Interest rates, TLT and XLF

Aside from biotech jump this is the biggest story in markets. In July I was noticing how historically stretched the RSI's were getting on multiple timeframes and did two special posts here on 7/2 which said very stretched but should see a bit higher, and here on 7/9 which said a turn was starting to be possible. On 7/6 in the SPY daily I made the one and only counter-trend short recommendation on this site ever and picked off the level within .02 using pivots.

From 8/15 big picture thoughts: "So far my top call on TLT is still holding. I'm not totally certain that it does, but with TLT below the AugP then hold your shorts if you took that trade. Regardless, if TLT can rally again, then I think this will be a *very* key high. It might be higher, perhaps a double top, maybe lower; but after this, I will be quite bearish TLT and bullish rates. I am basing this opinion on the Bollinger band and RSI action on TLT across timeframes, some timing work, and the aforementioned perspective on government intervention in markets." 

Q4 as started very bearish for bonds as written up here, and each safe haven section from mid October on has pointed to bond weakness. Now what?

Let's start with long term charts. I usually refer to TLT, but for even greater long term perspective let's check out TYX. This has been under the 10MA (aqua) since 2014 Q3 until just now. I think the momentum move is to stay above, and the next level to test will be the 20MA at 3.03. While ultimately I think higher, maybe some reaction from this level and round number area. Longer term, if correct on the rally idea, a move to the upper BB and falling 50MA is not out of the question. Currently these are up near 3.8.

Going back to TLT for the monthly chart, it has broken both the 10MA and 20MA with 50MA at 120.91.

Now the weekly long term pivot chart shows a break of 2HP and resistance from there, and straight down to the YP at 124.65.

TLT daily pivots only (no support or resistance) shows the entry 10/3 with rejection of Q4P and OctP, falling MAs, MACD rolling over. The 2HP really never bounced and the move stayed under the falling 20MA (orange) the entire time. TLT is breaking the YP at 124.57 with no attempt to bounce! Now we might see a break and recovery (like IWM & QQQ recently) but let's watch this key level. Below this means below all pivots for bonds! This is the first time since July 2015 we have seen bonds this weak.

Adding in support levels and momentum, either this YP area stabilizes or we could see Q4S3 at 121.89

This huge move in bonds and rates has turned financials into the leader of the market. XLF above Q4P the entire quarter! What else can say that? All USA mains broke at some point. Only EWZ Brazil and SMH/SOXX held up sideways above Q4P as other indexes dropped. On 11/7 XLF was above all pivots. The market gave plenty of time to spot this relative out-performance. 

Other financial indexes may differ a bit. IYF is the ishares version. It too jumped above all pivots on 11/7, but had a fractional break of Q4P 11/2-4. But both have made new highs for 2016 before anything else that I track. Are financials about to take over leadership like tech & biotech in 2011-15, and EWZ and SOXX in 2016? 

Decisions, decisions

The idea of trading or active management is to make decisions that will benefit the account compared to a passive approach. This can be difficult, but is far easier in smaller amounts (ie transactions that don't move the market). And as I have demonstrated on this site for 10 months, very possible with the right tools!

Some decisions are crystal clear, like buying stocks on 6/28 and adding 7/5-6. But that doesn't mean every decision is easy, even using this method. Let's take a look at two recent recommendations and decisions to make today. 

TLT daily chart below with pivots and moving averages. 5/31 and 6/1 was a long opportunity, crystal clear. But after the run up, TLT appeared to have a rejection from 2 long term resistance levels coupled with RSI extremes on multiple timeframes. A decision to take profits 6/16-21 was warranted, but wrong, as TLT jumped back up on 6/24 then exploded higher.

6/24 and especially 6/27 were tough buy areas, because not near any pivot, and RSI stretched. So I passed on that long and instead focus on stocks, which provided ample opportunities to buy above pivots. I recommended a short near the high (see recent featured posts) and took that. We have already sat through one bounce, now another. All we have seen on a drop is a move to a monthly S1. The decision here is to hold the short below the AugP, or take profits. I think if you took the short, still better to hold. But if you didn't take the short, yesterday's repeated hold of AugS1, combined with the rising daily 50 moving average (purple line), is not a terrible long setup in one of the strongest trend in the markets.

Now on to EEM. I strongly recommended this as a buy on 8/3 and made a special point to highlight this in the daily SPY comment. Do you see why? Clear hold of the YP, with the AugP also not far below; tremendous hold of a rising D20, and clear of a D10 and D400 as well. 3 moving averages on your side, the yearly and monthly pivot all on the same day. What more do you want?

As it turned out EEM was one of the best things to own since then, and made a very fast rise to major resistance cluster. Now we have a decision: take profits or hold? Key points: 3 resistance levels: AugR1, 2HR1, Q3R2 not far above. Daily RSI is officially overbought. And not shown: EEM has been entirely outside its daily Bollinger band for 2 days in a row. This is quite rare; the last occurrence was 4/8-9/2015. Although EEM did go higher by a few $ and a couple weeks, this was 2 week away from a major top. Before that the nearest example was 6/10/2014, which had 1 day mostly outside the BB and RSI near OB. This was a trading high that held for 3 weeks. One more example: 1/2-3/2013, both days nearly all outside the BB and RSI fully OB; that was the high for the year. 

