INDU RSI peaks

This post is a follow up to the analysis of quarterly chart RSI peaks from a few weeks ago. Today I'm looking at the monthly version.

The chart below goes back to 1915. Yes I know it is hard to see the price. I'll zoom into the specific incidences soon enough. The point is that RSI is in historically rare territory and we want to examine what has happened in the past when it has been up at these levels. 

1925
1928-29
1945
1955
1959
1986-87
1996-97
2017

14 40 INDU M.png

1925-29
The first of these was a momentum high that was enough to pause the market for several months. The index went fractionally above but did not close higher; and a -16% drop to near support followed. After that, parabolic move began.

There was a cluster of months in 1928 when the monthly RSI was at today's level or higher; 3 months powered higher, then a 5 month sideways pullback, before a zoom to the final top. There was a -13% decline before the real trouble began. I think something similar 'should' be the case today. There was some divergence on the final high via Bollinger bands but RSI was not glaring and the decline was rather sudden, crashing -49% in just 3 months. 

Note the later highs in 1936 reached 80 but not 82+ of today. 

14 41 INDU M.png

1945
Similar to 1925, the first high was not 'it' but a few months later a bit higher high in price with notably lower high in RSI was followed by a -25% drop over 6 months that then had to stabilize for more than 2.5 years before another rally took off. 

14 42 INDU M.png

1955 & 1959
This was the nicest RSI peaks. 1955 went steadily higher for another year before putting in a clear RSI divergence high shown at the slanted red arrows. 

1959 had a high retest before a drop of -17% into 1960.

Note the high that really mattered in 1966 happened with much lower RSI. 

14 44 INDU M.png

1986-87
Like the late 20s, 1986 had a series of months above current RSI level but most of the gains were in before a sideways period & pullback, then another massive trust to the top. That red bar in 9/1986 was a -10% pullback, something we have not seen in 20 months!

1987 really did come out of the blue and while indexes faded back inside the BB I would not have guessed that a single 1 day drop of -20% was on the way. 

14 45 INDU M.png

1996-97
This was an amazing move as the first RSI above 82 was just 1 year into the run! While I doubt we are in the same scenario i could be wrong. There was a lengthy topping process with all kinds of crystal clear divergence on the 2000 top. But now that everyone is looking for a top like this it may not play out in the same way.

14 46 INDU M.png

2017
What is the next move? While this could go higher by a few or several bars, the more likely move according to history is a slowing of the pace, some pullback, then a higher high or at least a high test with RSI divergence. No divergence means no worry and no premature top picking just yet, even though i do think YR2 is the place for some pause this quarter. 

The only thing that bothers me with this idea is that now everyone is looking for a topping process like 2000 or 2007. Who knows, the market may be kind enough to give us a year of stall before a truly painful drop, but at the same time, given algos that are now in charge, we may see something rather sudden at some point down the line. 

The point with the two red horizontal lines is that the post election move was not really about Trump but the blast off above the 2015 highs which had stalled the market for quite some time and had started to look like resistance. From that breakout a massive one way move has followed. 
 

INDU RSI peaks

In this post I am going to explore RSI peaks on the quarterly charts for INDU, or Dow Industrials. TradingView data goes back to 1914 with RSIs kicking in 1918 on the quarterly chart. Red line is drawn at the current level.

Sum
Both 1929 and 1987 tops were followed by violent drops that came rather suddenly, with little warning or time. However, both moves had rallied much more excessively than today.

1954 RSI peak didn't have a high that really mattered until 1961, and even that after a drop was followed by another rally to higher highs in 1965. Similarly, the 1999 top gave plenty of warnings through RSI divergence and a nice long period to see distribution to get out.

Sudden top and sharp drop, or gradual slowdown in momentum and time before rolling over? So far we don't have the excesses of 1929 or 1987 in RSI terms, nor do we have any slowdown or divergence in RSI. We only have four examples but I think the conclusion is to remain bullish until we see more excess (RSI 85+) or RSI slowdown & divergence. 

Quarterly RSI values have exceeded the current level in:

1927-29
1954-56
1986-87
1995-99

3 out of 4 of these are rather glaring tops at the end, so let's explore them all in more detail. 

1927-29
This amazing run accelerated with the move above the 1925-26 sideways period in 1927. From 1927 Q3, 7 of 9 bars closed outside the Bollinger Band (BB) before the massive drop. RSI reached a peak of 91 on the top. 

The current environment while impressive is nowhere near the excesses of 1927-29. But let's file that for other indexes - Q chart RSI 90 is a potential sell.

That said when 1929 came apart it was in a massive way - if i see a candle like 1929 Q3, i will be OUT and probably short. 

30 31 INDU Q 1927.png

1954-56
This is a lot more comforting because even though the RSI peak was 1956 Q1 that was just the first in a series of higher highs. There was a sideways period and pullback to 1957 Q4, anther rally to 1959 and 1961 highs, and sharper drop to 1962 lows, then another strong rally to 1965-66 highs. These were the highs that mattered as ~15 years of sideways followed. 

If only the current environment would play out like this... we can sleep comfortably until we see a noticeable divergence top, ideally both on RSIs and Bollinger bands such as 1961 Q4 with RSI merely 71 and the highs all inside the BB compared to prior two peaks. These are highlighted by the red arrows on price and RSI in the chart below.

But it is not inconceivable that the current move could end like 1962 - a sudden drop out of the blue. 

30 34 INDU 1956.png

1986-87
The power move really began in 1985 Q2, with the jump above the prior 1983 highs, but RSI was still only 68 then. From 1985 Q4 6 bars out of 8 closed outside the Q BB before the massive drop.

