Weekly strategy review

So here's a review of all the points made on this post from 2/13. 

1. "INDU / DIA / YM YS1s, RTY / IWM / TF YS2s, NDX YS1, need to continue to hold for stock bounce; then the SPX needs to get in gear and recover its YS1 / 1HS1 1895-96 as well, along with NYA / VTI also recovering yearly levels. And of course, oil...." 

 Markets opened higher on Monday and on 2/17 SPX lifted above its YS1 / 1HS1 area of 1895-96, and NYA cleared its YS1 fractionally on 2/16 and went higher on 2/17. Basically, this criterion checked out for the bulls and it was easy to hold the INDU / DIA buy from 2/12. 

2.  "Basically if stocks are going to put in decent rally, we will continue to see a fade in the safe haven trades that have exploded the last couple weeks. If safe havens stay firm, for example, staying above the next weekly pivots,  and USA stock indexes cannot clear those, or reach a measly weekly R1 and then sharply drop, then the market could roll over." 

Stock indexes were above WPs all week, and most exceeded WR1s although not all reached WR2s. On the safe havens, both TLT and GLD were below WPs this week; TLT spent just a few hourly bars under WS1 and recovered, and GLD ended the week near its WP as well without touching WS1. All in all, decent hold by the safe havens despite the stock bounce.

3.  "Interesting vehicles to watch are anything that is poking above a monthly pivot. This is far from the case in any USA main or supplemental index, although if oil continues XLE will have the first shot. In world indexes, RSX will also pop on the oil trade and is just barely below its FebP as of 2/13 close, and selling in EWZ seems to have dried up with a much higher low forming and EWZ above its FebP on 2/13 close."

Both RSX and EWZ of these lifted above their FebPs (not the case with most USA indexes) and had a quick pop, but faded into the end of the week. I also recommended EEM this week as a speculative buy for the same reason. All 3 of these gave the chance for small quick gains that outpaced USA indexes on the bounce.

Note: aside from buying safe havens TLT, GLD and maybe some GDX, 2/12 on INDU / DIA and early this week for RSX, EWZ and EEM were the first times this year I have recommended any stock index buying.

4. "Big picture point is stage set for some stock bounce, probably hinging on oil. But the vast majority of stock indexes / ETFs / futures are still below all pivots, and most save havens are above. So let's not get too cute with the counter-trend idea. ...  if this idea is correct indexes will put in a relatively weak bounce in the scheme of things then roll over."

So far most USA main indexes unable to clear FebPs. As long as this remains the case, USA main indexes below all pivots, the path of least resistance is down.

5.  "This would mean playing a bounce lightly, look to add back safe havens on a pullback to monthly or even weekly pivot support." 

That was the right idea of the week. All the long recommendations (DIA, RSX, EWZ, EEM, BTCUSD) gave a chance for a quick gain, and we didn't lose too much holding on to safe haven positions of TLT (could have even added back in) or full GLD position.  

Check back tomorrow for weekly chart summary and the next strategy report! 

Goldman Sachs vs The Pivotal Perspective

People who work at Goldman Sachs are incredibly smart, have advanced degrees in economics, math, etc, from the best schools along with the advanced certifications, and all the data and computer tools at their disposal. But their "6 top trades" for 2016, 5 have already gone bust. No, I'm not making this up!

http://www.bloomberg.com/news/articles/2016-02-09/goldman-sachs-abandons-five-of-six-top-trade-calls-for-2016

Meanwhile, following this blog:

1. Buying USA leaders ie NDX / QQQ and perhaps some SPX / SPY early October; as major pivots held and recovered. I was clearly bullish because it was obvious using pivots; over the course of 2 days 10/2-5 2015 SPY recovered 3 of 4 levels and triggered a buy. 

2. Shorting a choice of weaker global indexes EEM, FXI, PIN, RSX, EWZ in November; all of these below all pivots at various points, and they were frequently mentioned as hedges. Some of these probably have taken some profits or out, some holding still today. 

3. Shorting oil as early as 10/19, scratch or small loss near 11/3, shorting again 11/4-5 using simple strategy of a daily close below all pivots for huge gain. 

4. Reducing USA longs 1/4-7 (most of which bought early October) as pivot status went from likely "open 2016 above all pivots" to 3 of 4 to 2 of 4 (ie mixed trend, no reason to be big long) on the actual open due to gap, and breaks soon after that; 1/6 SPY short possible under the YP aiming for YS1 which delivered; and/or putting on new shorts via IWM. Any remaining tech longs cut 1/7 (because that was the last index to break its YP). 

5. Buying TLT or other bond vehicle 1/6+.

6. Buying GLD 1/25 and maybe GDX after that too. 

If you doubt these calls please see the featured posts and when they were written, or go back and read the blog and my daily SPY / ES commentary. 

So, take your pick. Simple and what works, or complex positions that depend on  economic theory. I'm not against economics, but there is a crucial difference between economics and markets in how they function. Also, notoriously, once everyone on Wall Street agrees that something has to happen, it doesn't. 

"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. 

Key calls

I started this blog just over 2 months ago. In that time, using only this pivot technique and in very simple, clear English, have made the following five key market calls:

1. Caught the turn near end of September low and was very bullish from 10/2-5 on

The 9/30 Ringing the bell blog post - referring to the chance of a major bottom, not a top - across 4 main USA indexes of SPX, NDX, INDU and RTY. "These are the ingredients for major turns...." Then on 10/2 SPY daily post: "After holding 2HS2 1905 for 2 days, SPX again tested and held, then launched. Despite the bad jobs # it managed to close above the OctP at 1937. This was a huge score for the bulls and a a significant development per The Pivotal Perspective." Further confirmed by 10/5 SPY daily post: "Bulls win." 

2. Signaled caution 10/13-14, but gave a great level to watch on QQQ to continue rally

On 10/13 I wrote in the blog post Cracks Appear said for the first time the big turn we were seeing significant signs of weakness. Instructions were: "So from here, QQQ 2HP, DIA YP and IWM Q4P are levels to watch." QQQ 2HP held near exact, and the rally continued. 

3. Continued bullish until suggesting hedge and/or lightening long exposure on 11/9

11/9 SPY daily post said: "If it were me managing a pivotal portfolio, I'd hold USA winners from 9/30-10/6 buys and put on some much weaker index hedges via EEM, FXI, PIN, RSX and EWZ."

4. Caught the November low in SPY exact

I pointed out the level on November pivot on 11/13, and on 11/16 3 major USA indexes held NovPs nearly exact. 11/13 SPY daily post: "For now the level to watch is the NovP at 202.16 on SPY." Low of day 202.18! Then on 11/16: "If there was a place to take off some hedges (mentioned from 11/9) and add back on the long side, it was when SPY held the NovP (small orange dots), which happened along with QQQ & IWM holding NovPs too." From there comments have been bullish. 

5. Gave nearly the perfect level to watch on TLT

In this video blog post on TLT from 11/7 I said to watch the yearly pivot at 118.44. The November low was was just .44 below and it never closed more than .12 below the pivot on 11/9. Since then the YP was support very clearly several days. Result was decent rally back up to medium term term resistance at the Q4P. I also pointed this out in process on the 11/19 quick TLT follow up post.

Not bad eh? There is a lot of noise about the market, perhaps now more than ever with social media, but the pivots are giving very clear indications and directions on the moves that matter.