I don't know what is right here. If we take profits, then it could have a minor pullback and jump above the resistance levels. If we hold, maybe this a major top. I made a decision today to trim the position and take some gains, but hold a decent chunk. We'll see what happens. 

Bonds

Sum
TLT still in strong uptrend, above all pivots. Current high of year on 1HR1 / YR1 combo. While stocks have pushed higher TLT quietly back near highs. I could be wrong, but per this safe havens, stock and vix post feel something should give here, either safe havens should be dropping as stocks continue up, or safe havens stay strong and stocks have more of a pullback.

* * *

TLT W lifted from 1HP the first week and cleared the YP the second week. The high is bang on the 1HR1 / YR1 combo. After a 3 week pullback there was just 1 close below the 1HR1 which quickly came back as support.

Now what? While stocks pushing higher TLT has quietly rallied 4 weeks in a row. Not as zippy as first rally but that was when stocks were crumbling. It is hard to imagine a scenario where TLT is at 2016 or even 2015 highs and USA stocks are powering up too. 

TLT was above monthly pivots nearly all January, February; below in March but didn't even reach S1, now again above in April. Quite healthy trend, above all pivots again as of 4/1. There was some rejection at AprR1 but looks like coming back here today. 

Bonds

Sum
I recommended TLT on 1/6 when it jumped above pivots and then said add further if YP acted as support which was 1/22+. The first exit was nailed on 2/11, but then I said hold above the 1HR1 level which got shaken out and probably I should have used a zone of that long term level plus a medium term level.  

A recent play on TLT I said quick in and out but not sure the out was correct. I thought to move money into what was moving best and that meant stock indexes but this is still quite a decent trend. Near term will be watching relation to and any move from Q2 and AprPs that will be in play from 4/1.

* * *

TLT went from 2015 high very near 1HR2, all the way down to 1HS1; then up to 2016 high at 1HR2 / YR1 combo. Current it is holding 1HR1 as support. The long term level range is that 1HR1 up to high area at YR1 / 1HR2. 

Here is the daily chart with the same levels to see how active they were. I am not showing the quarterly and monthly pivots since they change over on 4/1. For the huge rally in stocks, TLT has held up quite well.

Some interesting BB divergence on the highs. Previous highs were outside the BB, this one entirely inside. But decent advance with strong rising MAs and markets can ignore divergence and continue higher. Near term I am wondering about a re-balancing drop in TLT.

This M chart just doesn't look too bad. Small red bar that held the open area. To me looks more like pause than reversal. Nicely rising MAs too. 

Bonds

Sum
TLT above YP, HP and even 1HR1 acting as support and Q1P; still under MarP. Upward sloping 20MA on Q, M, and W charts, but not daily. Ie, mostly still strong uptrend. However, potential BB and RSI divergence forming on the quarterly chart, for now something to note. For more see the details below. 

Recent rec of buying TLT if above both 1HR1 and WP did well, although probably a better idea was one portion on the 1HR1 and then add above the WP. That would have been lower average cost. 

TLT W well above long term pivots and despite 1 week break of 1HS1 recovered that level and acting as support. High of year on YR1 / 1HR2 combo so for now that is the long term range.

TLT D with medium term levels. TLT has spent all of March below its pivot and yet not much damage. Also, it didn't reach MarS1 while many stock indexes reached MarR2s. Point: TLT holding up quite well. If it maintains strength into quarter end then it will be poised to be above all pivots, but several days to decide that. 

TLT D with all levels harder to read unless fluent in these methods. Remember, MarP in play only through end month but active until then. Jumping above Q1R2 bullish today, though still some resistance near the MarP. 

As quarter end approaches I think it could be worthwhile to look at regular format charts on larger timeframes. Standard bollinger bands, 10MA in light blue, 20MA in orange, 50MA in purple below. Quarterly chart here and very strong trend with nicely trending 20MA. But te top shows classic divergence pattern from previous highs both on BB and RSI. The top is completely inside the BB while previous highs were outside; and despite a quarterl close near the high bar RSI likely lower. Divergence precedes big turns but also can last an excruciating amount of time if you are looking for a turn. For now, something to note. As we head into Q2, is the big money move sell bonds or buy bonds? Not sure!

Monthly chart below. A close here would look quite bullish, ie small red bar in  uptrend that held last bar open area. 

Bonds

Probably there was some selling on bonds / buying on rates heading into the FOMC, and now there has been a dovish surprise: from 4 hikes to 2 already and it is only March. Why not spare everyone the agony and just say .25% every December and then people can plan on 1% for the start of 2018? Oh well... 

