Weekly strategy sum

If following along, you came into last week solidly long with DIA & SOXX positions as early as 2/12 up through 3/11 with SOXX jumping above its 1HP and DIA lifting from its YP 3/4-11. You might have also had some small emerging market positions via EEM first recommended on 2/16 and/or runner units in EWZ & RSX. Lastly you had a decent chunk of GLD/GDX first suggested end of January with adds early February. I have shuffled the adds (ie out then back in) and they haven't done much for a while. 

There were a few shorts in past weeks that were taken with idea of quick hedges that were quickly out - SPY short small loss; VI long worked very well for 1 day as planned; TLT long for scratch exit looking like mistake; XLF short small gain or scratch; and if short FXI as hedge on EEM then you would be out of that too based on Friday's hold of AprP by EEM and FXI. 

GLD saw 2 days of selling from its YR1 level 3/30-31, and I did say in last week's post that would be condition for a reduction, ie take some gains. DXY is weak below all pivots so it may still pay to hold a runners portion of GLD/GDX above its Q2P. Given the very good first entries and monthly charts I think probably better to do that. 

If you went with the bullish scenario the easy choice would have been to be adding tech ie QQQ longs, although I didn't spell that out in advance. If GLD reduction then there are still some units free for next idea. A lot of markets are between pivots right now, or rallying into levels while daily chart overbought making it a tougher setup (ie, EEM, RSX). 

I have been pointing out possible short on NKY with break of YS1 for weeks. Unless you are some institution it is unlikely you are trading NKY directly; EWJ is below all pivots as of 4/1/2016 and not much risk to hold that. I am not saying this a huge position, more like an odd exception to USA strength. But why not 1-2 units of index that is among weakest in world right now from the Pivotal Perspective? Even Shanghai and FXI are above AprPs. 

Oil via CLK closed pennies below its Q2P of 36.89, while CL1 is still above Q2P of 35.43. If CLK looks like 36.89 resistance then that is a close of any runner longs, more caution on remaining EWZ / RSX units if owned, and possible short setup as it will be below all pivots. A break of CL1 would confirm the short idea and be a possible add.

And how could I pass on TLT long, again above all pivots as of 4/1/2016 with clear hold of AprP? To be honest I thought we would see some institutional re-bal drop on TLT early in Q2 but per pivots this still looks quite fine. If USA stock indexes work off overbought conditions then TLT may go higher. 

What are not good setups right now: 
IWM short, no resistance level and dropping onto AprP support then Q2P support under that.
XLF shorts, ditto.
IBB short, above AprP.
FXI also above AprP and then Q2P, although in general weaker than EEM and can be used as hedge.
PIN long above AprP and Q2P but below long term levels, why buy mixed condition when TLT is above all pivots? 
Other USA mains (SPY, QQQ, DIA) decently above support and not near any resistance yet, except next weekly levels. 

Maybes to watch:
Shanghai below Q2P so that is possible short if we saw that tag and act as resistance.
DAX holding Q2P by a few points, would not take much for break below all pivots to join NKY with this status.
Oil as above if break of Q2P then below all pivots.

 

Weekly strategy sum

If following along coming into last week long DIA and SOXX, maybe EEM, maybe runner portions oil or oil related EWZ / RSX left to hold above Q2Ps, and decent GLD/GDX position. Strategy suggestions did a nice job avoiding stock pullback damage with TLT and especially quick VI futs trade idea along with XLF and possibly other shorts, but GLD/GDX got whacked, sorry. That was rather out of the blue and even though looked like holding YR1 as support had a big gap down under the level.

We are heading into quarter end and new Q2 so in addition to pivots I try to guess the likely institutional re-balancing move. I don't always get this right - wouldn't that be nice! But be aware that starts of quarters can see sudden new directions as the window dressing period is over and there is re-balancing going on. Where might this happen? As the week unfolds I might post a few longer term charts like quarterly (Q) and monthly (M) standard view Bollinger band and moving average charts on several asset classes as well. 

