Safe havens

Sum
TLT and GLD under SepPs. VIX had one day above SepP (as did TLT) only to move back down below the pivots on Friday. XIV strong and not at resistance. VI futures also below all pivots. Safe havens all flashing green light for stocks. 

TLT
Weekly chart sideways between levels. Daily chart had 1 day somewhat above SepP but without the look of support; the next day back down. SepS1 not far below. TLT has tried to rally from its daily 50MA several times to fail. Pivots showed weakness first by being under AugP the entire moth, although to be fair AugS1 held as support. 

GLD
Weekly chart off the lows but also basically sideways between long term levels. Daily chart back to testing SepP. Not a cluster of levels on lows so far, but GCV contract (not shown) was near its Q3P. Regardless GLD will be stronger if it can clear SepP. 

GDX
Check it - small red bar just above Q3P and then a big jump on decent volume. Pivot buy early 9/1 for active, or short cover if short from 8/23 bar. If long then you'd want to see this clear SepP.

VIX
VIX has worked great for the buys this year - the days it dropped from YP or near it have been the key buys of 2016. But not so well for tops. It would be nice to see a tag of SepS1 however. 

XIV
What a run this has had. All above SepP with SepR1 and Q3R2 above. 

VI1
The one VIX variant to show some concern for later August with several days above the pivot. Even this dropped under SepP on Friday. The first sign of trouble for the market would be back above this level. 
 

USA main indexes

Prior week: "SPX set back to half above half below; NDX futures under Q3R2s; INDU within 100 points of YR1 target twice but no tag, then pullback to Q3R1s on DIA; RUT set high on 2HR1; VTI high on YR1."
Last week: SPX set above all pivots; Tech set mostly above levels with NDX futures just under Q3R2s; INDU set above all pivots; RUT set back to Q3R2 & 2HR1 with YR1 just above; NYA & VTI above pivots with VTI topping on YR1 the last 4 weeks. 

Sum
All main USA indexes above all pivots is positive. As long as these hold we can aim for higher level targets. Mostly these are SepR1s with other levels very nearby depending on the index. For the last several weeks I have been looking for: SPX Q3R2 - 2HR1 (top within 5 points so far), NDX 4816+ then ideally a pivot, INDU YR1 (within 59 points) - these 3 all did not quite make target areas. But RUT set & VTI did reach levels. Now it is possible that market can go higher, tag SepR1s and then we'll see. This would be effectively a high test since the SepR1s are mostly near the previous tops. I have to be bullish here with all 5 above all pivots, but this is the 3rd month above monthly pivots and even strong trends are due for a pause or move to monthly S1s from time to time. 

SPX / SPY / ES1 / ESU
SPX has held YR1 as support which is bullish. In fact there have been several trading days with lows near this level. As long as this holds we can look for higher targets: SepR1, then especially Q3R2 (both as shown on the daily charts) and then if above that 2HR1 which is quite near the Q3R2 anyway. SPY, ES1 and ESU charts also show clear hold of new SepP on 9/1. This will be the 3rd month above monthly pivots which increases the chance of trading high or break.

NDX / COMPQ / QQQ / NQ1 / NQU
NDX bullish but still pausing at the 2000 top level shown on the red line 4816. Above all pivots with all variants clearly holding SepP. Q3R2s mixed condition with the cash indexes and QQQ above, while futures look like resistance. If higher then SepR1 first target level. 

INDU / COMP / DIA / YM1 / YMU
INDU & COMP struggling near their YR1 level, with INDU just shy of a tag and COMP overshooting then dropping back under. DIA and others below monthly pivots on 9/1, but jumped above on 9/2. 

RUT / IWM / RJ1 / RJU
Nice hold of SepP and already back at Q3R2 with YR1 just above. Big levels to watch the coming week. 

NYA / VTI
NYA looks fine but VTI 4 weeks with top at YR1. 

Valuation and fundamentals

Thomson Reuters reporting 17.10 making potential support near 17x 2167 and 17x resistance at 2230. We may see 18-20x forward earnings for a bull market high, but not higher than that. 

Citigroup Economic Surprise Index as posted by Yardeni back down to the zero line. Although I understand the market rallied on Friday with postponement of rate hike I do not view this as positive development, and adds to my "upside limited" base case from here. 