Sum
TLT broke a long term level that could have held as support for 2 days but then recovered. Still above yearly, half-year, quarterly pivots; only below a monthly this month, yet didn't even reach the MarS1, a sign of potential strength. Using MAs, there was a 1 day slight break of a nicely rising D50 and recovery. Depending on if stock indexes do with their yearly pivots (SPX, NDX) into the end of the week, TLT maybe worth again keeping in mind as a buy (if out) or a re-add if had reduced earlier this month below the MarP to put into stocks. Also, rate weakness TLT strength likely corresponds with XLF weakness so that remains on the list of short ideas. Another post on that soon. 

TLT W chart below, and I cannot complain about the pivots as they have been an amazing tool for months. Just look at the 2015 high on 1HR2 and rejection under the YR1 and big drop from there all the way to 1HS1. After recovering the 2015 YP was clear support several times, the 2016 1HP clear support and launch, and now the 2016 high is bang on 1HR1/ YR1 combo. So if we have a mildly annoying slight break and now recovery of the 1HR1 level we just have to go with it. 

Here's a daily view of long term levels - I am showing the extreme high volume selling on the high which was also a tag of 2 long term resistance levels. That was the place to reduce any later adds. The 1HR1 level (red dots in middle of range) broke for 2 days but now recovering.

Daily view of medium term levels, note resistance also near FebR1, then especially clear on MarP orange dots. 

Now all together. 

Here's a more typical daily chart. That still has a nicely rising D50 which cannot be said for several USA stock indexes. If stock indexes fade back under long term levels this likely corresponds with TLT moving up. 

 

 

 

 

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.

TLT and GLD

TLT low near 1HP, jump above YP, tag of 1HR1, up to the high of year on 1HR2 / YR1 combo, now fade back to 1HR1. Got that? Just look at the bars and levels below. 

But on the medium term levels we see a monthly pivot acting as resistance for the first time in a while this month. 

So the recent range this month is long term support at 1HR1 127.87 vs medium term resistance at the MarP 130.84.

GLD started below its 1HP but jumped above later in January, then soared above its YP and very quickly reached its YR1 / 1HR2 combo. Unlike TLT, however, GLD cleared these and now may act as support. 

GLD above Q1R2 and well above its MarP. 

Here's a version with all levels. Better for YR1 and 1HR2 to act as support so that is 117.94 and 118.98 respectively. But if that goes it will still be above its MarP which could also try to hold. 

TLT and GLD update

If following The Pivotal Perspective you avoided a lot of the damage in stocks, started buying back 1 day off the low; and made great gains in the safe havens. Since these were the only things in the universe above pivots they were screaming buys, and then even adds as they cleared YPs in later January (for TLT) and early February (for GLD).

Recently I was shuffling the add portions expecting a safe haven drop if stocks bounced further, which was right for TLT and not for GLD. Let's take a look.

Wait, you mean those red lines at the top were there before the move? YES. From the open on 1/4/2016 yearly resistance levels like all yearly pivots are fixed and in play. So 1HR2 at the tippy top, also resistance at YR1 red crosses; so now the big issue is if 1HR1 lower red dots holds as support especially on a weekly close. That level is 127.87.

Here's TLT D with med term levels. You can see TLT below the small orange dot from early March, that is the March pivot. TLT has been mostly above the monthly pivot (except a few days) from December. Maybe we will see the S1 area 126.33 which is just a bit lower than the 1HS1.

So, if in from early January I think at this point hold portion above this area, 126.33-127.87. Any recent reduction below the MarP could be put back on if stocks indexes fail their major pivot area and we want to rotate back to more defensive. But if stocks clear their YPs and hold as support, we will be reducing safe havens further.


GLD also lifted from 1HP then jumped above YP and was at its YR1 / 1HR2 at the next bar. 3 weeks pause under YR1 but no red yet - that's bullish. If YR1 can act as support then the door opens to 124 1HR3 and maybe YR2 near 134.

Here's GLD D with medium term levels. Unlike TLT, it is still well above MarP support and much easier to hold above that. 

Lastly GLD D with all levels; there was some selling from YR1 but it has kept coming back. So far any reduction an error but we can see what happens. 

Weekly strategy update

If you are following along, the first stock index buys I recommended all year (not safe havens) were on 2/12 on DIA and 2/16 on a few emerging market ETFs that were above FebPs. This was the right idea.

But then there was a shuffle last week as I thought add to bounce plan on on 2/23, cut those as apparent mistake 2/23, then back on 2/24 as safe havens were also out, in and out again. 

So let's say using 20 units as base (1 unit = 5% of portfolio)
3 TLT from 1/6 area, the adds 1/27-28 are what we've been shuffling around
3 GLD from 1/27 area, again the adds 2/4-5 are what have been shuffled
3 DIA from 2/12 looks good to hold, watching the YP
2-5 DIA / SPY adds from last week so far hold
2 FXI shorts slight under water today, to decide
1 BTCUSD long to hold
1 DXY long OR EUR short in today

Now what? If in all positions from the higher side there are 2 units available. Current positioning is 30% safe havens, 10% short; 25-40% long, 10% currency somewhat uncorrelated. This is a bounce playbook and somewhat neutral yet the first DIA buy was from a good area. 