The worrisome point about this chart is no warning like 1929 or 1961; out of the blue, higher highs in RSI, a mild wick but nothing that screamed sell.

30 35 INDU Q 1986.png

1995-99
Q chart RSI was an amazingly above 90 from 1996 Q2 to 1998 Q2, before a sudden shakeout during 1998. Also note how many quarterly bars were closing outside the BB - a run of 10 in a row from 1995 Q2 to 1997 Q3, a pause, then one more in 1998 Q1.

I like the 2000 top, and probably everyone does. Crystal clear divergence. A nice long time to get out. Plenty of warnings and time. 
 

2017

30 36 INDU 2017.png

USA main indexes

Sum
Last week:  2 strong, 1 middling, 1 weaker, 1 TBD -.
This week: 3 strong, 1 mixed, 1 TBD +.

So positive status change in the tech set going from middling to strong, joining INDU and SPX already there. RTY small caps remain in long term downtrend but above both medium term levels, so from weaker to mixed. NYA, getting "TBD" designation looked like pause semi-rejection from levels last week but came back to close near the levels with more chance of clear, getting a +.

Still, bullish status shifts in 3 of the 5 main USA indexes and a major change for NDX/COMPQ/QQQ/NQ to all be back above YPs, the first time since 1/5/2016 for COMPQ to be above its YP. 

The levels to watch in the coming week are still the NYA YP / HP combo at 10302 / 10228 respectively.

The other thing that is a factor is high daily chart RSIs.
SPY RSI high 4/1 69.25
QQQ RSI high 4/1 70.33
DIA RSI high 4/1 73.12, bullish to be above its 3/18-19 highs
IWM RSI high 3/7 69.87
NYA RSI high 3/18 67.88

A strong market can ignore overbought readings as the Dow has already done so far, but as more indexes join in overbought territory the more likely move is a slowdown to a range with a quick shakeout to work off the overbought condition. 

SPX / SPY / ES
Above all pivots, bullish; and not near any major resistance area. Huge support with YP 1HP Q2P and AprP all nearby. On SPX the cluster is 1980-2023. Major resistance is up at the YR1, 1HR1 and Q2R1 area all 2151-2163. The near term concern is the high daily chart RSIs.

NDX / COMPQ / QQQ / NQ
This was a huge week for the tech set as NDX lifted from its YP, COMPQ cleared YP for the first time since 1/5 this year, and NQ also jumped above its YP for the second time confirming the QQQ move earlier. QQQ different structure due to 8/24/2015 spike so I haven't really been considering that status of above its YP as fully real - now it is though. 

INDU / DIA / YM
These continue to look great especially with DIA / YM daily charts ignoring overbought readings and continuing to power up. 

RTY / IWM / TF
Mixed condition. Still well below long term levels YP and 1HP, decently above Q2P and above AprP as well. Still can be considered as possible USA long hedge against DIA, SOXX, possible SPY/QQQ longs in coming weeks.

NYA / VTI
The NYA is the only "but" of this week with clear stall at the YP / HP combo. But bang on the level and may clear next week. The daily chart shows that drops were met with enthusiastic buying. Watch this NYA YP HP area next week. VTI is already above but that is a slightly different index; still as a very broad market ETF it helps to be above. 

Comparing bear market rallies to today

Using the 5 main cash indexes, let's look at 2008 and then 2001-02. I'm doing this to add to context of "bull vs bear" idea first posted here.

2008 Sum
In 2008, NDX, INDU and NYA backtested and tagged YP and/or 1HPs and clearly failed very near the level. NDX alone exceeded YP slightly, but with 1HP just above and still resistance and never achieving YP "look of support." INDU and NYA crystal clear rejections at their YPs. So maybe this is an obvious point right now, in 2016, but 2 major indexes are above YPs so as long as this is the case we are not in a 2008 type of scenario.

Ultimate lows in 2008-09 were at SPX 2009 1HS1, INDU 2009 YS1, RTY YS1 near test, and NYA YS1 near test. 

2001-02 Sum
While SPX and NDX stayed completely below YP levels, INDU, RTY and NYA exceeded YPs for several weeks both in 2001 and in 2002. In 2002, the RTY was above its YP for the entire first half! But eventually all 5 did break down and go lower.

Ultimate lows were SPX 2002 2HS2, NDX 2002 YS1, INDU 2002 2HS2 break and recovery along with 2003 1HS1 near test, RTY 2002 YS2 near test, and NYA 2002 YS2 near exact. 

Main point for coming weeks
As much as we'd all like to know for certain, the market is unpredictable. For positioning purposes, the more main indexes above YPs the more bullish. If indexes fail at YPs then that will be clear and one can adjust the other way. Right now INDU and SPX remain above, NDX / COMPQ mixed and testing, NYA nearing a test, and RTY well below.

Obviously, if NDX holds YP as support and COMPQ joins above the YP, and NYA rallies at least above its 1HP and eventually clears its YP, then that will be 4 indexes above instead of 2. Conversely, NDX could fail leaving only INDU and SPX above, and NYA have clearer rejection. We'll see what happens. 

Keep in mind we've already seen YS1s on SPX, NDX, INDU, and NYA, and YS2 on RTY and there has been a tremendous recovery since then. 

2008

SPX dropped to YS2, rallied back to near YP but didn't even tag, then crumbled. Eventual bottom near 2009 1HS1.