Monthly charts

Monthly bars just closed. Not every doji at the top of the monthly Bollinger bands is a sell - but sometimes they are! So will that be SPY, TLT, both or neither? 

Tom Lee vs TPP

Tom Lee told you to sell at the end of July and buy back SPX 2100. That didn't work did it? Nevertheless, CNBC is eager to have one of the most highly paid strategists back as a guest and didn't give him a hard time, just saying "you've been bullish." That is kind of true, as he didn't call for a big top like Gundlach, but still, they let him off easy.

Now he is saying buy USA small caps, which means the Russell. I say no way! IWM (ETF for the Russell 2000) just tagged its 2HR1 level, and YR1 is just above. This is terrible from a risk reward perspective. If you wanted to buy in here, then it was 7/4 and 7/11 weeks with the 2nd launch above the YP. Definitely not up here at significant resistance, especially with the weekly chart showing highest RSI in nearly 2.5 years! Basically, his buy signal is nearly 2 months and about 5% late.

Long term pivots on the weekly chart (look at RSI) below. 

E-wave bearish version

See previous post for preferred view. But let's consider the alternative. To keep things simple I will use SPX for bullish and INDU (DOWI) for bearish. W5 up idea is the same like this:

Although where we label the end of W4 drop makes a big difference, especially in the time target. Was it 8/2015 or 1-2/2016? The majority of USA indexes (SPX, MID, COMPQ, COMP, RUT, NYA, VTI) basically everything except INDU / DOWI and NDX, and NDX was partially pricing discrepancies on 8/24, made lower lows in 2016. But for this index we are considering the bearish count, so I'm using the lower price low in 8/2015. Projecting W1 from W5, INDU has already done 50%. This leaves the typical bullish version targets 61-100% of W1 19350-21800 above.

If we add a time projection we are past 38% of W1 and 1 bar from 50%. In fact, 50% in price and time line up at 18590 (let's say 18600) and 9/2016!

Even if higher, we could reach 61% in price and time 19350 12/2016 which is sooner than the SPX version pointing to 2017 Q2 as more bullish high. 

If we were to see a failure, we would more likely see some topping pattern; instead of powerful 5 waves up, could be some ending diagonal. The weekly chart would look more like this. 

Note W3 is dividing into 5, and we could already be in w5 of larger 3. This would mean important top soon (ideally from YR1, hey!) and decent pullback from there. After that pullback we would still have another rally to higher highs, though this would be a crucial high for the bull market - end of W5 monthly and W5 weekly.

E-wave bullish version

No change to what I've been saying the last several months: SPX 2250-2500 2017 Q2 to 2018 Q2. Check tag for prior versions and details. Here is the basic idea.

So monthly SPX W5 at which point we will see ABC down ie bear market. W5 could / should have a ways to go yet, according to the bullish version. Now going to the weekly chart, we are in a W3 like this. If bullish version playing out, then W3 should be longest and strongest wave. Something like this.

According to this version, we won't see much of a pullback and markets will continue to surprise to upside. In fact, the move up from 6/27 low could even be considered a w1 subdivision of W3, with much more to go. This conflicts somewhat with my pivot view - upside limited at key target levels - but let's see what happens at these levels. Now within the weekly moves, daily chart patterns will also appear. I think this is the best fit, ie, W4 done on 8/26 low and W5 in process. Like this, with W1, W3 and W5 up portions in green and W2 & W4 down portions in red. 

What do you know, W2 drop matched W4 drop almost exactly!

The classic target zone for W5 is 61-100% of W1, which is 2230-2275. This is admittedly much higher than I've been expecting, although the 38% failure level at 2205 is right in my target area of Q3R2 & 2HR1 2199-2209 respectively.

Total market view

Last week: "I don't have a bias on the coming week. Given sentiment extremes recently reached, I would not be surprised at a another small drop and comeback. Yet for now I keep to this view: ideal high area INDU YR1 18727 with other levels (Q3R2, 1HR1) a bit above that; SPX Q3R2 to 2HR1 2198-2209; NDX achieved 1 day above 4816 so if above that next pivot resistance level is AugR1 at 4857, and RUT Q3R2 to YR1 combo at 1246-1261." Also: "The main point here is we have reached a point where upside is likely limited, though markets can easily go essentially sideways for several weeks before a drop that matters."