With exception of biotechs most USA stocks are about flat so nothing screams re-balance to me. But TLT and GLD/GDX on track for large quarterly gains. GLD/GDX just starting new up move or bounce in downtrend depending on your view, but TLT up there near highs. So that is the question - will institutions sell bonds and put that money into stocks, or be selling stocks and buying bonds? I don't have strong opinion about next week other than i "think" the window dressing move should continue the emphasize asset classes that have done well on the rally, so small caps, oil & related, some emerging markets, and the USA leaders DIA and SOXX (doing much better than QQQ and IBB this year). Then I am wondering about TLT getting hit in the new Q as institutions sell again before any rate hike threat while TLT has the gains and toppy considering Q and M chart view. If oil rallies into quarter end it maybe vulnerable to a drop in Q2. But really just guessing here and we'll go with the pivots. 

If you took off VIX hedges and closed some shorts on Friday portfolio is back to mostly long. Or if keeping any shorts, XLF looks best to hold and if in EEM I suggested FXI as hedge and that is OK to hold too. Mostly long works on DIA and SOXX but really looking across USA mains, Japan and EU, then emerging market group there is no reason to have massively 100%+ long all in portfolio right now - ie, most stock indexes are still below long term pivots! So we can scan for the weaker indexes to possibly re-short, so that means IWM & XLF on USA side, possibly IBB but that could be getting about done, then clearly SHC (Shanghai) and FXI are the weaker indexes on the global side. Both NKY and DAX remain quite weak as well. If the Tech group (NDX COMPQ QQQ NQ) goes to more bearish with NDX break of YP, then it might be better to take the gains on the comparatively recent SOXX longs and free up cash for other ideas. 

Not sure what to do about GLD / GDX here. The slam was large and sudden and monthly pivot just below, so thought maybe just hold above that. But now both weekly charts look like YR1 rejection which is potentially quite bearish. 

The other things I've said in various places and will repeat here - if you took some gains on oil related, and out of TLT, put some shorts on and took off last week, then depending on GLD position you might have portion cash on sidelines. This is OK - you don't have to have 100% in all the time. In fact often quarter end and new quarters are ideal places to have more cash so you can go with the new move. But I am not talking about 50% cash or anything, if we carved things up into 20 units then you could be long with 8 DIA and 2 SOXX, then 4 GLD and 1 GDX (if still in full position), 1 EEM, .5 each EWZ/RSX leaving 3 units that you used for VIX, TLT and or XLF positions last week. Maybe use margin at times for a few extra units as hedges or good opportunities, let's say another 5 units so that's not too crazy if portfolio goes up to 125% total exposure. If GLD forces us out then that's OK, we'll have a new setup soon enough and maybe it will be better to be more long stocks or more short, we'll see.  

In the very near term on USA indexes, watch if SPY and NYA can again get green on the year. Both QQQ and IWM had too big a drop to do this, and DIA is already well into the green. On several indexes this year there was a rush of buying when it was clear the index was getting green. 

Bottom line I don't have a list of things like last week. I don't know which way the market will go. Momentum looks like DIA and leaders should test highs but that is just a bias. We will have new Q2Ps soon enough and sudden moves often start at the start of quarters as institutions adjust. That is what we are looking for. 

 

Weekly strategy sum

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. 

Bearish version would be any reversal of status change from last week, most likely would be NDX back under its YP and NYA rejection from its 1HP, along with XLF below YP/1HP and IBB continuing lower. 

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. 

If mostly long via DIA, some SOXX, perhaps EEM and RSX left, maybe you took some gains on oil and EWZ already but could have runner portions, plus GLD and GDX then what? Keep in mind a nice trade on TLT with one great exit and one shabby exit and you might be out of that. 