20160326 1 SPX W.png

NDX broke and recovered YS1, and rallied all the way back to YP / 1HP area. 2 weeks did close above YP but the 1HP was just above and stuck as resistance. 2nd time under the 2HP led to waterfall drop. COMPQ (not shown) remained completely below both YP and 1HP without even tagging the levels.

INDU also backtested its YP but failed bang on the level. INDU eventually bottomed on 2009 YS1 near exact. 

RTY did not even tag the YP on the rally. Breakdown of 2HP started the massive drop. 

NYA backtested YP and had clear rejection. 

2001-02

Back to SPX for 2001-02 charts. SPX failed bang on YP & 1HP combo early in 2001, and stopped fractionally above the level without achieving "look of support" in March 2004 followed by a clear failure. 

NDX was leading the drop and stayed completely under YPs after breaking down in November 2000 until finally recovering in May 2003.

INDU W exceeded its YP both in 2001 and 2002. In 2001, after recovering its YS1 / 1HS1 combo, INDU rallied and then was above its YP for 6 weeks. 2 of those weeks were up, 1 was a pause, 1 down, 2 not much movement, then a breakdown. After backtesting the level from underneath and failing a larger drop followed. In 2002, INDU held 1HP support and stayed above the YP for 16 weeks (!) before eventually breaking down. 

RTY stayed completely under the YP with clear resistance in 2001, but also stayed above the YP / 1HP combo for the entire first half in 2002, breaking down only at the start of the second half. 

NYA also spent several weeks above its YP both in 2001 and 2002. 

USA main indexes

Sum
Last week 2 strong, 1 middling, 1 weaker, 1 TBD.

This week 2 strong, 1 middling, 1 weaker, 1 TBD -. (This means still TBD with a slight negative.)

NYA is a bit weaker than last week, because it clearly stalled at its 1HP level; but due to the smaller range selling bar, this doesn't look like rejection quite yet. Not much status change overall. 

To watch next week: most immediate is NDX YP at 4373, because breaking this would turn tech index group from "middling" to weak and join Russell group below long term levels. Then we are also watching NYA because any lower than last week's low will start to look more like rejection than pause. And on Friday new Q2Ps and of course AprPs are in play. 

Due to the rally and likely close it is quite possible that several indexes will be in quite mixed condition heading into Q2 - like RTY group could be below YP and HP but above Q2P and AprP. If so then there is no reason to jump in willy nilly. Soon enough there will be a very clear setup. If some cash on the sidelines then we are looking to put that to work on the best setup and also impacts the portfolio in the desired manner (ie more or less long risk, more or less long bonds, more or less long oil, gold, etc). Above 2 below 2 pivots not great setup; better when you get at least 3 on your side. Or as we did from 2/12 on, we can watch for recovery of monthly levels after the chance of a big turn which means YS1s holding too.  

SPX / SPY / ES
SPX W chart still looks quite good with small red bar and holding long term levels as support. Bullish as long as that holds. SPY and ES similar, showing Q1P as support. All 3 variations above all pivots!

The resistance level on the high was a MarR2 reached on SPX nearly reached 3/21 and then tagged with a lower close on 3/22 (See second chart below.) Usually monthly levels are not enough for a major top, although current quarterly levels are far above. 

NDX / COMPQ / QQQ / NQ
NDX barely holding YP 4373 so that is a level to watch in the coming week. COMPQ still under its YP, as is NQ. QQQ above - what? This is due to 8/24/2015 spike and discrepancy of futures to ETF pivots. It does look in play though, as does NQ YP. Pesky. Still, conclusion is tech is mixed / weaker compared to SPX and INDU. NDX breaking 4373, should that happen, would be bearish development as 3/4 main tech indexes failing at YPs.
 

INDU / DIA / YM
These charts still quite healthy with INDU W small red bar in middle of tremendous up. Well above long term pivots. You will also note INDU and DIA held YS1 exact without breaking (current YM chart looks like break, but different on YM H contract at the time) and this was why I went with DIA on the long side 2/12. These continued to lead the other main USA indexes on the way up so easy choice for long adds.

RTY / IWM / TF
While above YS1 / 1HS1 area, still lagging considerably behind the other USA indexes and not nearly close to reclaiming a long term pivot level. These may open above Q2Ps however, something to watch.

NYA / VTI
NYA W does have a red bar rejection from the 1HP which is some negative. However, it is smaller range than the last blue bar and so looks more like a pause than rejection at this point. VTI looks above long term levels - barely - but side with NYA here. Even if NYA comes back and exceeds the recent high (IF), it will be running into the YP. 

USA main indexes

Sum
INDU looks fantastic, SPX also decent; we are now thinking about YR1 targets as long as those maintain above their YP levels. The tech indexes NDX COMPQ etc are lagging. RTY remains well under major pivots despite its huge rally. NYA has justed reached its 1HP level (did not clear) with YP just above, although VTI looks better in this regard. 

2 indexes INDU and SPX strong, above all pivots
1 middling (COMPQ and NQ still below YPs, with NDX slightly above, QQQ above)
1 weaker (IWM below YP, 1HP and Q1P)
1 toss up (NYA below long term levels, VTI above)

The more indexes above pivots the better. I think some pause is more likely. There is also the matter of March R2 levels reached on INDU, DIA, YM and TF (RTY futs). If any higher next week then we'll see SPX, SPY and ES MarR2s too and that could also be a place for a short term top. 

Similar format as last few weeks. Cash index weekly chart with long term levels only; then daily charts with all levels on ETFs and futures. 