Result was INDU less than 100 points of target zone twice, SPX within 5 points twice; NDX cleared 4816 but didn't reach pivot level. RUT did reach into target zone and dropped. So a bit pesky - I think upside limited, but market didn't quite reach the areas I have been expecting to see. So a drop in process, comeback remains to be seen. Thus far I didn't nail the profit taking / hedge day. 

Sum
Was that it? Hm. A big scary event - threat of rate increase - but actually hasn't happened yet, with equally bullish conclusion (promise of QE4). Sounds more like Brexit low than big stock high.

All stock indexes above all pivots. VIX just mild concern.  I ran my market top checklist again and my answer was more likely stock pause than major high. If this view is correct we'll see VIX below all pivots on Monday and a rebound.  

If the media wrote hey SPX up 10% in 6-7 weeks, NDX 8 weeks up in a row natural to rest as it tests all time highs, and bullish sentiment just too high - then they wouldn't have much else to say. Instead we get all kinds of drama about .25% that may or may not happen weeks away. The smart $ in the room (Gundlach, Druckenmiller, Soros) are much more concerned about all the past years at near zero than the possibility of .25 higher. 

My game plan: I uncomfortably took partial profits on Friday because SPY closed below its YR1 and VIX closed above its AugP. I'll quickly add back if SPY back above and VIX below their respective levels on Monday. Right now safe havens are looking like shorts, not ways to hedge out longs as they were in the first half of the year. Weak links continue to be Japan and Germany so that leaves shorting ETFs for most USA traders unless you have more deep pockets and trading futures; there is also EFA that is at least below its YP, still has a declining 200MA, and current high of year is 4/20 with lower highs in June and August compared to higher for most other indexes. 

Pivots
USA mains - above all pivots. A pesky near tag of targets on SPX, INDU and NDX - RTY and VTI did reach levels though. 

Safe havens - look much weaker below AugPs. TLT speculative short at highs still working. GLD / GDX short possible for those paying attention, or at least clear signal to take profits on longs. 

Global & other - Oil above all pivots on CL1 contract from 8/15. Rollover contract and USO different story, but those above 2HPs from 8/15 also. Global indexes excepting DAX and NKY healthy participation in recent rally also whacked on Friday after making lower highs compared to earlier in August (referring to EEM, FXI, PIN, RSX, EWZ).

Other technicals
We will have August monthly close to watch, and in 4 weeks the more important quarterly close and I'll put up some longer term charts then. For now technicals appear more threatening for TLT and GLD than stock indexes. 

Valuation & fundamentals
Citigroup Economic Surprise Index has faded and stocks have appropriately paused. 

Sentiment
Sentiment extremes reached earlier in August so pause in rally and some shakeout is normal. Whether that becomes a real pullback of more than 5% or remains in garden variety shakeout of 2-3% remains to be seen. 

Timing
In August I tried to separate stocks from TLT and GLD and whether that was success is hard to say - perhaps just cluttered up the calendar.

8/9-10 stocks - minor pullback low
8/12-13 bonds & gold - TLT high of month, GLD near lower high
8/21-22 stocks - 8/23 stock high +1 acceptable
8/23-24 bonds & gold - don't know, GLD low but TLT high both 8/25 possible
8/29-9/2 all mkts OK that's a full week and admittedly wide; a stronger window for turns

For September
9/12
9/16
9/23-27 

 

TPPs market top checklist

Version 4. See tag for prior versions (7/16, 7/23, 7/31) answered all No. 

Sum
If this is a top of significance it is a very sloppy one. I think more like a pause after fantastic run, SPX up 10% in 6-7 weeks, NDX testing all time highs, sentiment extremes reached, and summer range rather than continuing breakout up. 

1. Multiple major USA indexes at major resistance, then rejections? VIX / XIV alert?

Partially. The very pesky thing is INDU within 100 points (59 then 96) of YR1 and SPX within 5 points of Q3R2, but we cannot count these. RTY did tag 2HR1 near exact, and VTI tagged YR1. VIX also showing mild concern with 2 closes above AugP, but not with the look of support yet and a small drop would be back under levels. 

Possibly, but without SPX, INDU and NDX tagging big levels and VIX only giving partial hedge signal, looks more like a shakeout than a top - so far. 

