Valuation and fundamentals

If time permits I will keep all components of my total market view going in some respect:

1. Pivots
2. Other technicals
3. Timing
4. Valuation & fundamentals
5. Sentiment

Pivots are always #1, but the others just depend on whether see are seeing extremes or not. For example, sentiment can go weeks without mattering too much, then ideally we will see a major extreme on a turn. So this means #2-5 are not necessarily in that order, just depends on the week.

Now on to the subject of the post. See the tags for prior versions. 

SPX rather shockingly jumped to 18.50x forward earnings. I am simply reporting the data from WSJ here. This means the SPX total estimated earnings dropped from 117 to 112. To be honest, I really don't understand this move at all. If earnings estimates are dropping that severely, stocks should be coming into selling pressure quite soon. I thought we would see selling at 18x forward earnings, not a jump above the level without any struggle. 18x support (?) 2024, 19x resistance 2136; hard to imagine 18x forward earnings being strong support however. Even in an absolute best case scenario I think the absolute cap for the year would be 20x which currently stands at 2250 or about another 8% up. 

NDX 18.75x forward earnings, so 18x support 4361 and 19x resistance now 4604.

INDU 17.06x so that is near a round 17x at 17834. 18x resistance 18883.

RTY 17.10x so 17x support 1121 and 18x resistance 1187.

Citigroup Economic Surprise Index as posted by Yardeni is still fading from the zero line. It is my belief that a strong rally to take out 2015 highs on multiple USA main indexes will require this going into positive territory. 

Well, this is exactly why pivots are #1 on my list. If valuation of the SPX index jumped nearly an entire point from 17.41 to 18.50 in one week would you think that is a plus? I don't really get it but seems that markets are primed for "sell in May." 

Safe havens

In the last couple of months I have been dedicating one post a week for bonds via TLT and another for GLD & GDX. I use VIX and other VIX vehicles a lot but didn't really post on these directly. Since I am moving to a more limited posting schedule I thought it would be helpful to have a post on these as a group like the USA main indexes. 

Sum
TLT strong above all pivots.
GLD above 3 / 4 pivots, a shade below AprP (GDX above all on Thursday the clear buy did better on Fri).
VIX currently below all pivots but testing AprP. VIX and its cousins often get the market correct. 
XIV below YP and HP, above Q2P and AprP, ie, mixed. 

Bullish safe haven scenario would be TLT towards AprR2, GLD above AprP, VIX above AprP.

Bearish safe haven scenario would be TLT rejection from AprR1, GLD rejection of AprP and YR1 again, VIX below AprP with look of rejection.

* * *

TLT high of 2016 is on the 1HR2 / YR1 combo. After dropping from that leve, 1HR1 came back to act as support. So the current range continues mostly between 1HR1 support and YR1 / 1HR2 resistance. 

Any way you look at TLT it is quite a strong trend. It opened April above its Q2P and AprP and easy decision to jump back in with the look of support from near test of the AprP. After a 1 day drop from AprR1 it immediately came back and probably heading up to the AprR2 / YR1 / 1HR2 zone. 

If you are a dedicated bond trader you might want to look at TYX TNX ZB ZN as well. 

GLD is again moving above its YR1 but just a shade under 1HR1 resistance. Anything higher would look very bullish. 

I am not sure of that low last week; back above YR1 bullish, just under AprP though. 

Due to time constraints I will probably drop regular coverage of GDX, but wanted to point out that Thursdays decision to buy GDX over GLD was based on GDX being above YR1 *and* AprP, and that paid on Friday. 

On VIX, the 2015 high was on YR3. I also think it is interesting that VIX had the market correct as its YP / 1HP combo held as resistance. However, it is very unlikely that we will see the YS1! :)

The clear drop from the YP on 2/12 helped confirm the stock buys, and VIX nearly all bullish from there except a brief bounce 2/22-24 and then 4/7 above the AprP. Watch the AprP from here. Dedicated traders may also wish to check VXN, VXD, RVX, VXEEM, etc. 

VIX above AprP would be more bearish for USA stocks, but below the Q2P 19.70 is still in relatively safe zone. Any move above that would mean more serious trouble for the market and likely coincide with a break of some index Q2Ps as well.

The inverse VIX ETF XIV is pretty good too. Look at the 2014 high and 2015 low (both on yearly pivots). 2016 low quite near YS1 / 1HS1 combo too. 

XIV D just above AprP and Q2P not far below. More bullish for stocks to stay above these levels. 