SPX / SPY / ES
We can start to think YR1s at SPX 2163 as long as the YP area holds at 2016. Near term clear resistance at the MarR2s at SPX 2054, SPY 206.03 and ES 2056. There is also the 2015 close level (red line on SPY chart) which would add to selling pressure if the market drops back under this on Friday. In addition, ES RSI is fully overbought at 70, SPY reached 68, and SPX 69. Mostly likely event is some move to work off the near overbought condition; ie mild pullback or some consolidation phase. 

NDX / COMPQ / QQQ / NQ
NDX just above YP 4373, but less impressive. COMPQ still below, along with NQ too. QQQ is above due to the discrepancy from the 8/24/2015 spike low. Basically tech is lagging here (partially due to IBB impact). I suppose the NQ YP level could be used as possible short area, but NDX is above its cash level and I think there are better choices elsewhere. If NDX falls back under its YP with the look of rejection, then OK that could be a short especially with VXN confirmation.
 

INDU / DIA / YM
Wow does that INDU W chart look fantastic. Ideal high of year 18727 at the YR1. DIA just aboev its MarR2 with YM bang on it. With RSIs that high, it may be a place to take gains on the last adds and then look for a pullback. See this week strategy sum for more ideas. 

RTY / IWM / TF
Impressive percentage move off lows, and bullish to recover YS1 / 1HS1 area, but still under YP, HP and Q1P. Futs tagged the MarR2 level, although more to go on cash index and IWM.

NYA / VTI
And there is the NYA bang on its 1HP 10228 and still under its YP 10302. Back under its Q1P 10160 in additional to returning red on the year would be a bearish trigger. VTI looks better; a slightly different construction along with 8/24/2015 influence on pivots. I am not sure which to weight here so let's say toss up. 

FOMC day simplified

Hike or no hike? What about forward guidance? What is the dot plot and how did it change? What will Yellen say at the press conference? How is economic growth? Are risks to growth balanced, or nearly balanced? Is low inflation temporary? JOLTS? Wage growth? Are global pressures still a factor in FOMC rate hike decisions? etc Etc ETC!

Simpler method, yearly pivots: SPX 2015 and NDX 4373 and if those reject, back to INDU YP 17048. Bullish above, especially with the look of support; bearish below, especially with the look of rejection.

USA main indexes

First from last week's post in the sum section: "If indexes jump further above long term pivots then semi-bear is over and bull market back! We could see a rejection, which of course keeps bear market idea alive. But given the strength of last week's up bars, some pause seems likely. [...] Right now you could say indexes confidently approaching major long term pivots and that is bullish - it looks a lot stronger than creeping up with weak advance especially on lower volume."

And then in the INDU comments: "What a huge decision for the market here perfectly illustrated on INDU! Note all the big turns on levels, 2014 low of year, 2014 higher lows, 2015 all big lows, etc. If bear market for real this should be stiff resistance; if this clears on a weekly close that would be big sign back to bullish! Both DIA and YM like the SPY / ES are just above 1HP & YP but below Q1P and MarR1."

DIA and YM held their YP for 5 straight trading days before the big leap on Friday. 

Sum
More significant pivot status changes. As of the close of last week on 3/4: INDU / DIA / YM above 3 pivots but below Q1P; by the end of the week YP had acted as support for 5 days on DIA and YM and all 3 cleared the Q1P to regain status of "above all pivots." SPX cleared fractionally on Friday, so 2014-16 gets you the Q1P, 1HP and YP so a big tell going forward if that holds. Similarly, SPY and ES also jumped above all pivots on Friday from being below 3 levels on 3/8. NDX testing its YP 4373 another key level to watch; then better if VTI holds its 1HP / YP combo at 102.50 - 102.73 and clears its Q1P at 103.41 as well. 

RTY while healthy gains from the low, still a ways to clear pivots; NYA a bit closer but basically in similar condition.  

Due to all the Q1Ps in play I am going to follow the same format as last week. Weekly charts for cash indexes showing long term levels only, then daily charts on the ETFs and futures.

SPX / SPY / ES
SPX trading through the YP / 1HP and back above all pivots! This is a big deal as it opens the door to 2162-63. That said, the pivot level does not yet have the "look" of support. When we see that, then we can really think about that higher target level. If playing the bull side obviously you'd want to see SPX remaining above 2014-15 in the coming week. 
SPY does have 1 day lift-off from the YP and above the Q1P, bullish.
ES after 3 days of healthy pause, 1 day selling, 2 days pause, broke out to upside and now above all pivots!

NDX / COMPQ / QQQ / NQ
NDX back to YP 4373 so that's a level to watch this week, COMPQ a bit below. Hard to know what to do with that QQQ YP as there is such a discrepancy between that and the cash index & futures levels (due to 8/24/15 spike low). If long against that then watch the others. NQ also still heading into resistance at 4129.

INDU / DIA / YM
Clear pivot leaders with INDU having the most "look of support" on the weekly, and both DIA and YM holding YP for 5 days (!) before the launch. If INDU stays above this pivot support area YP / Q1P 17048 & 17138 then we can start to think about 1HR1 / YR1 targets at 18584 & 18727 respectively, or 8%+ from here. 

RTY / IWM / TF
These have had a tremendous rally from the YS2 low, showing real buying in the market. Back above YS1 / 1HS1 was a tell last week, and now that needs to hold as support. That said, still a far cry from regaining Q1P, 1HP or YP pivots. 

NYA / VTI
NYA clear lift from YS1 / 1HS1 support the last 3-4 weeks, but still heading into 1HP & YP pivots. VTI pivots are at different levels, again likely due to 8/24/2015 spike, although VTI may not be exactly benchmarked to NYA, they are both very broad composites. 1 day above 1HP and YP, still heading into Q1P. 