2. RSI extreme reached? Negative divergence? Bollinger bands in play, or divergence? (ie "other technicals"?)

On the daily charts, DIA reached RSI 68.9 on 7/20 and faded from there. QQQ reached 69.97 on 7/27 and kept on powering up. SPY and IWM reached higher zones but not what you'd typically call overbought (69+) yet. 
INDU quarterly chart does have issues though, and now about 5 weeks from the close of the bar. This is something to watch, because a September fade back under highs would look more like a bull trap. 
Lastly, SPX, NDX, INDU either tag or quite near monthly BBs. 

My read: Top possible but pause equally or more likely.

3. High tested with at least 1 lower high?

Yes, 8/15 high then 8/23 test. SPY double top, DIA lower high 8/23, QQQ fractionally higher 8/23, IWM higher 8/23, VTI fractionally higher. 

4. Safe havens showing concern? 

TLT and GLD *weaker* below AugPs. VIX / XIV / VI very mild concern, very easily alleviated with any move lower on Monday.  

5. Breadth or volume divergence (adv / dec volume is my favorite)

A dip into negative territory 8/25-26 after a clear lower high in August compared to July. The last stretch was 8/1-3. Mildly, but but not too bad yet. Other breadth measures are mixed. Simple readings like ADD look like this volume chart, a lower high in August. Cumulative breadth made higher highs on 8/23 however. 

6. Sentiment extremes reached?

Yes, definitely. I wrote about this here on 8/19. If market is going higher it needs to shake out some of the weaker hands. Classic. 

7. Valuation / fundamentals? 
Many would argue this is most important, but I believe information will show in charts first. Citigroup Economic Surprise index did a great job confirming the stock breakout, and now you could say it is confirming a pause in price by rapidly fading back towards the zero line (yet so far remaining above). 

Valuations on the higher side, but in later stages of 2009 bull market maybe we will see SPX forward P/E 18 - 20 especially if political concerns ease in the fall. 

8. Timing window?

I don't get them all and some turn out to be non-events, but several major turns this year have been in timing windows identified in advance. 

2/11-15 stock low / bond high
6/8 stock high
6/28 (missed by 1 day and magnitude)

In August I tried to separate stocks from TLT and GLD and whether that was success remains to be seen - perhaps just cluttered up the calendar. I did have 8/22 listed for stocks and so far 8/23 high is an acceptable +1.

$USD

If market really believes Yellen's hawkish tale we would see strength in USD right? Dunno, I read the same speech and saw promise of QE4 with any real downturn. Jeesh!

Basically DXY has to prove strength by moving above 2HP and YP 95.90-96.48 area and close above that on a weekly basis. If this happens then it will put a kink in the commodity and global index rally theme of 2016 (oil, gold and miners, EWZ, RSX, partially EEM, etc). 

DXY
Weekly chart high last year bang on 2HR1, low this year on YS1 and a choppy mess since then. 2 bar recovery of YP only to drop back below. Still under 2HP and YP at 95.90 and 96.48 respectively. If above it would be the 3rd time this year and that "should" be definitive. 
Daily chart big jump above the Q3P after being below for 8 sessions. Still below 3 other pivots though. 

Safe havens

I am going to continue calling this "safe havens" even if we bonds and gold have periods when they are not so safe. It is because people are buying these as protection alternatives to the growth promise of stocks. 

Sum
TLT and GLD clear drops from AugPs (keep in mind that all USA mains and most others than I can think of are above AugPs), making TLT and GLD in the weaker position. VIX closed fractionally above AugP for 2 days which shows some caution, but I will be quick to take off partial hedges or add longs with any clear move back below. The tell of the stock pullback only came on VI1 continuous futures, which did hold AugP as support for several days. It also would not take much to drop back below the level. Basically, TLT and GLD showing weakness, and VIX & variants mild concern but nothing drastic yet. 

TLT
Weekly chart still bar between long term levels.
Daily chart 2nd rejection of the AugP, but so far AugS1 has held. Adding in Bollinger Bands and MAs (3rd chart) we see 20MA starting to slope down and a break of the purple 50MA (this happened 4/20-5/31 as well, but held the 100MA on the 4/26 low). I don't know if we will stay in this range or drop lower, but if the latter then Q3P and rising 100MA beckon as targets. Remember I recommended a short right on the highs and have said since to hold below the AugP. 