USA main indexes

Sum
Last week: 3 strong, 1 mixed, 1 TBD+.
This week: 2 strong, 1 strong but testing; 1 mixed, 1 TBD-.

OK so what happened to make the USA main indexes somewhat more negative? SPX and INDU groups remain strong and above all pivots. COMPQ is back to testing its YP, and NQ is is not far from testing its YP again, so the tech set is "strong but testing." RTY mixed below long term YP and 1HP but above medium term Q2P and AprP; watch the AprPs there as a break below would invite a move down to Q2Ps. Lastly NYA having clear trouble at the 1HP / YP area again, and this is a concern for the market. It too held its AprP last week, and would be more bearish with a break below.

Bullish: AprPs on RTY / IWM and NYA hold as the low, COMPQ holds its YP, up from there.

Bearish: Break of IWM and NYA AprPs that likely start a move down to Q2Ps, COMPQ break of YP and then possibly NQ break of YP too. 

I am not going to write up strategy based on these scenarios so you'll have to figure it out yourself for whatever is appropriate for your trading / investing style and portfolio. 

* * *

SPX / SPY / ES

NDX / COMPQ / QQQ / NQ
NDX is comfortably above all pivots but COMPQ is not. It would be more bearish for that to break in the coming week. But NQ dropping onto YP is not a good short setup for the tech set as a vehicle. Just something to watch right now. If COMPQ breaks YP and SOXX breaks AprP I think the best move is reduce those tech sector longs and take the gains.  

INDU / COMP / DIA / YM
New! Adding Dow Composite to this group. I think the pivots are quite amazing clear here, and would have helped confirm a more defensive shift at the end of Q1 with the 1HR1 tag and rejection. Showing both the weekly and daily chart on that. Otherwise, all this above all pivots, comfortably green on the year.

RTY / IWM / TF
These all held AprPs on 4/7, but a break would be bearish and invite a move down to Q2Ps. 

NYA / VTI
VTI looks fine above all pivots, but NYA clearly having problems at that YP / 1HP combo where it has stalled for 4 weeks now. Institutions are not bidding up this index, and combined with action on safe havens this is a real concern. But both red bars are not quite clear rejections either, by fighting off the lows the closes were higher than the previous blue bar opens in each case. I will just call this mixed - due to red bar. NYA D held AprP on the low last week and as usual more bullish above and bearish below. 

Valuation and fundamentals

Why did 4/6 bullishness quickly vanish? I think a valuation issue and Wall St cos must be getting the latest SPX earnings estimates. 

SPX forward 12 month p/e from 17.49 (round number-ish 17.5?) down only to 17.41 with earnings lower, that is bad. 17x support 1999 and 18x resistance 2116. 
NDX p/e also mild drop to 18.46 with 18x support 4362 and 19x resistance 4604.
INDU p/e 16.70 which is actually a mild increase from last week despite the price drop. So 16x support 16839 and 17x resistance 17891.
RTY p/e 16.89, reached round number 17x last week, current levels 16x 1035 and 17x 1100.

Also I said Citigroup Economic Surprise Index clearing the zero line could be a tell on bullish / bearish scenarios from here. It dropped back mildly last week and just cannot get into positive territory; which continues basic economic conditions from early 2015.

Although the USA especially at times has been in "bad news = good" modes with FOMC rising rates etc, I do think this report is worth keeping an eye on. I have seen other variants like China, Emerging markets, Japan, EU (all not available without Bloomberg as far as I know) do a good job and leading the next larger index move. This year USA markets rallied along with fundamentals improving from a very low level - so that rally was in many respects warranted but not clearing the zero line is also a tell. 

Point remains: we have a real valuation concern as I don't believe SPX will trade much above 18x earnings especially before election matters are settled. This currently stands at 2116 but has been moving considerably lower even in the last 6 weeks when I have resumed tracking markets this way. On 3/11 18x forward earnings was 2176! This means earnings are being adjusted lower. And with the Citigroup report, nothing is surprising economists to upside. Together these put a real cap on further USA gains. 

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. 

A revised The Pivotal Perspective...

OK folks, for the few of you who are reading, my life is turning in a different direction and I couldn't be happier! At this point I expect to maintain the SPY daily section. After that, I will probably do the USA main roundup each weekend. Beyond that, I am not sure.

The last few months especially, I have written about all the components of my total market view - pivots, other technicals, timing, sentiment, valuation & fundamentals - and covered a variety of asset classes with multiple posts a day. But now my time and brain energy are going into another exciting project. Good luck and stay on the right side of the market!