Bull vs Bear

On 1/7/2016 I wrote: "Is this a key low or is the bear for real? Bear for real below the 2016 YP at 4373." This was a simple statement but actually quite carefully considered as explained here.

Now some might say that didn't turn out, because SPX and INDU were down only -15% from 2015 high to 2016 low, and NDX about -18%. If you are using -20% then OK that didn't qualify. Although the weaker USA main indexes RTY and NYA did reach bear territory with -25% and -20% respectively. 

Also consider by shifting conclusively bearish I emphasized the safe haven trades from there: TLT, GLD and perhaps some GDX. After 1/7, these had the chance for 11% upside in TLT, 19% upside in GLD, and 68% in GDX! Now you wouldn't have gotten these exactly because it is measuring a low made after 1/7 to the highs; but similarly, the stock indexes measure the drop from high to low. 

Meanwhile after 1/6-7, SPX had about additional -9% down to the lows, INDU about same at -8.5%, and NDX a bigger drop after 1/7 (because that is when YP broke) at another -10% down.  The more bearish vehicles as noted above were another -12% down on RTY and another -9.5% on NYA.

So despite SPX, NDX and INDU not reaching that 20% media headline number, this idea of playing the market more defensively worked quite well. Until 2/12 when oil bottomed on its YS1, INDU recovered its YS1 after a slight break (DIA and YM held) and RTY held YS2! I did recommend speculative buys on INDU and oil right on 2/12! 

Since then I have recommended even more longs, but still wary of the rally with two quick short shuffles that were nixed the next day. Why? Because stock indexes were below 3 / 4 pivots and only recovered monthly levels, while still below yearly, half-year and quarterly pivots!

But now it may be time to shift tune. INDU / DIA / YM has been the pivot leader on the rally. This wasn't the case in the 2009-2015 bull market where it was the NDX. What I mean by this is SPX, NDX, and NYA all broke their YS1s, and RTY went all the way down to its YS2, but INDU broke YS1 fractionally as DIA & YM clearly held.

INDU was the first cash index to close above its FebP (fractionally on 2/17) with others still below, and likewise the first to close above a long term pivot on 3/4 above its 1HP, where the others hadn't done that yet. And really YM and DIA were the best tells last week, clearly holding major support before the big jump at the end of the week. On Friday both SPX and INDU leaped above all pivots on Friday, but with INDU the current leader the market call here is:

Bull alive and kicking above 17138 (the highest of the INDU pivots, the Q1P) and still more likely than bear with INDU above its YP at 17048.

USA main indexes

Due to levels that tagged on Friday, this week will be slightly different. Usually I post weekly charts for all variants of the 5 USA main indexes, but since a few key quarterly pivots were clear resistance last week, I thought better to show those. The way I can do this is include all pivots on a daily chart. So the format below will be weekly charts with long term levels only on the cash indexes for larger context, then daily charts with all levels on ETFs and futures. 

Sum
So many levels in play with very important implications. A few indexes especially have a tight cluster of 3 pivots and a monthly R1 all nearby. If indexes jump further above long term pivots then semi-bear is over and bull market back! We could see a rejection, which of course keeps bear market idea alive. But given the strength of last week's up bars, some pause seems likely. A clear answer is easiest but sometimes it isn't and we check again on the next bar. Right now you could say indexes confidently approaching major long term pivots and that is bullish - it looks a lot stronger than creeping up with weak advance especially on lower volume.  

Indexes testing YP / 1HP:
SPY ES NDX (almost) INDU DIA YM and VTI. This past week was the first touch of these levels since the breakdown the first week of the year. In addition, most of these are near Q1P and MarR1 levels as well. 

SPX / SPY / ES
SPX still a bit shy of huge pivot status 1HP / YP combo at 2014-15. 
SPY cleared 1HP / YP barely, but resistance at Q1P (smaller crosses at the high) and MarR1 as well.
ES like SPY. 

So immediate levels to watch are the SPY & ES long term levels 1HP / YP 199.81 & 201.01 respectively and whether those act as support or resistance; then the medium term levels Q1P and MarR1 at 201.55 and 199.79 respectively. ES versions 1988 for the 1HP / YP, then 2004 / 1998 for Q1P and MarR1 respectively. 

I won't type up levels for each index but if you don't have pivots on your platform just ask through the contact page. 

NDX / COMPQ / QQQ / NQ
NDX approaching HUGE bull/bear line for mkt at the YP 4373. 
COMPQ also below its YP.
QQQ discrepancy due to 8/24 spike, although this doesn't make sense it DOES look like the level is in play. If long on that would want to see confirmation via cash index and fututes though, which hasn't happened yet. 
NQ still well under its YP  4432.

INDU / DIA / YM
What a huge decision for the market here perfectly illustrated on INDU! Note all the big turns on levels, 2014 low of year, 2014 higher lows, 2015 all big lows, etc. If bear market for real this should be stiff resistance; if this clears on a weekly close that would be big sign back to bullish!
Both DIA and YM like the SPY / ES are just above 1HP & YP but below Q1P and MarR1. 
 

RTY / IWM / TF
The low of the year was bang on the YS2s on these indexes. Sign of strength last week was jump above YS1. 

NYA / VTI
NYA healthy rebound from 1HS1 / YS1 combo. VTI already testing resistance cluster like SPY & DIA.

The most important levels for the market

SPX, NDX and INDU are within striking distance of their yearly and half-year pivot levels. Due to the variance between the levels on the cash indexes, ETFs and futures, there is not just one level for each but a zone that is very important to watch going forward. 