GLD
Weekly chart between long term levels like TLT.
GLD D struggled at the AugP for several days before the larger drop. From 8/5 on, only 1 week up bar above otherwise selling and resistance. 

GDX (for kicks)
Weekly chart shows a phenomenal move from above 1HP and YP on 2/1, then a rally all the way to YR3. Textbook RSI divergence on the 8/1 and 8/8 bar high tests (2nd lower RSI level compared to 4/25 and 7/4 bars). Fast drop but maybe we'll see a bounce from YR2. 
Daily chart has been below a monthly pivot 1 day in April, a handful of days in May with slight breaks then a cluster late May; since jumping above on 6/3 entirely above all pivots until 8/22, that is 2.5 months! Sometimes it can pay to watch the monthly pivots! 

VIX
Weekly chart up bar; I haven't been expecting this to reach long term support. 
Daily chart did not reach monthly pivot zone either. The important note is a fractional close above the AugP for 2 days. This is not nothing, but so far considerably more tame than bars like 6/10 or others than really launched above the pivot. Lastly, a falling 50MA and 100MA than may act as resistance against the upward 10MA and 20MA. 

XIV
Weekly chart between levels. Daily chart overshoot of AugR1 then a drop back under. No big deal here. 

VI1
Weekly chart up bars, but not on levels. Daily chart the lone tell here with a jump on the rollover which held the AugP as support.

USA main indexes

Prior week: "SPX set above resistance, NDX new all time high and now can go for pivot resistance, INDU came within 59 points of ideal YR1 target then faded, RTY also very close to long term resistance but not quite, NYA OK yet VTI YR1 tag."
Last week: SPX set back to half above half below; NDX futures under Q3R2s; INDU within 100 points of YR1 target twice but no tag, then pullback to Q3R1s on DIA; RUT set high on 2HR1; VTI high on YR1.

Sum
For the last several weeks I have been pointing to an ideal top area on 4 of the 5 USA main indexes (I probably should have included VTI but didn't, as that was also approaching YR1). SPX set 2HR1 & Q3R2 combo; INDU YR1; NDX above all time high then thought we would see some pivot resistance; RUT YR1, 2HR1 and Q3R2 combo. 

SPX came within 5 points, INDU 59 then 96 points, NDX did reach all time highs but no pivot resistance, RUT tagged levels (and VTI did too). A pesky high so far, with only 2 of the 5 (counting VTI) really tagging levels and not yet on SPX, NDX or INDU. 

SPX / SPY / ES1 / ESU
A slight crack in YR1 on SPY and ES1, but SPX still holding and ESU well above. It would not take much bounce to recover, so these are important levels to watch next week. 

NDX / COMPQ / QQQ / NQ1 / NQU
Although the both futures dropped back under Q3R2, the weekly cash indexes just don't look too bad here. 2 small red bars at all time highs for NDX looks more like a natural pause after a tremendous run. 

INDU / COMP / DIA / YM1 / YMU
Sigh. I was waiting for that YR1 tag on INDU which came within 59 points on 8/15 and 96 points on 8/23. COMP more clear with 2 bar overshoot then 3 bar clear resistance under the level before a significant rejection. DIA and YM1 charts showing pullback to Q3R1s which may be able to hold as support. 

RUT / IWM / RJ1 / RJU
Weekly chart looks toppy with small blue bars and wicks bang on resistance. Now *this* is what a pivot high is supposed to look like! IWM 8/23 high at 124.46 and level 124.53, with close re-test on 8/26. Futures charts just slightly different with RJ1 matching cash structure but still selling near highs. That said, the only index to make a clear higher high 8/23 and still above nicely sloping MAs.

NYA / VTI
NYA not near any long term level, but broke Q3R1 which had been trying to hold as support for several days. VTI, a different broad index calculation, does look like a top bang on YR1.

Total market view

Last week: "USA mains are acting in a very healthy fashion at the highs and we should see major pivot resistance for a top of any significance. Most sentiment extremes reached in mid July have backed off. Safe havens TLT and GLD are a bit weaker, and we aren't seeing any concern from VIX/XIV. Simply stated stocks should rally further and I'd especially like to see INDU YR1 area (also check other index targets below) for a key high."

