a pause than 1 day bear wonder and -2.2% down from SPX highs; but if I have to pick between VIX and opinion, VIX is usually the better choice. 

Bottom line
Portfolio is a bit underweight markets with 2 short hedges and 2 shorts. I will be quick to cover these with any additional strength next week (ie, SPY continuing above MayP, QQQ above YR2, VIX continuing below Q2P, IWM above Q2P, XLF above MayP).

Positioning
Detail here. Reduced from leveraged long to underweight 5/9. Due to market strength covered a couple of hedges, then quickly added these back on 5/17 open in addition to 2 shorts. Thus far, defensive moves have not paid but will not cost much more to hold. 

PIVOTS
USA main indexes - Leader NDX testing YR2 5684 again; SPX recovered MayP 2370; INDU testing MayP 20796; RUT below Q2P 1378.

Safe havens - VIX below all pivots, XIV above all pivots is bullish configuration for risk assets. But strength in TLT, AGG and GLD some caution.

Sectors of note - XLF below Q2P all quarter. SMH again USA sector leader in 2017, another huge run from 4/20 low.

Global indexes - DXY weakness supports global indexes. KWEB, INDA, EEM, ACWI above all pivots. RSX weaker, EWZ smashed, SCH also weaker below all pivots. 

Currency and commodity - The low in oil was CL1 YP. DXY bearish with YP and D200MA rejection.

OTHER TECHNICALS
Warnings about average true range and weekly divergence did play out with a range expansion drop last week. I don't think NDX power up move can continue much longer. 

In addition, Elliott wave model says upside limited in weekly W4, and pullback "should be" more than -2%.

VALUATION AND FUNDAMENTALS
Based on valuation via SPX forward P/E and Fundamentals via Citigroup Economic Suprise Index, I have been saying market should not blast through NDX YR2 & SPX YR1 for about a month. Check the tag on the dedicated post and you'll see.

SENTIMENT
Not a lot of bullish sentiment on recent highs, only 1 of 4 readings at lower end sentiment on lows. 

TIMING
(Proprietary work in progress model)

May dates published in 4/30 Total market view:
5/3-4 - so far stock index minor pullback low on 5/3
5/19 (stronger) - possible stock low 5/18 (-1)

5/9 was actually there in system but I missed it on 4/30 post so will not count it.