It is harder to add stocks here because there is nothing near a pivot. But TLT is clearly dropping from its MarP, and this is the first time since Dec that we have seen negative action from a level. So we could reduce the TLT down a unit. Or further, and maybe much too cute, but we could shuffle the 15% long position to 10% long and 5% short, ie sell one and reverse as a hedge against the drop, and program a reverse back to long with a daily close above the pivot. 

The main point here is like reducing TLT a bit more than adding stock longs here. Most stock indexes are heading into major resistance (like DIA heading into its YP) and have a lot of distance from both MarPs and MarR1s as well. But TLT looks like rejection and we're very near a level. Probably the short hedge is too cute so let's say TLT reducing a notch to 2 units which is also a way of making the portfolio slightly more bullish without adding any stock longs. 

3:30 EST update
To make portfolio more skewed bullish steps would be:
Reduce TLT by 1 unit as noted above
Cut FXI shorts
Add on QQQ and hold above YP or SOXX and hold above 1HP
 

QQQ above the YP today, but given 8/24 discrepancies that is a bit suspect. SOXX also worthy of consideration since reclaiming its 1HP today. Even though short term overbought, good R/R for buy and hold above the 1HP. Then we see what happens at the YP / Q1P combo. 

Monthly pivots

SPY, TLT and GLD monthly pivots only shown below with no other levels at all. Obviously this is not a standalone, but we can view this as a piece of the puzzle. Sometimes there is chop, sometimes crystal clear moves. We are looking for the latter while being alert for the former. Detailed comments for SPY:

2015
August - break, recovery, break, recovery, 3rd break was IT
September - started below, resistance several days, one recovery, next break tradable swing short
October - recovery on first trading day and off to races
November - exact low of month
December - started above, break, recovery, break and drop, slight recovery not clear, another drop, clear resistance 12/29

2016
January - opened below and slam
February - 1 day above, break and tradable short, then recovery and hold, bit higher. PS, the 2/11 low was on an S1 but for sake of clarity not showing the R / S levels on this chart. 

With that in mind we will have March pivots in play starting Tuesday. If SPY opens above it can hold as support and go higher, or break for a short. Similar idea for all other asset classes (TLT, GLD, oil, currencies, etc). Worst case in this method is when it chops which is why best positioning takes into account the other levels, as well as some supplemental factors like pivots on VIX. Then those who prefer can add RSI, volume, etc. 

Note TLT mostly above its monthly pivot for 3 months, with January and February of 2016 particularly strong. At some point we will see another test of the pivot.

GLD also completely above pivots for 2 months straight; but this was after a long period of being mostly below all pivots for quite some time. 


TLT and GLD update

The Pivotal Perspective has been all over the safe haven rallies because it was crystal clear using this method that both were making positive moves from important levels as stocks rolled over. Summary posts are here for TLT and here for GLD. 

Although I did say taking some gains from the more recent adds (TLT adds 1/25-28, then GLD adds 2/4-5) I encouraged to put them back on per bearish playbook. So we are in management phase of full positions on these. Now what?

TLT weekly chart with long term levels shows clear lift above 1HP, clear big high volume jumpabove YP, which acted as support from there; pause at 1HR1, tag of 1HR2 / YR1 area but maintaining pretty well. So the big issue is whether that's it for the year or if TLT will clear the YR1 and go for the 2015 highs or maybe higher. A simple long term strategy could be to hold above the 1HR1 near 128 that can act as support.

I don't like to see 2 smaller blue bars in an uptrend especially with wicks, but let's see how the bar closes and how stock indexes react to their FebPs from here. 

Here's the daily chart with medium term levels. You can see the launch above the QP and JanP, then Q1R1 turned into support, Q1R2 turned into support, but still struggling at Q1R3. OK, maybe Q1R2 will continue to hold as support. Also, in a few trading days, we'll have the March pivot which will probably act as support. Per my bias I think this is a full hold but it will be much easier if stocks indexes reject their FebPs. 

GLD was making an equally clear move a few weeks behind TLT. GLD did try to jump above HP & YP in 2015, but the difference at the time was that stock indexes were still above their YPs while this time they had crumbled. Knowing that is why I was really thinking the move was for real, in addition to seeing DXY weakness at the time. 

GLD too has quickly reached its YR1 / 1HR1 combo. So again we have the same issue - is that it for the year? Or will those levels clear and hold as support? So far just a pause, no red and looking like it could clear - and would be an easy hold for higher targets. 

Here's GLD D with medium term levels. Similar jump above Q1P, and was already above JanP at the time. No damage from Q1R1, a jump above that. Now it is consolidating under Q1R2 but not too much damage. 1 day rejection met with buying today. So I also think this is full hold and let's use March levels to held guide the position as well as keeping an eye on the big YR1 / 1HR1 combo. 

If you added GDX for kick above its YP, that is doing fine and looks like it should test its YR1 / 1HR1 combo as well with even a Q1R3 nearby all 20.20 to 20.42.

4:25 EST update.

A much different look at the close on each. TLT small blue bar with rejection from a monthly resistance level.

GLD especially poked above but did not close above YR1, potentially bearish if any lower tomorrow.

