REVIEW
7/14/2018 Total market view: "Bottom line - Although the next move up may take a bit more work than the last two weeks, I think SPX is heading to major resistance at 2820-30 and pulling for NDX to reach 7460 - 7570. I am less sure what happens to RUT as that has failed twice on its YR2. I'll keep to this bullish case especially with all 5 main indexes above all pivots."
Result - SPX made it to 2816 but not 2820 yet.
SUM
The Pivotal Perspective has been emphatically bullish to start the second half. As I mentioned several times, having cash ready, watching for good looking setups and then seeing SPY holding HP the very first day of the new quarter and half was tip to start getting long. On 7/3 sector leader XBI cleared above all pivots, though not above 10 and 20MA until 7/5. Main index leader above all pivots on 7/5 was another clue before SPY and QQQ joined above all pivots on 7/6.
From these core longs I recommended supplemental positions in XLF, XLE, INDA and potentially SMH (though semi's behind QQQ and XBI). XLF and INDA have gained, the others faded.
Now in monitoring phase of longs checking to see where adjustments might be appropriate. Thus far I have thought if DJI and NYA joined the others above all pivots I would aim for SPX and NDX target zones and expect to see RUT above its YR2. The pivot configuration is bullish but we haven't not quite gotten to targets yet. I'm pulling for these to hit these week, but also ready to make an adjustment by locking in gains, taking a short hedge on DIA, or VIX long, especially if I see a clear message of the market with multiple indexes below WPs and VIX lifting above its YP.
As total volume is quite low, there may not be enough gas in the tank to reach the levels, or the market may need another pullback to have 2H charts reach oversold before big buyers are willing to step in.
Bottom line - There have been moderate gains since longs of early July. If RUT cleared YR2 and VIX was below YP then I'd probably err on the side of holding longs. But with the three mains just shy of targets and VIX above YP, with DJI and NYA starting to move negatively from JulR1s, it is time to be watching for a defensive adjustment.
PIVOTS
USA main indexes - SPX and NDX haven't quite reached levels.
Sectors of note - XLF decent bounce from YP, but still below HP and D200MA. SMH has been chopping around its 2000 top for most of this year frustrating both sides. XBI up 18% YTD but the last 5 days stuck on JulR1.
Developed - DAX the weak link, and did not hold on to status above all pivots. Currently mixed above HP QP and MP but not YP.
Emerging - Shanghai Comp so far low 7/6 and trying to move back above YS2. Global indexes bounced quite a lot with DXY dropping; there may be more to this move with EEM back above its YP as well.
Safe havens - TLT started the 2H with a move above HP and D200MA, but didn't reach even a monthly resistance level. Sometimes it pays to do homework as I noticed levels on the continuous futures contracts that I thought would stop the rally. This was also part of the XLF long idea. TLT broke down in a big way on Friday and if we emphasize the long term levels of YP, HP and D200MA (or W50MA) then all these are currently bearish for bonds, bullish for rates. Conversely metals though only in avoid or short mode may have found a bottom on the GC current contract YS1. For stock positioning, I'm most keenly watching VIX flirt with its YP. This will be especially the case if we see a coordinated message between VIX and VXX.
Currency - DXY rejected big time at its YP, but still above MP and D50MA.
Commodity - USO tumbling to start 2H and currently below YR2 and QP, but did recover HP. Not sure which way this goes.
Crypto - It seems my 3-4K target idea being called into question with the recent pop. For all the decline this year this was a simple retest of the February low.
OTHER TECHNICALS
Total volume notably low, even for summer. I think this increases the risks on downside and may explain the target fail on SPX and NDX.
Another important note - NDX quarterly RSI about to reach 90. While there have been rare occasions with an asset class that maintains above this level, it is more likely on a monthly or quarterly chart that a major top and big drop is about to happen. For example, DJI Q RSI topped 90 only 2 quarters before the crash in 1929; IBB topped 90 2015Q1-2 before a fast 40% drop off highs.
VALUATION
Mid 16s. A tag of 17X implies 2850 area. All lines are 10 week averages as provided by Thomson Reuters.
SENTIMENT
My favorite sentiment meters remain simple put call and equity only put call as they continue to work very well. Simple put call was screaming warning in January at multi-year lows, was massively bullish to start Q2 at multi-year highs, and again warned of a top in mid June. Currently not at extreme so if the market goes higher not everyone has embraced this idea.
TIMING
7/3 - Stock index pullback low
7/10-11 - Actually looks like pullback low on 7/11
7/25 - Pulling for a stock high
7/27 (adding) - Looks like volatility spike
August dates
8/2
8/6-8 strong
8/17-20