Close but not quite; the high on 8/15 was 59 Dow points from the YR1. Hope is not a strategy, but I am hoping that wasn't IT as target failures are very pesky phenomenons since I don't trade them and they are only clear in hindsight. Safe havens are still a bit weaker, VIX and all variants are all clear, and we really "should" see several USA mains on major pivot resistance for a top of significance. This hasn't happened yet. 

Sum
I don't have a bias on the coming week. Given sentiment extremes recently reached, I would not be surprised at a another small drop and comeback. Yet for now I keep to this view: ideal high area INDU YR1 18727 with other levels (Q3R2, 1HR1) a bit above that; SPX Q3R2 to 2HR1 2198-2209; NDX achieved 1 day above 4816 so if above that next pivot resistance level is AugR1 at 4857, and RUT Q3R2 to YR1 combo at 1246-1261.

Let's put that in perspective. INDU has rallied from lows bang on YS1 to YP which held on 6/27, and now all the way to near YR1; SPX slightly below YS1 through YP to above YR1; NDX below YS1 to above 2HR1; and RUT from YS2 and now approaching YR1! These are all fantastic moves; not completely unusual historically speaking, but pretty good. Perhaps we will see higher than these levels by the end of the year, but SPX is up 10% off the 6/27 low and I am doubting that the market simply blasts through these resistance levels. In other words, they might be good areas to take some profits, hedge, or possibly short some of the weaker indexes depending on what unfolds. Of course, given the moves in TLT and GLD this year they could again be considered on the long side if back above all pivots. 

Friday 8/19 reminded us that at stocks, bonds and gold can all drop together on the fear of rising interest rates; but safe havens TLT and GLD below monthly pivots leave stock indexes in the relatively stronger position above all pivots.

However, sentiment extremes have been recently reached; valuation already on the high side; Citigroup Economic Surprise index fading. The main point here is we have reached a point where upside is likely limited, though markets can easily go essentially sideways for several weeks before a drop that matters. Oil which is acting very well will help stocks maintain gains. 

Pivots
USA mains - see above

Safe havens - TLT and GLD below AugPs but both haven't dropped much either. TLT reached AugS1, GLD not even that. VIX and variants all clear. 

Global & other - China (both Hong Kong and Shanghai), India, EEM, and others have all participated in the rally. NKY and DAX remain the weak links, and I even recommended a DAX short here on 8/15.  NKY can be considered with a move under its 2HP. These are harder for USA individuals to trade, but can be accessed through futures and perhaps EWG & EWJ, though currency moves will impact the latter. Oil is looking good, back above all pivots on the definitive CL1 contract as of 8/15. This is of course supporting the stars of 2016, EWZ and RSX (though the latter might be done on its YR1).

Other technicals
Daily 20 MAs have flattened as they do with sideways action on SPY, DIA, TLT, GLD. But not on QQQ, IWM, SOXX, EEM, FXI, and others. 

Sentiment
Now a concern for the market. Risk of shakeout drops has increased, sideways, and upside limited until fear is refreshed.

Valuation and fundamentals
Citigroup Economic Surprise Index dropping rather fast after what looked to a great move.

Timing
I probably should not have tried to separate out stocks from safe havens as it just made a mess. 7/29-8/6 strong period was a relatively minor pullback low in stocks, yet a key higher low in oil for the year, and a double top in GLD. 

But August has been a bit too sloppy to be helpful thus far: 

8/9-10 stocks - minor pullback low
8/12-13 bonds & gold - TLT high of month, GLD near lower high
8/21-22 stocks - we'll see
8/23-24 bonds & gold
8/29-9/2 all mkts

Symmetry

Before I really got into pivots I fooled around with this kind of thing a lot more and it really can work. For example, the SPX weekly chart below shows that the drop from the 5/18/2015 bar high to the 8/24/2015 bar low was roughly matched by the drop from the 11/2/2015 bar high to both 1/18/2016 and 2/8/2016 bar lows. Roughly, because the exact level was 1848 and the low was 1810. Not bad on the weekly close however. 

But now this is where things get pretty cool. Doing the same exercise in time on a daily chart gave us a match on 2/9, just 2 trading days off from the low. This is using the actual price low on 8/24. Shifting to the noticeably lower close low on 8/25 brings us to 1 day from the low, but we don't even have to fiddle. Within 2 days is pretty good stuff. 