Weekly strategy update

Some charts on vehicles that I mentioned in the last weekly strategy report. Conclusions are obvious - USA reclaiming FebPs on SPY & DIA which is a mild positive. So my view of a Pivotal Portfolio is shifting a bit more bullish here. But a reclaim of a monthly pivot while being below the others is not the same as position long on an asset above all pivots (the only examples that I track this year have been TLT, GLD, GDX and BTCUSD). 

If you have been following along, there is  a speculative INDU / DIA position from 2/12 that is an easy hold and/or possible add (or SPY), and some smaller combo of the suggested emerging market vehicles RSX, EWZ, and EEM from 2/16 or what is left if you took some quick gains last week.

TLT is not getting hit too hard, but right now GLD looks more like rejection from YR1 area which, if appears this way into the close, I think is a profit taking signal on any add from 2/4-5. In addition, DXY has just held its YP and even reclaiming its 1HP which further pressures GLD.

SPY jumping above the FebP.

GC continuous contract making the rejection look clear (based on first hour, real judgment at the close), and this is really the 2nd time we are seeing selling from this YR1 area. 

Sure enough vehicles that led on the recovery of the FebPs are getting more pop on the bounce. RSX, EWZ and EEM here. Watch FebR1 on EWZ approaching soon.

Lastly BTCUSD had nice pop and already at the FebR1. Let's give this some time. So far pause no rejection despite DXY strength. If people want to get money out of China, a stable BTCUSD is definitely a way. So maybe there is another massive move on this. 

Weekly strategy sum

If you are new to my methods you might want to read the last strategy sum and/or the recent review. 

Last week I was expecting a bounce and that delivered. Per my view of the market and timing model, my bias is for breakdown in March but I have to respect the bullish action on long term levels last week. It is easily possible that indexes go higher and the simplest strategy is to watch the FebPs that are nearest in play on SPX / SPY / ES, INDU / DIA / YM, and NYA / VTI as posted here. I really don't have an opinion on direction for the coming week and will let the FebPs decide. 

If the market shows strength then I might say reduce safe haven trades and add more longs (but only what is above a FebP); but if it shows weakness be ready to pounce by adding shorts or safe haven positions. A breakdown from here could be very fast and messy. 

Based on oil, a breakdown looks more likely. But various VIX indexes are appearing more positive, and it is my experience that VIX if often correct. We'll see what happens. More specifically:

1. In 2016, following The Pivotal Perspective would have reduced then cut (or at least fully hedged) USA stock longs, possibly reversing short, early January 1/4-7, while buying TLT. TLT then added after clearing the YP, and probably took gains on a portion of that at the YR1 / 1HR1 rejection. Basically we are monitoring the TLT position and deciding whether to go back to full strength or continue to hold the portion. If you took USA index shorts, then the YS1 holds, turn alerts 1/20-22 and 2/12 along with the INDU buy were good cover areas. 

2. Likewise, GLD was mentioned several times before the big jump, with an add 2/4-5. I think the first buy is definite hold but watch the YR1 area this week on the ETF and futures to decide on taking some profits or not. This move likely corresponds with main stock index decision at the FebPs. Also might be worth keeping DXY in mind here, as DXY is again testing its YP. A second break should help support the GLD idea. 

3. If in the INDU / DIA speculative buy, then obviously we are watching the reaction from the FebPs. If that clears across the board we could add, but if rejection then cut and take the small gain. I don't want to get cute with the counter-trend. Best gains are made long above pivots and short below. If still in the emerging market longs from last week - RSX, EWZ, and EEM all mentioned as possible buys above FebPs - and of course they have to stay above FebPs to remain valid. Again let's not get too cute with counter-trend, as these have poked above a FebP and still below all the others, but I'd give them a bit more time to play out if the DXY breaks its YP again which was testing on Friday. 

4. If in BTCUSD from 2/16 near 407, that is moving well. "Above all pivots" scores again. 

5. If market is strong, then really INDU / DIA / YM appeared to be the leader for a couple days last week, but as of Friday came back to be about even with SPX / SPY / ES so either of those could be adds. Basically I would only buy what is above a FebP. If weak then there are plenty of choices for shorts - anything that hasn't tagged its FebP yet. So NDX / QQQ / NQ, RTY / IWM / TF, IBB, XLF.

6. Oil. On the CL1 contract, oil has been below all pivots since 11/4/2015. The recent lows were bang on 1HS1 on 1/20 and YS1 2/11-12. Something that has been down 75% in the last 2 years is going to be quite squeezy. So, if already in this position from last year then your judgment call. Major support levels were the perfect places to cover. You could also hold a portion until oil recovers a quarterly pivot.

7. If in emerging market shorts as suggested as portfolio hedges from last year - FXI EEM PIN RSX EWZ were all mentioned in November -  probably you would be out at least some of these positions, most of which had huge gains. First, all except EWZ reached an 1HS1 or YS1 or both. Second, EEM, RSX and EWZ have been above their FebPs 3 times as DXY softens. FXI has been the weakest, remaining below all pivots since 11/25/2015 and so the best to hold at this point. PIN recovered its DecP towards the end of the year but again below all pivots from 1/6/16, at which point there were plenty of USA short choices as well, but also could be held as a short compared to the now relatively stronger EEM, RSX and EWZ.

