REVIEW
2/24/2018 Total market view: "Though I am expecting more volatility in general in 2018, and more trouble at various resistance areas, now the most likely path seems to be tech strength and high test, which will pull other indexes higher. In addition, some indexes like SPY that are still below FebP are on track to open above MarP. An expansion of risk assets above all pivots would support this more bullish view. I am still concerned about the quarterly charts, and don't think 2018 will trend the same way as 2017. But for now I'm playing for the QQQ YR1 area high test. New March pivots in play from Wednesday will be easy clues on further strength or weakness."
Result was QQQ YR1 test then rejection. SPY opened above MarP but broke on 3/1 and remained under it 3/2; DIA and NYA were also under MarP.
SUM
2 months into 2018 and so far it is very different year than 2017. Referring to risk assets, 2017 saw USA, Europe, Asia and other emerging markets all participating in a global rally with a minimum of volatility. The only levels that mattered were support - monthly pivots, on the rare occasion that they were tested, were usually buying opportunities. SPY only had 1 day with a close below a QP. VIX was under all pivots for most of the year. Similarly, pullbacks to moving averages were buys.
While several long term levels (YP HP D200MA and D100MA) tested and held on 2/9, thus far the levels that have mattered more have been resistance. This was just not the case last year as most indexes ignored resistance areas or had only minor pauses for a few days. In January 2018 it was striking how many indexes across risk assets were testing YR1s. Daily comment from 1/28/2018: "There are so many indexes on or near YR1s the situation calls Jan-Feb 2016 to mind, as the only difference was that they were on YS1s. Both years started with a directional bang, reached yearly levels, and then... we shall see. That is our task now, to assess the chances of a turn here."
And so far that late January high has been *the top*, with only the few tech leaders along with EWZ and RSX near earlier highs or higher. Most benchmarks, SPY, DIA, etc, are far from 1/26 highs.
Last week, while QQQ did rally to near high test and YR1, again, the levels that mattered more were resistance: SPY and DIA FebP smackdown, and QQQ YR1 rejection. VIX confirmed trouble with a launch above YR1.
2/27/2018 Daily comment advised locking in some gains and urged caution in global names especially China.
Heading into March that pivot status for risk assets is disparate. Still a handful of leaders that have managed to hold above all pivots:
QQQ, IWM (in surprise move Friday 3/2)
SMH, XBI, KWEB, KRE
EWZ, RSX
VIX
But everything else in mixed condition, or worse: SHComp, Nikkei 225, DAX, UK FTSE all below all pivots. If at hedge fund with global desk the obvious trades would have been short FTSE (below all pivots 2/2), then DAX (YP test from underneath, below all pivots 2/26 as SPX and INDU testing FebPs); now watching to add to shorts on NKY (or USDJPY another good one below all pivots from 1/11). Writing to presumably American audience, if playing along EFA is a good vehicle - ex-USA developed benchmark index ETF, with options and 3x bull bear ETFs available - currently below MarP, QP, weak bounce from HP but break below that would be good risk reward short.
Benchmark SPY is testing its MarP and tagged the level on Friday but did not clear. Consider this and the theme I have been emphasizing - if resistance is mattering more in 2018, then we are about to see a drop from this level.
Of course, bonds not helping with all indexes I track below all pivots. Metals continue in trading rate, and cryptos on the weaker side with BTCUSD facing trouble at its YP several times.
Bottom line here is indexes do seem to be a in a bit of trouble. But 2 of 5 USA mains are above all pivots so let's not get carried away on bearish scenarios just yet. Sentiment per put-call is also quite high, highest since 11/2016 - and this may especially help a mid March rally into OE week 3/12-16. Stay nimble, and if hedging or shorting isn't your thing then you can always raise cash and focus on the few relative leaders and avoiding damage in the volatility. For this week its all about the reaction from SPY MarP.
PIVOTS (expanded first of month)
USA main indexes - QQQ above all pivots from 2/23 on; IWM recaptured above all pivots 3/2. NYA below QP reflects weakness in global names. Additionally, more global DIA in worse shape than SPY.
Sectors of note - SMH and XBI above all pivots and both testing long term highs; 2000 top for semis and 2015 for bios. XLF also failing at 2007 quarterly close high. KRE is recent addition as I happened to notice it jumping back above all pivots.
Global developed - Trouble here. And the base indexes are even worse than the ETFs (DAX below all pivots, EWG still above YP).
Global emerging (last but not least, probably this should go at the top of the list) - Trouble in China but commodity economies EWZ and RSX among leaders of 2018 so far. Both above all pivots and both testing YR1s.
Safe havens - VIX above all pivots from 1/29 to 2/28; now below MarP. Bonds weak as pivots main so clearly obvious from the beginning of the year. Metals in range; GLD shot at reclaiming above all pivots could be re-entry long.
Currencies - BTCUSD failing at YP, again. LTCUSD stuck under pivots. ETHUSD leader and still holding on to MarP, above all pivots.
Commodities - Trying to expand this section as time permits because a lot of smart $ (Gundlach for one) has already been on to this as major theme of the year, reminding me of emerging markets 2-3 years ago. USO already watching, occasional glance at UNG. DBC testing MarP from underneath, otherwise above YP HP and QP (seems to be mostly correlated with oil). DBA (agriculture index ETF) spiked above all pivots on 3/1 for the first time in about a year. I'll do a separate post on this soon. XME metals and mining ETF also above all pivots.
OTHER TECHNICALS
Daily new high new low chart about to invalidate bull confirmation from 2/26.
I have been pointing out quarterly chart threat for weeks on USA main indexes. See the chart page for those. Per this week's theme, resistance matters - and this means pivot & resistance levels per this system, as well as Bollinger bands.
VALUATION
Interesting that SPX faded back under 18X (well, 10 week avg of 18X that i use to smooth out chop). This means the only period of SPX above 18X was 2017Q4 - Jan. It may start acting as resistance again as well, as it did for 2017 Q1-2 when tested.
SENTIMENT
Per put-call, highest since election. Probably bulls not going down without fight and if you find yourself too bearish consider both QQQ and IWM (!) above all pivots. Relative weakness usually means easier shorting so right now that is anything below at QP than breaks a HP, or SPY at MarP with tight risk control.
TIMING
Tweet from 1/24: volatility window 1/25-2/2 and perhaps extending through 2/15
Tweet from 2/6: "Since vol extended past 2/2, think instability in general through 2/15, & 2/9 looking like a key date. With YPs along with D200MAs testing and holding on both ES and YM near term move most likely furious bounce that then fails and sets up lower or divergence lows into 2/9." Ding! And that was pre-open!
February dates
2/2 - middle of drop
2/9 - added per tweet maybe low
2/12 - middle of move
2/15 - end of volatility window per above; so far TLT, AGG, LQD lows all 2/14 (-1)
Didn't have 2/26 unfortunately
March dates
3/6 (minor)
3/8-9 (strong)
3/16
3/22-26