Best performing hedge funds vs TPP

According to ValueWalk, the best fund of 2016 is up 16.75%, with still the top 20 in the world only up 6%+! Frankly I am flabbergasted at these performance numbers, because there have been so many great moves in so many markets a skilled fund really should be up 10+% this year. That means a vast majority of funds are really quite terrible in the trading department, so in which case, why bother?

Needless to say, if you have been following recommendations on this site, even despite today, you would be on this top performing list and without any leverage! With leverage like the funds use, top of the list! Yes really, go back to 1/4/2016 and do the math on the recs! Just consider, short USA stocks first week of January and good cover, long bonds 1/6, then adding, long gold late January, then adding, long Dow and oil 2/12, long other emerging markets the next week, adding longs late February and early March... OK then! There have been a few quick 1 day outs, a couple of shuffles, and today was not pretty but I guarantee larger moves add up to more than 6% gain this year! 

I've been involved in a small world beating team before. I cannot take full credit since I was not the trader, but a small hedge fund that I worked with as a strategist for 3 years was top 3 in the world with about 110% gain in 2013. So I know what it takes to outperform - getting the leaders in size with leverage and holding the best trends. This is why my focus is buying leaders above all pivots first and shorting the laggers down below all pivots first, and holding winners relentlessly. Knowing when to hedge helps, but you have to know when to really change gears too. When those great trends end, it is time to leave. That judgment is the toughest part. Pivots help a lot. 

Anyway, today it seems like companies want certain certifications and certain methods - despite the fact that those certifications just mean crowded trades and methods that continue to under-perform the market.

Fresh thinking here, demonstrated daily on a very part time basis on my part... full time still available if anyone is interested! I may (and hope to) have another commitment soon, though, at which point blogging will reduce considerably. 

Piper Jaffray vs TPP

Strategist at Piper Jaffray keeping to SPX 2350 call this morning. Tough timing for him today, but that's not the point here. Most of Wall Street would doubt this call too, since 2350 would assume a 5% jump in SPX earnings from here (up to 125 from current 118.50) and forward 12 month p/e near 19 (up from 17.5 now which already on the higher side of historical valuations). Both seem quite unlikely at this point; earnings estimates are usually revised lower as the year unfolds. 

But what I can say from The Pivotal Perspective is that using INDU data from 1925, this has never happened. This year has been historic, both in the January drop and Q1 recovery, so nothing can be entirely ruled out. But from 1925 to now, the market (meaning INDU index) has never traded to YS1 in the first half and reached YR2 by the end of the year - which is what his call implies on SPX. 

Of course, the reverse has occurred - from reaching YR2 and then down to YS1. Even that is rare, but it did happen twice: in 1929 and 1987. So basically he is calling for a similar type move this year in reverse. While we can still consider the possibility of a YR1 2163 target as long as SPX holds YP 2015, but I highly doubt we will see YR2 2282, let alone trade above it. 

Was 4/1 a big high for the market?

Using the 5 main USA indexes, sticking to ETFs here for ease:

SPY 4/1 high
QQQ 4/6 high a bit above 4/1 high
DIA market leader this year 4/1 close high, price high was .03 higher 4/2
IWM similar 4/1 close high, pennies higher 4/2
NYA 3/30 price and close high

Usually we will see multiple indexes on resistance levels for significant turns in the market. The larger the timeframe the more important so a big top "should" have several yearly, half-year or quarterly resistance levels involved, or a combination. That wasn't really the case here:

SPY reached MarR2, no pivots tagged after 4/1
QQQ reached Q1P, no pivots tagged after 4/1 (Also, QQQ levels maybe suspect this year so confirm with NDX)
DIA reached and exceeded MarR2, no pivots tagged after 4/1
IWM reached MarR2, no pivots tagged after 4/1
NYA is really the issue here, with price high just under its YP, rejection from 1HP, and yesterday's hold of AprP is being undone. 

So 3 indexes on monthly resistance levels - in the previous month though! - and another index tagging a quarterly pivot but same idea, previous quarter. Only NYA tagging current pivots and showing rejection. This would be quite rare to a big top like this. But I will have to shift more bearish the more stock indexes break the AprPs, and the more we see the safe haven trade back on. 

Sentiment

Check tag for prior versions.