If consolidation idea is correct then choices would be:
1. Reduce on last adds and try to get in on pullback; ehh, DIA and SOXX charts look so good i think better to hold the winners and look to play weaker indexes or TLT or VIX.
2. While NDX and IWM remain weaker, and I suppose could be short possibilities if NDX drops under its YP again or IWM against its futures MarR2 (Fri high basically), I think better choices elsewhere.  
3. I mentioned IBB and XLF (along with IWM and XLE) as short possibilities last week, and IBB did break under all pivots so depending on an entry 3/14 or 3/15 you might have gains on that. IBB may continue to drop into quarter end I suppose, but VRX reached its YS1 level 26.05. If that stops going down, IBB likely pops. If VRX below 26, then can still play IBB short. XLF is a candidate if drops back under YP 1HP combo both at 22.65 (barely cleared on Friday).
4. If stocks consolidate I like the idea of trying TLT if above its 1HR1 level 127.87 and next weekly pivot; possibly looking to buy VIX futs J6 either with a move from Q1S1 17.72 as support or if one more plunge then down to YS1 (!) 16.85 would be a good stab at speculative long.
5. Lastly indexes that look especially weak compared to the USA rally are: NKY, DAX, then Shanghai, FXI, PIN. EEM is a theme this year so probably FXI and PIN have more chance of playing catch up, so of these NKY looks the worst! 
6. Just thinking out loud here to share process, of all these choices my top ones are TLT long, VIX fut spec long per levels listed, NKY and maybe DAX, then for USA probably XLF over IBB this week unless VRX breaks 26. In fact IBB only thing I see right now below all pivots (except VIX which is bullish) but if you wanted to play that entry was last week. 

USA stock momentum is very strong and it would be rare to have a big drop start after such a move with a consolidation phase and high test, so I am just thinking of lightly playing this idea for about a week and then see where things are. Of course all suggestions with pivots only as triggers, ie, TLT above WP, VIX futs above Q1S1, if any shorts look for level rejections and indexes that are still under most pivots. Forget about shorting strength; we are holding strength on the long side. 

GLD is an easy long term hold above its YR1 levels. GDX hasn't definitely cleared yet, but if gold stays strong GDX should continue to catch a bid. 

Weekly strategy sum

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. 

Basic bearish would be reversal from last week, and the first signal would probably be SPX back under 2014 and then ES re-testing 1988, INDU back under Q1P 17138 and NDX rejection from 4373. Seems less likely. 

Markets could also go higher and then return to support or have some mixed scenario with SPX below 2014 but INDU holding its YP again. Let's call that the bull / bear market line since INDU has been the pivot leader on the 2016 rally.

Main point is that markets have been quite healthy from all the YS1 holds and recoveries that happened early February. I won't list all the recoveries as virtually everything did this, but 2/11-12 lows were INDU YS1, RTY YS2, CL YS1, and HYG YS1, all very near exact holds. Now after 4 straight weeks up we are again seeing indexes above major levels on INDU etc and SPX etc with NDX almost there as well.

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.

If stocks fade then it is simple to reduce some recent longs from the last two weeks, or can hedge out via shorts on weaker vehicles so that means is still below most pivots ie Q1P, 1HP and YP. Right now on USA that means IWM, then IBB, XLF and XLE though oil has been on tear so careful with the latter. 

Take a look at the emerging market vehicles since if DXY continues weak some of these should continue to pop. EWZ and RSX have been leading and above pivots, EEM testing, while FXI and PIN are lagging and well below levels so first shorts. The leaders are already overbought or nearly so and thus late adds at this point, but still worth consideration as trading vehicles in general. They have moved quite well as shorts last year and longs this year. 

GLD and GDX are a bit of tricky case as they have held up quite well during the stock rally, so probably better to view those positions separately with less idea of correlation ie stocks up gold 'should be' down. Watch the YR1s on both. 

Lastly if you like individual stocks you can scan for what has held pivots or is moving above pivots, but I just don't have time to track all the possibilities. Here's an example of a basic investing method using long term levels only. 

 

 

Weekly strategy sum

As noted in the USA main index post, there are several indexes right at huge pivot levels and most of those have a tight cluster to boot. 

Last week already had pivot status changes on several major indexes SPY ES INDU (barely) DIA YM all cleared either 1HP or YP or both. But these are all under Q1Ps and we can further watch MarR1s for resistance as well. 

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. 

Recent currency trades are out. DXY long or EURUSD short would be out for small loss. BTCUSD out for scratch if you were watching the pivots or yesterday's alert. 