Bonds

It can be worthwhile to keep up with the bond market, even if just trading stocks. Sometimes buying safe havens is easier than shorting. Also, if bonds (meaning TLT here not yield) stop dropping then you can start thinking about a turn in stocks. 

For example, last year on the tech highs near 7/20/2015 TLT had broken its YP and was mostly below it for about 7 weeks from early June. That said it had tried to come back a few times, and on 7/22 there was a clear lift from support. After that TLT held its YP for the rest of the year. Rallies did not get far but that told you something about stocks for the second half.

This year TLT jumped above 3 pivots as SPY and others broke YPs on 1/6; for this method, this was a very important day and going with this change was the absolute right thing to do. 

For a full analysis of bonds you could check  TLT, ZB, ZN, TYX, TNX, then HYG, and then maybe even check a more typical chart view using Bollinger bands and  moving averages, but for today lets look at TLT on pivots. 

Sum from below: TLT had perfect long and medium term buy signal from early January, and adds after that above the YP. Pivots also gave a fantastic exit bang on YR1 / 1HR1 and if you didn't have a sell order in it was still clear rejection the next day to take gains from add positions off the table.

Now what? Resting period after such a strong move would be common. On the pivot view, holding 1HR1 127.87 would be positive, as would WS1 at 129.03 and overall a favorable reaction to 1H RSI chart oversold. If bonds drop further, it will likely confirm & correspond with stock index rally. If the bond pullback stops about here, then stocks more likely to fail at FebPs and drop back down. 

First, weekly with long term pivots only. The move for 2016 is clear: lift above 1HP, clear YP, lift to 1HR1, pause but no red, comeback, fast move to YR1 / 1HR2 combo, then larger reaction down. Buying was week 1 and 2 above levels, taking some profits last week was recommended. From here maybe 1HR1 can act as support. 

Here's the daily view of the same pivots. 

And here is medium term levels only, without the long term.  1/6 was a very important day. SPY had broken its YP and TLT had jumped above levels. These kinds of days can mean something in the market and sure enough it was time to cut USA longs and buy bonds. 

Here is a daily chart with long term and medium term levels combined, ie yearly, half-year, quarterly and monthly pivot levels. 

Lastly here's the 1 hour chart with weekly and daily levels. Note RSI lowest since 12/30/2015, and first touch of a WS1. A bullish reaction would be not much lower or bounce from here. 

Partial TLT exit?

Entries are easy, exits are tough. If you decide to hold everything, you risk losing decent gains. If you take profits too soon, you can be right on a phenomenal move and watch the train from afar without you. So, I prefer taking some profits on a target and holding the rest. Of course, judgment depends on the market. 

Here's the daily TLT pivot only chart - meaning it shows yearly, half-year, quarterly, and monthly pivots only, without any support or resistance levels. This makes entry decisions very easy. You can see most of 2015 second half was quite mixed; it could not sustain any more above the 2HP, but the YP held has support several times. As of 12/30/2015, TLT was below 3 of 4 pivots and appeared it would open below all pivots for 2016; but a lot changed between 12/30 and 1/4 in the markets. On 1/6/2016, the status changed to above 3 of 4 pivots! It is this kind of status change near big levels you want to see for an entry. (And if you had any shorts from late December, these were clearly cut.) On 1/6/2016 TLT changed status on one long term and two short term levels all clustered for a great risk-reward. That said, it was below the most important YP so this would be a partial position. 

Then we were watching to see how the YP acted. No problem; one day partial pause and after that held as support. That was your place to add 1/22-28 up to a full position. This has moved nicely and now the question is when to take some profits.  

Let's look at the resistance levels. TLT cleared 1QR1 (smaller red crosses) without any trouble, and it quickly acted as support. There was more of a rejection at the 1HR1 (red dots) but crucially the YP held as support. Once it cleared the 1HR1 again, that level held. Now it has jumped above the Q1R2. The YR1 near 135, which seemed way out of reach when I mentioned it as possible back on 1/15, now looks very doable! The simple answer would be: TLT move catching everyone by surprise, very strong trend, hold for that. 

That said, RSI is the highest in a year on both daily and weekly charts, and that is why we should at least consider locking in some gain especially on the recent add. Here's the weekly chart with more standard tech indicators and MAs. I suppose I am a bit concerned about pro selling coming in with the high RSIs, as that can happen - although it was with stocks in a bull market.

Lastly, here is the pivotal reason for my exit consideration. The futures are giving very clear signals, and ZB reached at YR2; and ZN at Q2R2 showing some rejection. We could also use resistance levels that have already cleared as possible support; ZB 1HR2 and ZN MR1.

OK, for now:

1. Watch reaction from ZB and ZN resistance and support levels mentioned above; on TLT next up is the FebR1 area.

2. Watch how stocks react to their YS1 levels; several broke the last few days and may recover (which would probably be bearish for bonds.)

