Weekly strategy review

It was one of the few down weeks of the year for recommendations, and easily the must frustrating week of the year for the method, so I think it would be remiss of me to say scaling down the site and not address this. Starting last week basic portfolio looked something like this, if saying 20 units is 100% exposure and allowing 5 or so units for margin positions. 

8 DIA longs various entries 2/12-3/11
2 SOXX longs 3/1
1 EEM long, as early as 2/16 or if in and out then March
1-ish oil or oil related runner unit longs EWZ RSX entries 2/12+
2 GLD/GDX late January longs, just reduced down from 5 total prior week
2 EWJ / NKY shorts, entry 4/1 though NKY really triggered 3/31 close below all pivots
2 TLT longs, entry 4/1, above all pivots
If putting free capital to work you might have been long 1-2 QQQ units per bullish scenario of prior week although i didn't spell that out in advance for 19-20. 

Larger note: I am trying to keep balance of portfolio roughly in line with larger structural issues of the big pivots. If all stock indexes were above YPs and TLT and GLD both below it would be foolish to have safe havens, and better to be 100-125% long stocks especially leaders. But that isn't what is happening this year - instead NKY and DAX below all pivots, USA mostly bullish but still mixed with RTY and NYA below YPs, and safe havens still quite strong. 

This week I got fooled by 4/6 as I am sure many others did too. In all the usual ways it seemed quite fine, ie bullish response to mild pullback, VIX vehicles confirming, volume OK, etc. But any bullish adjustments based on 4/6 were quickly wrong. Sometimes this happens and like I wrote up in other SPY daily columns just try to go with the flow and think about risk/reward. 

For this week ideas were to hold runner units above CL Q2P. This was a very right idea, but I used wrong vehicle CL K contract broke on 4/4, lower on 4/5, then turned around and recovered the level and exploded higher on Friday. CL1 continuous contract was perfect hold of Q2P right on the low. Unfortunately by looking at CL K, i cut the runner oil (let's call it 1.5 that remained of oil plus EWZ / RSX) and shorted small only to cut and then add back oil & XLE as longs the next day. Frustrating chop, lost a bit on it, could have been avoided just by emphasizing CL1. Getting out of world indexes EWZ / RSX and replacing with XLE cost some gains. But glad to say back in oil on long side because that really helped things on Friday, and put up direct XLE rec on the site on Wednesday too. 

EEM looked like pivot rejection on 4/5 with negative action on 1HP, AprP and confirmation with ACWI and VXEEM. Thought worth cut. The very next day all those bearish conditions reversed, again including VXEEM, and ACWI seemed more bullish although heading into resistance again, and thought back in long. Slammed again next day. That is chop! 

DAX short right idea but vehicle is issue. DAX clearly below all pivots 4/5 and EWG similar. DAX stayed under all pivots 4/6 but EWG jumped and I went with that on a cover only to see it go lower again the next day. Right idea, wrong index to watch. 

NKY short also "right idea" but somehow USDJPY crashing, NKY still lower low on 4/8 Japan session yet EWJ huge jump Friday USA. I don't really get that. 

On Thursday I also saw PIN (India ETF) below all pivots and with bearish scenario more likely thought that was good enough to try; slightly against on Friday, back above Q2P but still under AprP. 

Lastly after reducing adds on GLD/GDX due to YR1 selling they did exactly what I did not want to see, ie, jump above levels. I did say get back in on GDX Thursday and that helped balance out the losses of the above listed frustrations along with the oil pop and XLE pop. 

So, EEM was really a pure chop scenario but in case of oil, DAX/EWG, and NKY/EWJ, it seems to be more a base index vs vehicle issue. Of course you could skip the headache and just keep to USA indexes, TLT and GLD, although the global emerging market indexes have been providing better percentage moves than USA indexes for a quite a while now (think 2015 first half with USA indexes going nowhere and China huge rally then EEM & China massive drop). Of course Japan and Germany had huge rallies 2015 first half but you were better off with currency hedged ETFs. So this is a matter of personal choice but if using global ETFs just allow for extra volatility and use smaller position sizing. 

From here I definitely won't be doing this kind of detailed strategy, and am thinking about the core of the site that I would like to maintain. SPY daily and USA main indexes weekly posts are the first two choices; then perhaps quick posts on valuation once a week, a sentiment post only if there is something glaring; and given markets these days I would also like to track bonds, gold and oil. We'll see if there is time. 

Weekly strategy review

From Where is market going post 3/26:

"OK, so bull case is safe havens continuing to fade from YR1 levels, stocks joining VIX on the rally with more indexes clearing long term levels. If this happens NDX will clearly hold YP and COMPQ will join NDX above the level, and NYA clears 1HP at least. Globally EWZ, RSX and then EEM likely to clear long term levels first. 