In 2008, the INDU was able to backtest its YP in April after rallying from YS1 even, and we all know what happened after that. But if the YPs clear then it will be very likely the major low of the year is in. 

So it is also a good time to think about what can happen as the market approaches a critical level from underneath:

most bullish - soar through it
bullish - slight pause then clear
mixed bullish - pullback then try again
mixed bearish - overshoot by a few days then break
bearish - clear rejection
worst case - chop, ie above below above below, but let's hope that doesn't happen

SPX YP 2015, 1HP 2014
SPY YP 200.01, 1HP 199.81
ES YP 1988, 1HP 1988 (very close tag already!)

NDX YP 4373, 1HP 4373
QQQ YP 104.11, 1HP 104.11 (already cleared) 
NQ YP 4432, 1HP 4432

QQQ looks bullish but level maybe suspect due to 8/24/15 spike; I would weight the cash index and futures here.

INDU YP 17048, 1HP 16977
DIA YP 169.30, 1HP 168.60 (1HP tagged)
YM YP 16959, 1HP 16907 (1HP tagged)

Here are charts for those that tagged (or nearly tagged) levels - ES, DIA and YM.

USA main indexes

From last week: "I will do a separate post for the medium term levels to watch for the week, ie, the Feb pivots. If the market drops back down, then at least some of these YS1 / 1HS1 levels will be back in play."

And that is almost exactly where the lows were with huge holds of SPX YS1 1895 (low 1891), COMPQ YS1 4455 (low 4425), NYA YS1 9350 (low 9325), along with oil CLJ6 1HS1 30.77 (low 30.56). 

The reason I am watching cash index, ETF and futures levels is because (unfortunately) all of them seem to be in play. Last year I was more focused on the cash index levels (which worked great for NDX on 8/24); but my plan to aggressively buy SPX YS1 at 1833 in late September never triggered as the market held YS1 on the then current ES contract instead. That convinced me to include futures on all levels, not just medium term as I had been doing. And the ETFs have the benefit of free real time monitoring on TradingView as well as several other sectors & countries that are otherwise more difficult to track.

Also, due to pricing differentials on the 8/24/2015 spike low, pivots are more different this year across similar asset classes. Meaning SPX SPY ES should be about the same, but 2016 pivots vary more this year than most other years, so I want to watch which seems to have the most influence on the market. Verdict so far is the cash index yearly levels, but there are definitely some moves coming off the futures and the ETFs as well. 

Now on to this week's report on the 5 main USA indexes. All charts weekly with long term levels only. If you are new please see the FAQ for explanation. Levels sometimes look to good to be true (see low of year on the Russell vehicles) but in fact all levels established at the close of 12/31/2015 and fixed for the current period, so that means all of 2016 for yearly pivots and the first six months for first half pivots.

Sum
Several key indexes clearly lifting from YS1s is bullish, especially when those levels "look like" support. The indexes that directly tested and held major levels last week: SPX, COMPQ and NYA.

Also, RTY / IWM / TF continues the bounce from YS2 lows (all very near exact), which was basically the low in the market on 2/11. They now are testing the YS1 / 1HS1 area from underneath; a recovery of this area would be major bullish development as this has been the weakest main USA index for many months (so not including sectors like energy). A pause is mixed, a rejection of course is bearish. I think this is one of the most important levels to watch for the coming week.

If the market goes higher, then DIA, YM then INDU may test YPs as well. 

We'll also have new March pivots on 3/1 and the first thing I will scan is whether any asset is above or below these levels. 

SPX / SPY / ES
SPX clearly lifting from its YS1 last week which is bullish. If the market goes any higher it will is possible that YPs will test on the ES (which will happen before a test of SPX or SPY). 

NDX / COMPQ / QQQ / NQ
NDX continues the bounce back above YS1; COMPQ held YS1 as support last week like SPX; QQQ tested its YP! And NQ also lifted back above its YS1.
The differential between QQQ and others is due to 8/24/2015 spike low and very annoying. I won't go back to full bullish with QQQ above YP, but could add to bullish considerations if above and bearish if it is rejected. 

INDU / DIA / YM
All of these very clearly held YS1 and 1HS1 areas near the lows, which is why I recommended the buy on 2/12. And soon a very critical test of the YPs could be coming up. Right now INDU / DIA / YM are the market leader of these 5 indexes, so I will change gears significantly if these clear the YP / 1HP area. If rejected, however, then it looks like other bear market years testing the YP from underneath after a bounce, and this could and should lead to another significant leg lower. 

RTY / IWM / TF
Note the lows of the year on YS2s across the board; now all 3 testing YS1 / 1HS1 area. Recovery would be very bullish for the market, so this is one of the most important things to watch in the coming week.  

2015-16 can be summed up this way: YP hold, YR1, attempt to clear YR1, rejected, down to YP, chop with several breaks & recoveries, then sharp drop to 2016 YS2. So, 2015 YR1 to 2016 YS2. 

NYA / VTI 
NYA also clearly lifting from YS1 / 1HS1 combo which is bullish; VTI already above. 

FebPs

A lot of February pivots in play for the coming week. I am showing med term pivot only charts here (so no S or R levels, and no yearly or half year levels), to make these easier to see. FebPs are the small orange dots. Crosses are the Q1Ps. 

If bullish then indexes will recover these levels and then they will further act as support. If bearish then we'll see any more lower and/or a clear rejection. I haven't lised NDX based indexes or RTY since they are not quite near their FebPs yet. 

SPX 1930, SPY 192.21, ES 1925

INDU 16440, DIA 163.49, YM 16373

NYA 9536 and VTI 97.76.