3. To be clear, only taking about a partial exit consideration at this point. Entry near 1/6 I believe best to hold until at least one pivot (probably monthly) breaks as support. But the adds taken 1/22-28 are a judgment call here. Let's see what happens. 

2/10/2016 12:40 EST update

Looks like a TLT hold. TLT pushing the FebR1 with no sign of rejection and may close above. ZB may close above the YR2 level, very bullish; ZN also right on the level with no sign of rejection. Meanwhile, SPY & ES could have reclaimed their YS1s but didn't; bearish action in stocks today. On a weekly basis, TLT is flying and looks like it could even go for the highs!


2/11 9:35 EST update: YR1 tag! Probably a partial take, but let's watch how it responds and the volume. This was target first mentioned from 1/13 with simple logic: if TLT started trading above the YP we could see YR1. Did not look likely at 124 and change but lo and behold 134.42 has tagged!

 

2/11 4:00 pm EST update: YR1 tag and high volume selling. Tough call here, not really a reversal since well above yesterday's low. But volume selling at 1HR2 / YR1 combo. When I mentioned this target on 1/13 it seemed far away - only 1 month! Anyway, from here you could:
1. hold all and go for higher levels
2. hold all until monthly pivot breaks
3. hold at least half (1/2, 2/3, 3/4, up to you); and sell if weekly pivot breaks
4. hold at least half (1/2, 2/3, 3/4, up to you); and sell portion near this YR1 / 1HR2 combo

Tough call here. On the stock side, RTY held its YS2, but INDU broke YS1 and VIX cleared its YP. 2/3 bearish. So, probably hold all. Like I said earlier, exits always tricky. 

2/12 12:20 EST update. Looks a bit different now doesn't it. Even if portion out with TLT back under its FebR1 , decent gains from entries 1/22-28. TLT weekly (long term levels only) and daily charts (usual setup) below.


"1/20-22 Turn but not a buy call" looking good!

OK, the title sounds like horn-tooting and maybe so a little bit. But the main point of this post is to understand why i was making those calls 1/20-22 and what has played out since then, both in terms of money and aggravation saved and then perhaps more important, other opportunities. 

First, on 1/20 blog post "Big turn?" indicated possibility of decent turn and what we needed to see. 

1/22 post continued to point out all the yearly levels that had just held, along with oil. 

At the very same time, I was saying not a big buy on 1/21. 

Then clarified this seemingly contradictory view with a detailed post here on 1/22, "A turn but not a  big buy." 

Now, if you have a 1 week time-frame that is really short term swing trading which I am not addressing so much here. For that you'd want to be using daily, weekly, and some monthly pivots - and yes, the week of 1/25 SPY held its weekly pivot for the first time since the last week in 2015, so that was a decent buy for that kind of trading. But for those with longer term horizons, any buys 1/20-22 would likely be now under water. 

But that wouldn't be the only cost! In fact, maybe you could take some small stop outs and it wouldn't be a big deal. If you are trying to catch bounces, the big S levels are where to do it. Although I think a better method is to swing trade the bounces when you get a good setup on the shorter term pivots (daily & weekly, sometimes monthly) and hold core positions aligned with longer term pivots (yearly, half-year, some quarterly). 

The main point of this post is to point out what you would have missed if you focused on trying to catch the bounce in stocks - which at this point, is counter-trend move according to The Pivotal Perspective. 

The charts below show why I focus on buying what is above pivots, and avoiding, shorting or hedging what is below pivots. If you focus on trying to buy support (S) levels, ie, what is below pivots, once in a while you pick a nice turn but you could just as easily have a year of headache. Stock indexes are below major pivots for the first time in years, as safe havens jump above. This situation may take several months to resolve, or longer! 

Now for longer term short positions, yes, those yearly level holds were good places to take some profits or hedge a bounce. This is equivalent to taking some profits on big R (resistance) levels in an uptrend. That said, just tagging those levels is not an automatic all out - not by a long shot. Often you want to continue to hold some shorts if the index continues to trade below all pivots. I'll address this in a separate blog post soon and point out some examples. 

So by trying to buy the stock bounce you missed entries that we might not see again on TLT, GLD and GDX all below. 

1. You missed a chance to add TLT longs as TLT held its YP as support 1/20-28. Showing long term pivots only here.

2. You missed a chance to buy GLD as it cleared its 1HP for the second time this year on 1/25, and possibly adding above the YP on 2/4-5. 

Even GDX got in gear with long term buys last week, first above 1HP on 2/3 then clearing YP on 2/5. 

Bonds

Another reason I like pivots so much is that this tool is working on all asset classes: stock indexes and individual stocks (especially higher volume stocks), bonds, currencies and commodities. Let's look at bonds. Depending on your focus you might be looking at TLT, the actual interest rate vehicles like TYX and TNX, or the bond futures ZB and ZN. Let's check them all!

To start here's a weekly chart with long term pivots only (year and half year). After droping sharply in 2013 with the rejection of the 1HP and YP in early May, TLT first recovered a long term pivot level in early 2014 and rallied from there. Eventually it recovered its YP and had a huge run all the way to 1HR2 top in early 2015. Although the YP broke for about 4 weeks, it was able to recover and hold a few more times. 