Bear case is a return of safe haven trade, VIX up, and a fade of the the few indexes that are above YPs. If this happens NDX will break down, NYA look like rejection, and likely oil down that will drag down RSX and EWZ as well. 

Right now the thing that strikes me as most odd is how low all the VIX vehicles have gotten while safe havens still up there and most stock indexes still long term downtrends. I feel like this should resolve in one way or the other in coming weeks, ie VIX jump as stocks drop or fade in safe havens as stocks rally. I should also add that I like VIX very much as an indicator and right now it looks quite healthy ie, pointing to further stock rally."

Results
TLT rallied but GLD and GDX but struggled at YR1s
NDX clearly held YP; that was the big tell, see chart below with direct hold of the level and massive buying, very large range blue (up) bars
COMPQ joined NDX above its YP as well
NYA had 1 day close above its 1HP but fell back, then rallied back near the level on Friday
EWZ closed above YP, RSX closed just below YP but continued to hold 1HP, and EEM closed above its 1HP for 3 days despite opening well below on 4/1

So bull scenario most items met! I didn't have a list of adjustments because the suggested portfolio was already pretty long combined with GLD/GDX. I've been recommending mostly longs with exception of a few very quick hedges / shorts from the 2nd time above FebPs in late February, and pointing out Dow strength very frequently since then. But if you wanted to add long exposure then the thing to do was buy something lifting from a pivot that wasn't overbought yet; ie NDX / QQQ the obvious choice. I suppose possible add on EEM though that has been quite overbought several times recently. EWZ and RSX more subject to oil move and oil hanging by a thread. More on that in the next strategy report. 

View fullsize

Weekly strategy review

From last week: "Bullish scenario would be indexes continuing higher, with DIA leading above its MarR2, perhaps tech indexes playing catch up, and NYA clearing at least one long term level (it hasn't yet, see the USA main charts). Even if we get this, I'll be watching SPX / SPY / ES MarR2s for resistance. [...]

Due to RSIs across INDU and SPX vehicles, with big run up on FOMC meeting and option expiration week, with the leader INDU reaching MarR2, a pause is the more likely move. But fund managers are not nearly long enough and expect any pullback to be bought. Basically I am expecting some consolidation in the coming week."

So that was a pretty good take! SPX stopped just 2 points above its MarR2 of 2054 with a high of 2056 and faded back under. Strategy list had several "thinking out loud" ideas with TLT and VIX play as first choices, hold longs while short the weaker indexes with emphasis NKY, DAX and XLF, with some caution on IBB short due to VRX YS1 level. (Note: Probably better to stick to hedging USA longs with USA shorts and global longs with global shorts; EU and JPN really in their own categories.) 

TLT was a matter of entry, VIX idea worked well, DAX in then nixed but down, NKY didn't really trigger, XLF worked, IBB was scram. I mentioned IWM in the list then opted against, but short term levels 3/23 gave the green light. . But the gold slam was a surprise, too bad. 

Weekly strategy review

From last week: "Basic bullish is follow through gains with INDU remaining above all pivots so holding Q1P 17138, SPX holding YP 1HP Q1P support all 2014-16, and NDX above 4373."

FOMC made that easy with SPX staying above the area and NDX not showing any rejection, then a jump above all levels on 3/16 as INDU continued to lead higher.

Per the bullish scenario, "If these indexes stay above their big pivots then it is appropriate to be reducing or cutting the safe haven especially TLT below 1HR1  and buying more stock indexes, though if following this system on a daily basis you have already done this. Starter longs were 2/12 on DIA and oil, then possibly EWZ and RSX above FebPs from mid Feb if you held (or got back in early March) and now watching EEM, then a shuffle but more longs late February with USA leaders DIA and maybe SPY, in my view better to add via  the leaders so SOXX and/or DIA the last two weeks."

So if following daily SPY comments and weekly strategy ideas you were already significantly long coming into the week. No reason to be max long because there are still plenty of indexes below pivots. Perhaps you took some gains on EWZ or oil. Still mostly long via DIA, with some SOXX or SPY, and maybe EEM or RSX left, and decent chunk of GLD/GDX, is a very good place to be right now.

The first TLT exit suggestion was very good on the day of the high, but the 1HR1 break was a shakeout and not ideal. Still if you want to actively manage this sort of extended swing style, it isn't a bad idea to get out of what is weaker to free up capital for what is stronger. 

Weekly strategy review

From last week's post:

"Basic bullish scenario: these clear Q1Ps and regain status of above all pivots. This would likely coincide with TLT breaking its 1HR1, although not sure of impact on GLD. This would mean adding longs above pivot support and possibly reducing safe havens further. 

Bearish bearish: clear rejection, which would mean reducing longs especially some late entries, and possibly adding back on safe havens or stock shorts against the pivots. 

Or we could have a pause and shuffle around this large areas without a clear move. Hate to say it but think this will be most likely. Or 1 day rejection then a recovery or something like that. You can also use weekly pivots for an additional decision point as well."