NDX is setting up on something very similar to the upside, with 100% at 4864. Time matches on 9/5, so that would be an interesting area to watch along with AugR1 at 4857.

Safe havens

Sum
Friday 8/21 reminded us that stock indexes, bonds and gold can all drop together with the fear of rising interest rates, but in general I think TLT and GLD below their monthly pivots leaves stocks in the stronger position. 

In addition, VIX continues to give the all clear sign by holding the AugP as resistance on 3 days this month. I even included the VI1 and VIU futures this week to see if any warnings of immediate reversal. Other than oversold divergence on daily charts (XIV, VIU) there is not much to worry about. Of course VIX will increase at some point, and there is probably more upside than downside with VIX in 11s. But that hasn't happened yet. 

Keep in mind the ideal stock sell signal will combine major level rejections with some sort of VIX confirmation. We haven't seen that yet. 

TLT
Weekly view far away from YR1 support and 2HR1 resistance. If you add Bollinger bands on quarterly, monthly, weekly (not shown) then there looks to be less chance of seeing that 2HR1 as prices would again have to move outside at least one of those bands to hit that level.
Daily chart has been below the AugP all month, with lows basically on AusS1. I think a jump above AugP would likely coincide with a pullback in stocks. For now the short recommended on 7/6 and triggered on 7/8 is holding below the current monthly pivot.

GLD
Weekly chart similarly between levels. 2 small blue bars with wicks vulnerable to a drop. 
Daily chart tried to lift above the AugP on 8/18 but could not maintain. 

VIX
Unlikely to see long term support, as I just don't think we will see VIX in 8s let alone 9s. VIX AugP support 3 trading days has said keep buying dips and hold longs. If market were going to have a more serious pullback we should have seen a close above the AugP. 

XIV
Healthy. Daily chart looking good above the AugR1 again, although showing divergence on RSI. 

VI1
VIX futures continuous contract showing a very different story with a big jump last week. Daily chart shows the jump up on 8/17, which has happened a few other times this year on monthly rollovers. So, more bullish with VI1 below 14.60.

VIU
Weekly chart doing fine; daily lows just 8/20 and maybe we will see the Q3S2 at 14.21 tag. The only warning we see is RSI divergence on the daily chart. 

USA main indexes

Prior week: "SPX set above resistance and going higher, NDX going for 4816+, INDU ideal top near YR1, RTY also healthy and not at resistance. NYA fine, VTI YR1 level to watch."
Last week: SPX set above resistance, NDX new all time high and now can go for pivot resistance, INDU came within 59 points of ideal YR1 target then faded, RTY also very close to long term resistance but not quite, NYA OK yet VTI YR1 tag.

Sum
I have been pointing to ideal high areas the last several weeks. Markets *almost* reached those on some indexes on Monday 8/15, with INDU coming within 59 points of YR1. Then we have SPX set 2HR1 and RTY 2HR1 as well. I'd still rather see the INDU YR1 tag, and have multiple USA mains on levels for a significant high. A target failure is very pesky because you cannot really trade it and only clear in hindsight. So hopefully that hasn't happened! 

SPX / SPY / ES1 / ESU
SPX has held YR1 as support the last 4 weeks after clearing it without any trouble on 7/18 week. I'd really like to see a tag of 2HR1 for a key high, but not sure we will see YR2. A move from below YS1 all the way to YR2 would be spectacular - but quite rare historically speaking. SPY showing sideways digestion and clear resistance at the 2HR1 / Q3R2 combo if it can get there. Similar looking chart on ES1 compared to SPY, with YR1 holding 4 times near exact in recent days. Lastly, and ESU chart with MAs and BBs. If market drops we could see the lower band i guess, but a tag of Q3R2 would be a nicer high. 
 

NDX / COMPQ / QQQ / NQ1 / NQU
Cash indexes healthy above 2HR1 and not year YR1. Oh yes, NDX new all time highs as I have been saying the last few weeks. What a run!. Daily charts QQQ and NQ1 combined just now signs of trouble the entire rally - 7/13 looks bad on QQQ but not NQ1, then 8/2 looked more serious on NQ1 but QQQ clear hold of support. Interesting zig zag here... more on that in separate post. 