Sum
Sentiment has correctly improved considerably off the price lows and extreme readings reached in February. Put-call has moved up from low area which seems to indicate a lot of hedging and skepticism on the most recent push up in April, but it was an extreme low reading reached shortly before that. AAII managers are not yet at extreme readings historically but came in at the highest exposure in about a year. Also AAII investors had an extreme low reading of bears. So given these three together, I think there is same warning for the market. It may not be "the top" but perhaps this points to recent highs as potentially more important than pivots would currently indicate. 

* * *

Put-Call daily reached a low extreme 3/14-24 with the lowest reading near 3/18. This is shown by the red line which is also the area of several other key highs in the market. But since then it has jumped while price has gone higher. This 'should be' quite bullish as there is already quite a lot of skepticism and fear. Also as of last week I thought very low put-call would increase chance of option expiration related drop, and now that is really not a factor. 

Put-Call weekly also near low areas of past 1.5 years, but not historical extremes. Still, after 2014 second half is QE unwind and FOMC rate hike fear market. 

ISEE
No spikes and all MAs still very low end which indicates more put-buying. I'm not sure how to reconcile this with the standard put-call data above. ISEE is trying to capture pure sentiment plays and not pro hedging. 

AAII managers
Down to 32% percentile. This has moved quite a lot. Near the weeks of the lows this year it reached 83-90% percentile, a full bearish extreme as of 2/3/2016. While 32% has room to move up it is the highest reading since 4/22/2015, nearly a year!

AAII investors
Bulls still 72% percentile, plenty of room to move up
Bears 6% percentile, extreme reading. This means of all data from 2005, this is extreme low (ie lowest 10th percentile) reading of bears. 
Bull bear spread 34% percentile, room to move up.
Bull 8 week avg still 85% percentile, up from the absolute lows reached in February but still on lower end. 

There is one warning flag here and that is very low number of bears. 

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. 

Timing model

For previous posts check the tag. As I have stated several times, rough work in progress and feel free to ignore. 

Big picture idea is:
1. Pivots, ideally long term and medium term levels, AND
2. Other technical factors such as volume, RSI, MA trend analysis, BBs, AND
3. Timing, AND
4. Sentiment extreme, AND
5. Fundamental valuation level

Will all be on the big turns. Of course indexes bumping up against yearly pivots will do it right there, so you can toss the other stuff if you want. But for what it is worth all of these did line up at the 2/11-12 low and that is the big turn that mattered for most stocks, oil and bonds. Really a lot came together - yearly pivot holds and/or breaks & recovery on many asset classes; RSI, breadth and other divergence compared to January lows; timing model; significant sentiment extremes reached (search "sentiment" in tool on FAQ page then go through tags) and lastly SPX forward p/e at the time was very likely about 15. 

I started writing about timing just a couple months ago and mentioned it near that 2/11-15 turn. There are two models, A and B. Sometimes they agree, sometimes not. Sometimes timing is there but interpretation is off. Or maybe market moves and ignores my timing idea :)

2/11-15 was both A and B turn and there was a huge result. 

Model A 3/1-11 directional move, thought volatility ie down but flipped to positive early in the window Model B 3/8, so originally thought 3/8-11 would be low. Turned out minor pullback in larger uptrend. Timing there, interpretation off. Did not result in big cost as pivots had shifted to bounce scenario from late February. Markets were heading into Dow and SPX YPs at the time and there was 1 day SPY / ES short that was quickly cut. 

Model A 3/18-22. Pretty clear high. This was part of the VIX futures 1 day hedge idea also because on YS1 at the time, and that really worked if you took gains when I recommended. 

Model A 3/31, Model B 4/1. You will see I first mentioned 4/1 date on 3/9 post. I thought some turn here but USA stock indexes were not running into levels so did not play this too much. But NKY broke down as I had been watching for weeks anyway and TLT started month above all pivots and just could not ignore either of those developments.  

Model A 4/8, Model B 4/8-9 strong. Not sure, as of Monday I thought maybe stock low, Tuesday maybe high, now back to low? Safe havens jumping today in pre-market. 

Model A 4/15 strong, 4/29 also strong
Model B 4/22 and 4/29 both medium

Interpretation is 4/8 area possible turn, 4/15? and 4/22?, 4/29 area good chance for larger turn. I know skeptics will say what? Timing turns once a week through this month? Whatever! Sometimes they are more spread out (like 1/19 and next 2/11-15) but let's just see what happens on these dates. 
 

Trade idea to watch

Mostly the ideas in the weekly strategy sum are enough to keep you busy. This is going along with the move in oil today possibly back above its Q2P. 