As it turned out it was a combination of #1 and #3; a one day rejection on SPY / ES, but crucially not in DIA / YM, and not confirmed on VIX vehicles either; then a comeback, then a clear.

A couple daily posts gently suggesting maybe short setups looking at ES 1988, although the earlier idea did not trigger and VIX never confirmed this at all. Even if you shorted near the close on 3/8 at 1971 then the worst possible would have been without a stop judging daily bars and out Friday for -2%. You could have had a tighter stop and quicker out with any trade above 1988, and/or smaller position without any VIX confirmation.

And if you were shorting SPY / ES below its YP, then you should have been buying DIA / YM with clear holds of their YPs on Thursday.

The weekly pivot on SPY was also a good check. If you shorted near the close on 3/8, 3/9 was back above the WP from the start of the day; and then if you still held on for 3/10, there was only 1 bar fractionally below its WP with a recovery the next bar. 

Per the bullish resolution at the end of the week, you might have been reducing on TLT which broke its 1HR1, adding on any USA leader like DIA or SPY, and SOXX has been better than QQQ or IBB for tech exposure which is why I pointed that out on 3/1 as a way to add even more longs if the rally was continuing. Hopefully there is not a fake-out and shuffle but if you want to actively manage instead of plopping in a 60/40 or 70/30 and re-balancing once a quarter, then this is what is required. 

Weekly strategy review

For the last week the two main points were:

1. How safe haven trades (TLT and GLD) acted against major resistance. As it turns out TLT weaker but GLD stronger.

2. Positioning with the March pivots; stock shorts would be easier, if indexes dropped below MarPs placing them back under all pivots. That didn't happen at all. To be fair last week I mentioned more cash if stocks were above MarPs, as this was more of mixed scenario (ie below 3 larger pivots, above monthly); yet this assumed already decently back to bounce scenario from 2/27 or so. 

As it turned out virtually all stock indexes opened above MarPs and rallied up quite strongly from there, all the way to major resistance levels (see next post). The mid February idea I had on emerging markets specifically EWZ, RSX and to some extent EEM was really good; but with the shuffle got in and out of those, unlike DIA / SPY did not say get back in 2/25. But you certainly could have - more on EWZ here. 

So how did things turn out? I may not have time to constantly update an entire Pivotal Portfolio, and that is going to be your discretion on how to use this stuff. But holding or adding any stock longs was right idea above MarPs. The one asset to drop under a monthly pivot was TLT, so a reduction on that possibly warranted depending on how active you want to be. Longer term investors should hold above long term support. More on that here. 

I also mentioned ways to shift more bullish in a SPY daily section here.

Weekly strategy review

This year pivots have worked amazingly well, but the past week had a bit of frustration as can happen with any method. Or perhaps my application was off. Main point was to be more long and less short and/or fewer safe havens if the market (primarily referring to the main USA indexes) was strong; and less long, more short and full safe haven positions if week.

I let the FebPs on SPY / ES / SPX and DIA / YM / INDU along with NYA / VTI decide strong or weak. That was the pesky part as Monday jumped above on all 8 of these which I thought was good enough for more bullish positioning as above; only for Tuesday to break on ES, SPX, INDU (slight), NYA and VTI, combined with a VIX sell signal so back to bearish; only to open lower Wednesday but come roaring back from CLJ6 1HS1 and SPX YS1 near exact, so again shifting more bullish Thursday. Using NYA to confirm longs (as happened Monday) and VIX as stock sells (Tuesday) have worked far more often than not so I won't be to sore about the minor chop this past week. 

In the larger scheme of things this was just some shuffle and a couple minor dings in an fantastic year. 2016 basic moves (all very well documented on this site, and posts searchable in the FAQ page in the search tool):

1/4-7 cut USA longs from early October
1/6 buy TLT
1/6 SPY target 186
1/7 "bear for real if NDX below 4373" and full defensive mode, whatever that means for you, was correct approach
1/20-22 stock index turn but not a big buy, SPY target achieved and good cover if short
1/22-28 adding TLT above YP
1/25+ GLD buy, adding 2/4-5
2/12 turn alert and DIA buy (also good cover if still short)
2/16 RSX EWZ EEM buys for quick pop
2/16 BTCUSD buy

So the latter part of February if following along:
Reduced add portions on TLT and GLD, put them back on, then out again Thursday if paying attention (not saying all these moves correct, just how it seemed at the time);
Cut the RSX, EWZ, EEM positions for small gain;
Added SPY or DIA on 2/22, small loss next day; 
Added XLF / QQQ / FXI shorts 2/23, then took USA shorts off for scratch.
Added SPY and/or DIA longs back 2/25.

Market in digestion range after the power moves of the first 6 weeks which is to be expected, so maybe adjustments seem like too much work. Perhaps. Just calling it how i see it.