REVIEW
6/11/2017 Total market view: "Basic configurations remain supportive for stocks - all 5 USA main indexes above all pivots, VIX below all pivots, XIV above all pivots. However, with momentum stocks getting slammed and Dow testing YR1 area it is a week to be watching carefully."
Thus far Dow not seeing any selling from the YR1 level, and portfolio made no adjustments last week.
SUM
3 of 5 USA main indexes and safe haven bonds (TLT, TYX & TNX) are at yearly levels. Dow at YR1, VTI also near YR1 and QQQ back to YR2. Meanwhile, TLT, TYX and TNX all testing YPs. These are the levels to watch this week, especially considering the historical importance of Dow yearly levels as outlined in this post. See below for actual numbers.
I think that bond strength will increase chance of stock drop, while bond weakness increases the chance of stocks continuing to trade above levels and/or not much damage on declines.
As we head into the last 2 weeks of the 2nd quarter / 1st half, it is still possible to have re-balancing out of the hottest trade and money into sectors like energy. This would imply risk to tech, semi-conductors, Europe (which I don't track too much here) and global indexes.
Bottom line
It is not every week that 3 of 5 USA mains are at yearly resistance and so happens that bonds are at yearly pivots. Watch, and if the market makes a "ring the bell" sort of move with VIX and XIV confirming, take meaningful action.
Positioning
So far still holding tech and EEM for 100% long even though wary of further re-balancing. If tech and global stocks drop further with other indexes holding up, shifting out of QQQ & EEM into SPY might be smart.
PIVOTS
USA main indexes - Dow at YR1 21350 with 1HR2 21428 just above: NDX back to YR2 5684; VTI slightly above YR1 124.88. Also, QQQ JunP in play at 139.66.
Safe havens - TLT at YP 126.51. GLD at JunP. VIX and XIV still below/above all pivots respectively.
Sectors of note - SMH weaker with XL bouncing without any move in oil points to the re-balancing idea.
Global indexes - ACWI, FXI, EEM still above all pivots. KWEB fractionally below JunP. SHComp above YP & 1HP, below Q2P. EWZ weaker, RSX still above YP but well below all others.
Currency and commodity - DXY recent low bang on 1HS1. DXY strength would pressure global indexes or at least increase the chance of a rebalancing drop. Oil below all pivots via CL current and USO for a few weeks; CL1 finally cracked its YP so below all pivots on 6/15-16.
OTHER TECHNICALS
E-wave idea of market structure not qualitative but interpretation has been mostly correct. Are we about to see end of weekly wave 3? If so, what is next? Check out the post and then click on tag for series here.
RSIs for SPY reached above 70 on all timeframes recently, but so far working off condition with minimal damage to price.
Q 79.0
M 74.0, no divergence
W 67.6, down a bit from recent high 71.8 reached 5/29 bar
D 54.8, so far working off higher readings of 70.3 reached 6/2 and tested 67.9 on 6/13 without much drop in price. Watching 50 area for reaction.
VALUATION AND FUNDAMENTALS
SPX at 18x forward earnings but with earnings increasing, price can continue to climb higher without getting truly more expensive. But Citi Economic Surprise looks terrible and should present at least some risk to the market.
SENTIMENT
Extremes reached on 2 of 4 meters I track reached early June, but these also working off.
TIMING
Proprietary work in progress model that I quietly persist in pursuing due to calls like this from two weeks ago:
"In addition, a larger timing cycle points to momentum slowing in risk assets from 6/5 into July."
QQQ, the main index momentum leader, fractionally higher on 6/8 then slammed.
This timing work used to be more of a focus when I worked for a small hedge fund, but I just don't have the time to properly devote to it now. Still, given timing, I would rather see some topping process then more of a risk off move.
June dates (published in 5/29 Total market view)
6/9 - SPY price high
6/15-16 - DIA price high 6/14 (-1)
6/21-26 - TBD, prefer down for stocks especially the hot trades of 2017