USA main indexes

Intro note: If you are new to my terminology please see the FAQ page and especially the video posted there.

The must read summary of the big indexes. All charts are weekly with year & half-year pivots only.

Sum
Based on the 2/8 weekly bars (so 2 bars ago) that held INDU / DIA / YM YS1s and RTY / IWM / TF YS2s, the stage was set for a bounce and that came through. And last week, SPX / SPY / ES recovered their YS1s; NDX lifted from its YS1 as COMPQ & NQ recovered YS1s, and NYA & TFI recovered YS1s too. In all cases, the half year levels are quite nearby the yearly levels as well. So this is bullish action from major long term support (both yearly and half-year) on all main indexes - with YS1s in play for all except YS2 & 1HS2 on RTY / IWM / TF.

If looking at the charts below, just check the action from the large green crosses (YS1s or in case of Russell indexes YS2s).

And who knows, maybe the major low for the year is in and the market is on the way back to yearly pivots and then YR1s. Anything can happen. Right now we can say long term support held, recovered, or bounced on all 5 main USA  indexes. 

If the market goes higher it will will take significantly more advance to recover longer term levels ie the YP / HP / QP levels. I will do a separate post for the medium term levels to watch for the week, ie, the Feb pivots. If the market drops back down, then at least some of these YS1 / 1HS1 levels will be back in play. 

SPX / SPY / ES
SPX reclaimed YS1 1895 / 1HS1 1896 combo, bullish
SPY had held levels fractionally 2 bars ago, more convincing lift last week
ES lifted above 1866

So all 3 recovered YS1s, bullish. If lower the first to break will be SPX 1895-96, then the SPY and ES levels back in play. 

NDX / COMPQ / QQQ / NQ
NDX YS1 & 1HS1 recovered fractionally 2 bars ago, clear lift above last week, bullish
COMPQ also recovered YS1 / 1HS1
QQQ perhaps not best guide this year with big discrepancy in structure due to 8/24/15 spike
NQ also recovered YS1 / 1HS1 4130

So all but QQQ (which remained above YS1 due to pivot structure discrepancy) recovered YS1s, bullish. COMPQ and NQ do not quite yet have look of support. 

INDU / DIA / YM
All 3 had clearly held the YS1s / 1HS1s 2 bars ago, and put in some bounce from there as planned. The hold 2 bars ago is why I recommended a speculative buy on INDU / YM on 2/12. 

RTY / IWM / TF
All 3 bounced from their holds of YS2 / 1HS2 combo. 

NYA / VTI
Both recovered YS1s & 1HS1s, bullish.

FebPs

Quick one here, the market is testing FebPs on:

SPY / ES / SPX (as mentioned in the usual SPY daily section yesterday) at 192.21, futs 1925 and cash 1930 respectively. 

DIA / YM / INDU at 163.49 (above yday), futs 16373 (slightly above)  and cash 16440 (slightly above) per yesterday's close.

Also keep an eye on NYA FebP at 9536.

*

2:00 EST update. As I type SPY / ES / SPX looks rejected, but DIA / YM / INDU too close to call. Things could change tomorrow but right now the SPY / ES / SPX rejection is bearish until they recover. This would mean taking profits on some other recent longs (RSX, EWZ, EEM) if not out already, and adding back shorts. Best short candidates likely to be anything that didn't even come close to recovering its FebP and quick scan turns up QQQ, IWM, IBB, XLF; or go with what is above all pivots and add back any trim on TLT.

Monthly levels are not my favorite place to position because they can change status fairly easily; so to be clear this is just finessing long / short exposure from the recent drop and bounce. If bounce looked good to continue, then I'd say add more on what is above FebPs. But stopping at the FebP and turning down puts bear breakdown scenario back in play. Watch what happens into the close, and if nothing is really clear then just wait until Friday.

USA main indexes

Intro note: If you are new to my terminology please see the FAQ page and especially the video posted there.

The must read summary of the big indexes. 

SPX / SPY / ES
SPX needs to reclaim YS1 / 1HS1 combo
SPY level is lower due to 8/24 spike, and in fact 2/12 closed slightly above
ES also below but within striking distance of level 1866

NDX / COMPQ / QQQ / NQ
NDX YS1 actually hasn't broken on weekly close yet; big level to watch considering 2009-15? tech led bull market. 
COMPQ well below however
QQQ perhaps not best guide this year with big discrepancy in structure due to 8/24/15 spike
NQ well under YS1 

INDU / DIA / YM
All 3 of these clearly holding YS1s. Read this blog post for the importance of the INDU yearly levels. Holding here sets up bounce possibility, which is why I wrote about this speculative buy. 

RTY / IWM / TF
All of these are on YS2s. As RTY etc has led the USA market down, obviously the YS2s need to hold for USA stock bounce.
 

NYA / VTI
These are not exactly the same but similar broad composite cash index & ETF. NYA bit under YS1s, VTI more easily recovered. Watch these also to gauge strength of bounce if it happens. 


Speculative buy

Generally I am in favor of buying above pivots and selling below. Use S levels to cover shorts and R levels to take some profits. But sometimes the markets present good risk/reward chances the other way. 

INDU is reclaiming 2 long term levels, YS1 15746 and 1HS1 15817. VXD poked above its YP 26.79 and 1HP 27.14 and as I type back below. All the other yearly levels I have been mentioning the last two days here and here and here and here as I type are all resolving in bullish fashion. INDU is the only index of the main USA 5 to hold its YS1 (SPX, NDX, COMPQ, RTY) all broke. 

