Sum
I look at VIX and XIV every day because i find technical analysis on these to complement indexes quite well. In recent weeks, the setup on XIV as a short was so compelling I pounded table on recommending that for a trade. Needless to say it has been a phenomenal week at The Pivotal Perspective.
In addition, safe havens have done their job. Whether you chose to have positions or not, they have worked very well as providing important reads on the market. For example, GLD and AGG held key support (YP and 2HP respectively) early in Q3. They then continued to strengthen. GLD surprised to upside, reclaimed status of above all pivots on 7/27 and remained above all pivots on the pullback. TLT joined in 7/28-8/1 with holds of 2HP and near tag of D200 and D100 MAs. Also, TLT held Q3P on 8/8. All these contributed to my reasoning that indexes were vulnerable, that IWM could have a significant drop, and even leading global indexes would pause at YR2 levels. This is not hindsight reasoning. Simply review the summary comments of Safe havens over the past 4 weeks or so.
7/22: "If both TLT and GLD rally above all pivots (both are not far from this condition) it may be correct to reduce stock positions no matter what VIX & XIV do (against my usual view to put more weight on VIX and XIV for stock positioning)."
7/29: "We could have just seen the major turn in XIV for the year. If you think this is too much a stretch then please review the charts towards the end of this review and see if you are convinced that seemingly unstoppable trends can and do end on yearly levels."
8/5: "XIV is seeing resistance at YR3. This could be a critical turn per this post. Also keep in mind that XIV has been a great tell on many other critical turns (11/4/2016 for starters). Safe havens TLT and GLD are both above Q3Ps. I think this threatens stocks a bit as well."
OK, moving on. VIX and XIV are very extended - this move has been too much. If VIX and XIV are correct, stocks should be lower. I think caution is correct approach. Additionally, watching TLT because anything higher above the YP would very very bullish for TLT, and bearish for risk assets. GLD is near high area for the year but acting well.
VIX
W: So far looks like normal VIX spike that happens from time to time. It would be a better speculative buy at the YP. Right now above 2HR1 means caution. It would take a massive collapse to be back under 2HP & Q3P 12.28.
D: Above Q3R1 as well, same level as 2HR1.
D: 8/8 gave the buy signal, 8/9 looked bearish (for VIX), then 8/10 skyrocket. Key point to remember - reversal that is still outside the daily BB is suspect.
XIV
W: From YR3 to YR2 in one week. RSI already near 50.
D: On YR2 and 2HP combo.
D: Sitting on 2HP, but 2 days outside BB. In other markets that are moving down sharply, it usually pays to wait for divergence lows inside the BB, or at least a recovery inside the BB itself, before attempting any longs.
TLT
W: Above 2HP for the last 4 bars and knocking on YP.
D: Q3P and AugP hold was key tell.
AGG
AGG part of the market tells, as it could have broken down early in Q3 but instead held 2HP, then quickly lifted back above all pivots. After that, Q3P held several times with clear buying. Above all pivots from 8/1.
GLD
W: Seems like it should reach 2HR1.
D: Above Q3R1 so far, testing AugR1.
D: Everyone knows GLD has been up here 2x before with RSI overbought and had made key tops. So far sign of strength above Q3R1 and powering up outside the BB.
GLD sum: Buy rec on 7/11 working nicely.
GDX
Above all pivots for 2 days. The thick brown line is D400MA, roughly like monthly 20MA.