I point out these histories to understand the long term motion of the market using pivots. TLT started the first week of 2016 with a clear lift from the 1HP. Stocks were looking ugly and this was clearly the only thing that was giving any decent buy signal (except inverse stock ETFs). The next week the 1HP held as support, and jumped above the YP. Although it had a possibly toppy reaction from the 1HR1 in red dots, the YP held as support and as I type TLT will likely close higher. 

Now here's the daily chart view with all pivots. 

Don't say the market didn't give you a chance to get in. There 5 days in early January there TLT was clearly above the Q1P and 1HP combo with the YP much higher as resistance. This was a good risk reward entry because you had 3 pivots all just below as support and the first real resistance considerably higher. 

Let's just say if you are a long term investor without using leverage, I would look at weekly charts once a week on the weekend and focus on the closing bar. This meant a buy after the close of the first week, ie open on 1/11.

If you are going more trades and watching the daily chart, you could have been buying on 1/6 at the close, the first day above 3 pivots. Both could have been adding as the YP held as support although admittedly there was concern with the rejection from the 1HR1. If not adding though, definitely a hold above the YP because you could start thinking YR1 which is much higher. 

Now, more quickly, do the other vehicles confirm these entry and hold decisions? 

TYX below 3 pivots on 1/6 but no clear rejection; some red the next day. 

TNX clear sell bar on 1/6 (ie TLT buy). 

ZB congested for 2 days and clear buy on 1/6 and nice smooth trend up. The only selling was the JanR1 on 1/11 which was quickly answered the next day with a big rally. The discrepancy with the futures is that it already reached its YR1 level were TLT and TYX / TNX are nowhere close to yearly R1 / S1s respectively. This is because the futures aren't looking back for the full year; this is annoying discrepancy of the method but programs are still positioning off these levels. 

ZN also jumped above 3 pivots on 1/6, and you had a chance to buy there or the next few days. 

Back to TLT. TLT already has a high on 1HR1 exact on 1/20 which was the date of the stock low. That is a major resistance level and important to watch. But if the YP continues to hold as support, that is even more bullish because it will mean TLT is above all pivots. Trust me, there is not much to buy right now that is in that category (ie above all pivots). Maybe we will see Q1R2 at 129.80, or even what would surprise everyone is a big bond rally back near the 2015 highs to YR1 area at 134.42.

Big levels

The amount of indexes or ETFs that turned from long term levels - by this I mean yearly or half-year pivots - is rather amazing. These weeks are rare. The odds favor more on the bounce, but how far it gets we shall see - and use the shorter term pivots, especially the FebPs which will be in play in about a week - to gauge the strength. Of course all the levels below that broke and recovered by the weekly close will have to hold.

All charts weekly with year and half-year levels only (no quarterly or monthly). Listing comments first, then the charts. If you get confused to which is which, look for the light grey watermark of sorts identifying the index / ETF.

This post has gotten quite long, and I still didn't cover two categories - currencies and commodities namely, oil. I will do another post on that soon, but check the recent blog post on oil that pointed to the key level YS1 a day before the low!

USA mains stock indexes & ETFs
SPX / SPY / ES - all broke YS1s & 1HS1s, but recovered on close (hard to see 1HS1 on chart b/c so close to YS1)

NDX / QQQ / NQ - low on NDX near exact, QQQ disparate structure ie not on YS1, NQ more like ES

INDU / DIA - lows on YS1 & 1HS1 combo

RTY / IWM held YS2 / 1HS2 combo area. (Note: these two charts added on 1/27.)

NYA - recovered YS1, but still a fraction under 1HS1

USA additional stock indexes & ETFs
IBB - weaker bounce off YS1

SOXX - better move up from 1HS1. The Pivotal Perspective prefers SOXX over IBB here.

XLE - also YS1 low and recovery of 1HS1 

XLF - I don't know what to make of pivots this year due to massive 8/24 spike, so not showing here

Safe havens & risk indicators
TYX - just slightly below its YP; recovery would put in back in congestion zone above YP but below 1HP; below YP remains bearish yield and bullish bonds. 

TNX - rebounded from 1HS1

TLT - high on 1HR1 near exact

ZB - high on YR1 / 1HR1 combo, but could be pause and not rejection.

ZN - also high on YR1 / 1HR1 combo, but also perhaps pause and not rejection.

HYG - low on 1HS1

VIX - poked above, but did not close above, the YP for the last 2 weeks. decent reversal from the YP although some may point to closing below the low of last week as confirmation, which hasn't happened yet.

XIV - near test of YS1, no official tag however

GLD - rather awful that GLD could not climb above 1HP in all the turmoil

Global stock ETFs
EWJ - held YS1 and 1HS1

EWG - held YS1 and 1HS1

FXI - holding 1HS1 but not much green 

EEM - similar to FXI

PIN - low on 1HS1 exact

RSX - low on YS1 and decent bounce along with oil

ACWI - global benchmark ETF, also low on YS1 & 1HS1 combo