So if INDU holds its YS1 and 1HS1 into the close, along with VXD remaining below levels, i think a decent speculative buy setup. 

Tradingview.com only has index end of day data, so I"m typing this up with DIA at 159.24.

 

2/12 3:15 EST update. Conditions likely met for spec buy. If taking next week want to see DIA above weekly pivot and SPY above YS1. Spec positions better to use tighter risk control. Remember, despite the rally, right now DIA above only 1 pivot - daily. Not weekly, monthly, quarterly, half-year, or yearly. 

INDU and turn here?

The Dow Industrials index, or INDU, though common in the media, doesn't get as much attention from the pros. For example, daily volume on SPY yesterday 190M, QQQ 60M, IWM 53M, and DIA a lowly 10M. Futures are similar. However, from The Pivotal Perspective we need to consider the Dow as important as other indexes. Evidence all on INDU long term pivots over the last 10 years:

2006 key high in May on YR2
2007 low of year in March bang on YP, and *the top* on 2HR1
2008 major lower highs April and May bang on YP; July low on YS2
2009 *the low* on YS1 near exact
2010 key high April 1HR1, key lows May June very near 1HP
2011 major high in May on YR2
2012 highs March - May on YR1
2013 QE steroids year trend up no turns; YR2 support pullback low in June
2014 low of year on YP exact
2015 key low early February on YP exact, lows of year just under YS1 (INDU traded below YS1 for 3 days in 2015, and actually level held on each weekly close)

And since we here we are near INDU YS1 again, have to consider it as possible major support. Here's the chart. Recovery and close above YS1 15746 possibly bullish, even better to close above 1HS1 15817. Remaining below those levels definitely bearish. 

Other yearly levels in play are on the RTY cash index. Similarly, possibly bullish above YS2 952, then better above 1HS2 966; definitely bearish if remains below. So, if short on IWM from late December on best trigger or early January, or reshort from 2/1-2, possible partial cover. 


Also, VIX yesterday above YP & 1HP both at 27.46. So what's bullish for VIX (above pivots) is of course bearish for stocks, and vice-versa. 

Lastly, oil on both continuous and current contracts on the YS1s. CL1 YS1 26.69, 1HS1 27.89.

Volume shifting into the J contract, showing the daily chart here.

Lastly, TLT and other bond vehicles (ironically, ZN futs and TYX, charts not shown) each tagged yearly levels yesterday with some rejection. 

My bias is this isn't the final low for the year, but when we do have it it will be something like multiple yearly or perhaps half year levels testing and holding like potentially today. 

USA main indexes

Weekly charts and long term levels (yearly & half year) only:

SPX / SPY / ES
COMPQ / NDX / QQQ / NQ
INDU / DIA / YM
RTY / IWM / TF
NYA

Sum: The more of these that trade below YS1s, the more likely we will see a batch of YS2s on the low that counts. Considering some current YS1 breaks that we are seeing after the market stabilized for a few weeks, that's bearish. 

SPX broke YS1 last week, SPY still above, ES breaking this morning as I type. Bearish to break the YS1s as many YS1s tried to hold the market for the last few weeks. On the long term level, next support is far below ie YS2 / 1HS2 combo at 1748 SPX.

COMPQ broke YS1 last week, NDX on the level, QQQ well above (discrepancy due to 8/24 spike), NQ break. Barring big recovery today (anything is possible) likes like both cash indexes and the futures will be below YS1s, bearish.

Interesting, INDU and DIA well above YS1s, with YM testing this morning. So this type of relative out-performance over SPX and NDX makes INDU/DIA for now, first on watch for any bounces. This is especially true if YM continues to hold YS1. Conversely, if you are short (as one would be following this method, along with TLT and GLD longs), one could use DIA as hedge if you wanted to keep more gains on stock bounces. 

RTY / IWM / TF stopped at YS1 on the bounce, making visit to 1HS2 / YS2 area likely.

NYA broke its YS1 on close for 1 week, recovered, bounce, down but held, and looks likely to open below this morning.

Weekly charts - USA main stock indexes

Showing weekly charts with long term pivot levels (yearly and half-yearly) for what I consider to be the 5 main USA stock indexes / ETFs:

SPX / SPY / ES
NDX / QQQ / NQ
INDU / DIA
RTY / IWM
NYA

SPX recovered YS1; SPY and especially ES have the look of lifting from the level as support. Also note lows the last few days bang on the level 1866 which I was mentioning all week in the daily SPY comments. But still below the major YP and HP levels by quite a lot. In my view, big levels definitely used for short covering, perhaps speculative buy, but no big investment buying until above at least one long term pivot level. 

NDX held its YS1 exact and this was pretty much what stopped the crash. Although QQQ levels "should be" like NDX, due to the 8/24 low they are quite different. So QQQ did not even reach and YS1 level although the cash index did; and very close to recovering its YP although the case index is quite far. The futures NQ also reached YS1 and held. Bottom line some programs may check in with QQQ above the YP / 1HP combo, but anyone buying should keep sharp eye on the NDX and NQ pivots to confirm.

INDU held YS1 / 1HS1 combo and decent bar up from there. DIA almost same look. 

RTY and IWM held YS2 / 1HS2 combo and now heading into YS1 / 1HS1 level which might be resistance. 

Last but not least, the NYA held its YS1 / 1HS1 combo as well. 

All of these, along with many other stock indexes / ETFs, held yearly and half-yearly levels in the past weeks. Most of these will open below February pivots, so we'll carefully watch the medium term levels (quarterly and monthly pivots) to assess the strength of the bounce.