TPP picked off the key low in oil and didn't start saying think about locking in some gains until the second week of March (search on tags). The initial plan was to watch reaction on the Q1P either current or CL1 contract, that the Q1P on CL1 was 2 day weak clear and rejection. That was the trigger to take most gains. But I also thought oil would be good to hold a runner unit above its Q2P, but I was thinking on its current contract. Well that didn't work as it broke down without any bounce. So this was a cut and reverse short. Although I did mention CL1 Q2P had to break for larger position and that held. So really CL1 is giving the best signals, and maybe I should start weighting that as indicator from here. 

I didn't like the short setup on the daily chart (CL K) and kept to 1 unit (my base = 20 with 5 or so margin units 125% exposure). Sure enough, oil (CL K) may recover its Q2P again today as the CL1 Q2P held on the low yesterday. I already suggested to watch this for a cut and reverse long. And again to repeat, low was on CL1 Q2P! I just needed to factor this in more in the decision making process. Right idea, wrong vehicle with the CL K contract. 

Today I am also watching XLE which will move with oil. RSX and EWZ already had huge moves and will be subject to more profit taking. XLE is holding positive on the year and may clear its AprP. If this happens on daily close good r/r buy setup. Although some of my filters and signs to not take or take small would be a weak up bar with low volume above the level. Of course, a rejection of the AprP and negative on the year would suggest drop to Q2P, but I am not so keen on shorting oil this year. It has been down for 1.5 years, c'mon, damage should be mostly done.

GLD and GDX

There is a method to this... checking GLD and GDX after currency review. 

If you search the tags on gold you'll see TPP all over this move from mid January with the move above the 1HP on GLD, and further recommended adding units above the YP. But since then it has been choppy and I have been fooled by move above and below the YR1 / 1HR1 level. Ie, take profits on gains, add back, take again. The last weekly post recommended a position reduction if we saw selling from YR1 (ie inability to maintain gains on 3/29) which we did. 

The last weekly bar on GLD suggests drop to me, ie, small blue bar under major resistance. But reclaiming the YR1 would be bullish. Really we only see 1 buying (ie up) bar above that level otherwise red. If you bought down 1/25 week that is still an OK long term hold, but the buys the next week are the question here. 

GLD D as of yesterday looked like it may try again to clear YR1 but today dropping back down again. This will be the first month since December that GLD is below its monthly pivot. I think more likely move is down to Q2P first near 114. 

GDX also just under YR1 / 1HR1 combo.

But doing better on its AprP so far. These are obviously correlated but they don't have to move together all the time. Last year there was a big drop in GDX while GLD barely moved. Still, due to volatility of GDX, it is better to have GLD on your side for direction.

Currencies

I am not a currency trader but some of you might be and due to correlations in the markets think worthwhile to check up on these at least once a week.

DXY below all pivots and looks like we should see that 1HS1 level at least. 

DXY also below Q2P and AprP with no immediate support. 

Here are all long term and medium term levels on one chart.

EURUSD above long term levels and may see 1HR1.

EURUSD did tag Q1R1 on the last day of the quarter.

USDJPY breaking YS2! This is a big deal. Bearish below that level 110.62. 

Since announcement of negative rates USDJPY has been sharply lower; below all pivots from 2/3/16.

AUDUSD top on 1HR1 but still above YP. 

GBPUSD W under YP / HP from the start. Second break of YS1 in last 3 weeks is bearish. Trying to hold 1HS2 now. So from here I'd say a break below 1.4007 should mean down to the lows or YS2 1.371.

Q2 moving sharply lower so far, already from Q2P to 1HS1 and break of AprP and YS1 in the process.

Lastly the digital currency wish I knew about earlier. I thought bitcoin might get a run this year but alas right idea wrong vehicle! ETHUSD "Ethereum." 1 day break of AprP and recovery, note March low was exactly on the pivot. 

Safe havens, stocks and VIX

Interesting conundrum. 

ETF: % move from 2015 close, % reaction, current

TLT: 12.2% rally, -5.9% pullback, now +9.6% and pushing towards the highs!

GLD: 20.6% rally, -5.8% pullback, now 15.8% pretty good gains!

DIA: -11.3% drop, 15.2% rally, now +1.2% on the year.

IWM: -16.8% drop, +18.9% rally!, still -3.2% on the year.

VIX: 76.2% rally, -59.5% drop, still -15.5% on the year.

The point is the comparison between the stock rally and VIX slam with how firm both safe haven ideas have been. TLT rallied impressively, and GLD was even stronger, and both suffered only minor pullbacks while stocks had quite decent rallies of their own. DIA +15% and IWM +19% not shabby! 