I mentioned SOXX as a leader among USA indexes because it was first to re-capture a 1HP. It is right on its YP so if above that then *above all pivots!* We have not seen any stock index above all pivots in weeks (only the safe havens, TLT, GLD, & GDX). 

The real big gains last week were the emerging markets. If you held or got back in kudos. Comments on each below; i'll do separate blog post on these soon.
 
EEM entry tougher from here heading into Q1P & 1HP resistance.

FXI the weakest of the lot still could be first choice for shorts, especially if back under MarP.

PIN jumped and could have been bought 3/1, now between levels.

RSX buy was really 2/16-24; but could buy against the 1HP / Q1P combo and use that as stop area. RSI is highest in more than a year however, bit late.

EWZ buy also 2/12-24, or could have jumped in 3/1 above MarP and WP; jump above Q1P 3/3, now also above 1HP 3/4. RSI on the daily is highest in about 2 years and also at moving average resistance. 

If stocks turn down, the first things to move under all pivots are likely IBB, oil as CL, then probably FXI. 


Weekly strategy sum

Basic idea: if the market is more bullish, that means more longs and fewer safe havens; if bearish then more safe havens and or shorts. Mostly I try to buy what is above pivots and avoid, hedge or short what is below pivots, but once in a while there is a good buy setup from support (or sell setup from resistance). 

So last week 3 of 5 USA main indexes lifted from YS1s (SPX, COMPQ, and NYA) as RTY continued its advance from the low of the year on 2/11 bang on YS2. And between 2/11-12 INDU / DIA / YM held its YS1 as well. This is bullish. 

Meanwhile, both main safe havens TLT and GLD jumped above their YPs and quickly rallied to YR1s, and then have consolidated for 3 weeks. Holding gains is positive, but failing to clear the major levels increases the chance of a larger drop.

If stocks continue to advance, we will probably see more pullback in the safe havens. If safe havens stay firm or even rally back to or above YR1 / 1HR1 levels, then stocks are likely dropping. 

We will also have March pivots to consider. All stock indexes are still below their YPs, 1HPs, and Q1Ps; MarchPs will likely vary. So any stock index that opens below or breaks its MarP is a short candidate, most especially any vehicle that did not trade above its FebP as others did. 

Similarly, safe havens are above their YPs, 1HPs and Q1Ps so if MarPs test and hold as support that is a good buy.

It will be more of a mixed market if more stock indexes hold or trade above MarPs while still remaining under the larger levels; and/or safe havens break below MarPs while above their YPs, HPs and Q1Ps. If markets are mixed it is OK to have more in cash, especially if you prefer not to be adjusting on each change of monthly levels (which happens a lot more frequently than the Q, H and Y levels).

If you saw the bullish developments between Wednesday and Thursday last week then you were probably back on the bounce playbook which is a more neutral stance; adding back longs on USA leaders DIA & SPY above the FebPs, and/or reducing safe havens as TLT and GLD that put in small blue bars under resistance with wicks on Thursday. 

The easier trade will be if stock indexes fall back under MarPs; clear shorts and back to bear playbook. But if the stock bounce continues, then we can consider longs above MarPs. We'll carefully watch what happens at the big levels like RTY / IWM / TF YS1s and especially INDU / DIA / YM YPs. I think the latter levels, if they tag, especially decides if correction over or bear market continues. 

See the USA main index post for the yearly and half-year levels. 

Lastly, I have a currency trade idea to watch: long DXY / short EURUSD. I prefer trades that surprise the market and I think it is consensus to be long DXY, but fact is DXY recovered its YP break, lifted from there as support; lifted from 1HP Friday and cleared its Q1P. It will likely open above MarP too. So that means probably above all pivots. Idea valid above the QP at 97.66 especially if it "looks like" support. EUR similar but in reverse with its QP at 109.58, especially if it "looks like" resistance. Daily charts with pivots only (no S or R levels) below to make this idea clear. Of course new MarPs on 3/1. We could also wait to see where those are and/or reaction.