But safe havens stayed firm. This is odd and something should go one way or the other. Safe havens should drop more and stocks maintain gains, or safe havens stay strong and stocks have more of a pullback on their recent advance. This would likely coincide with a lift in VIX. 

I thought the institutional re-balance move (I did say these were tricky, I try to guess and am often wrong - maybe some institutional player can clue me in here) was to take profits on TLT and GLD, but instead we are seeing profit taking in some of the hot emerging market names along with oil, TLT bid, and a slam in other developed market indexes like NKY and DAX.

 

 

NKY and DAX

These were quite obviously weaker compared to the USA this year. This isn't just a hindsight point, as I have been saying it all March. 

NKY in fact did break YS1 fractionally on 3/31 before the big plunge the next day. But unless you are an institution it is unlikely that you are trading NKY directly, unless you swing / position trade via futures. Anyway, this idea worked whether you shorted the break on 3/31 close or even if you entered EWJ short on 4/1 below all pivots, it is still a nice move today and helping limit the damage on the drop.

DAX also breaking under all pivots today, although EWG is just on its Q2P now. Tough call. DAX 'should be' the underlying but EWG is the vehicle with currency factored in.

If the last portfolio moves were 2 units short EWJ, 2 long TLT both 4/1 1-2 oil short 4/4, then portfolio is mostly all in with the other DIA, SOXX, remaining GLD/GDX, small EEM, possibly small QQQ longs. This is a case for margin too, allowing for 20 units (roughly how I am imagining things) with margin chance up to 25 for hedging or max long if everything was bullish (which it isn't). Point is you can consider DAX / EWG as short but Japan beat it to punch. If EWG breaks under its Q2P then there is really no debate, it can be added as a short. 

NKY W looks pretty bad with failure of YS1 level. Opens door to re-test of lows or YS2. 

Although NKY also fractionally broke YS1 twice in March, the headache free setup was shorting when it was also below the new Q2P and AprP.

Here's is EWJ, OK not perfect entry right at highs but worst case should be scratch trade at this point. Entry 4/1 or even 4/2 plenty of time below all pivots. Ideal move down to Q2S1 / 1HS2 near the lows. 

DAX also relatively weak bounce compared to USA indexes.

Note, does not include 4/5 data; broke under all pivots today.

Here is EWG trying to hold the Q2P. I think if already in the recent shorts might as well wait for clear move below the pivot. 

Oil

Sum
Recs did a great job of catching low and from early March have recommended to lock in some gains, especially after the CL1 contract tag of Q2P and rejection. But I also suggested runner portions to hold above the Q2P and that was a mistake, as that busted without any bounce. In my view there is no holding and hoping here, any longs with an asset below all pivots with the look of rejection are an immediate scram and then reverse some short depending on total positioning of portfolio. I am not going to link all the recs but you can search on the tag and see for yourself. 

Despite the impressive hold on YS1 / 1HS1 combo and huge rally, oil is still in a long-term downtrend ie below YP and 1HP. 

CL1 D version showing poke above Q1P and rejection after 2 trading days. Data shows 4/4 only, near Q2P at 35.43.

 

CLK current contract didn't even reach its Q2P, started AprP below its pivot and quickly broke Q2P. I was hoping to hold runner portions of oil, EWZ, RSX with oil above Q2P but that was wrong idea. Per strategy report, anything below all pivots with look of rejection means no more longs and possible short. 

Breadth

Check tag for prior versions. Most breadth tools out there have been very strong. Though I have been mostly recommending a bullish portfolio from late February and increasing bullish as stock indexes cleared pivots, the reason I have not gone max long, kept some safe haven positions and shorts, is because NYA and ACWI are still under long term levels. 

Both indexes have had resistance for a few weeks in the crucial YP / 1HP zone. Today both pulling back to near AprPs. A bullish scenario would be hold here then higher. But if AprPs break then we have to think about moves to Q2Ps on these which would probably mean jump in safe havens and more damage on the leaders. 

Crystal clear resistance on NYA 1HP / YP combo. Looks worse at this point with rejection looming, but not finalized until close. 

Here's the daily chart version with the same long term levels. Looks in play don't you think?

Now adding the Q2 and AprPs. Support just below today, better to hold that. If lower then down to Q2P possible. 

ACWI looks very similar. This is not coincidental. 

Also holding AprP so far. Stronger to hold that, if below then move to Q2P possible. 

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.