INDU / COMP / DIA / YM1 / YMU
Oh so close on INDU to that YR1 tag - 59 points. COMP looks more threatening as a top, but we really should see a level on the INDU set considering 4/20, 6/7 and 7/20, all of which tagged monthly R1s on cash, ETF, futures, or combination. 

RUT / IWM / RJ1 / RJU
Cash index quite close to the 2HR1 tag, just 4 RUT points. IWM bit further, RJ1 looks like cash, RJU actually reached it. Considering move from YS2 a tremendous run. It is hard to imagine a blast through 2HR1 / YR1 without a decent pullback at least. 

NYA / VTI
NYA isn't near any long term levels, but at least holding Q3R1 as support. VTI reached YR1 and looks more like a potential top. 

Valuation and fundamentals

Thomson Reuters P/E increased slightly to 17.1 as SPX dropped a bit, so a mild reduction in earnings estimates. 17x potential support 2171, 17.5 current resistance 2234. 

Wall Street Journal publishing more conservative estimates with SPX already at 18.6x forward earnings. It jumped above 18 in mid July and has maintained this since. 18x potential support 21113, 19x 2230.

Both measure show P/E getting into high area of 2015, which itself was the bull market high. If we are in euphoria stage of the bull market I think we can see 18-20x on the Thomson numbers which currently means 2300-2550, but the extremes of the late 1990s are just not going to happen in this decade. 

*

Citigroup Economic Surprise Index published by Yardeni starting to look like a sharp fade after a rapid move into positive territory. Coincidentally most stocks have been sideways for 2 weeks. This is really something to watch here with sentiment extremes already reached and bonds holding up quite well. A move back into the negative zone would likely result in stock pullback and bond jump (yield drop). 

Sentiment

There are 4 things I track. When I worked for a fund I made sure to do a detailed analysis each week, and these days do a a full version only occasionally. There are other things out there like commitment of traders report, or BAML fund manager survey. The Fat Pitch site does a good job of summarizing the latter. 

To be honest sometimes there are discrepancies and I'm not sure how to reconcile. For example, if fund managers are holding a large portion cash - which has historically been very bullish for stocks - is that still applicable with interest rates so low? The opportunity cost of holding cash is lower than it has ever been. 

So I will stick with the 4 I know. 

Sum
Extremes reached on daily put-call and weekly lower end for post QE period 2014 on. NAAIM managers significant extreme. Both ISEE daily spike highs 7/18 and again 8/5 & 8/12, though moving averages remain middling for any data period. AAII individuals have been the bearish holdout, though near relative highs for past 18 months; not enough to be extreme (10% percentile, but higher end (20% percentile). 

3/4 of these have recent extremes if you include the daily spikes on ISEE - should be enough to at least restrict upside, possibly increase risk of shakeout and often will contribute to a key high area. 

Put-call
Daily put-call made a multi-year low near 7/20/2016, then had a sharp rise. It has recently fallen. Although this doesn't look like an extreme compared to 7/20, there are still only a few days in the last 18 months or so that have been lower. Red lines are simply the 7/20 low and 8/18 low. 

Shifting to a weekly view from the start of 2012, we are on the lower end. Put call went significantly lower towards the end of 2013 into early 2014, which was the results of QE fuel, a year of non-stop up for stocks and down for bonds, and preceded the first -10% drop in months that occurred January and early February 2014. 

Put-call sum
Daily extreme reached 7/20; still low enough to be considered extreme (10% percentile) 8/19. Weekly on lower end, and may even be extreme for post USA QE period.

ISEE
Daily readings: spike highs 7/18 (2nd highest of 2016), also high enough 8/5 and 8/12. Spike lows 8/1, 8/10-11, 8/16-17. 
However, all moving averages are quite low considering data from 2005 to current. Even reducing data to 2012 to current, MAs are nowhere near bullish extreme. For some reason, this put-call measure designed to remove professional hedging has skewed lower over time but I don't know why. For now, spike highs have been near trading tops or at least upside limited for the last few years. 

NAAIM managers
Using data from 7/2006 on, we have reached significant extremes in the last month or so. This is a warning sign for the market or at least says upside limited. There have been about 530 weekly readings, so anything in top 50 would be top 10th percentile. Let's restrict it further to top 5% percentile. 
7/27 (3rd highest of all values)
8/17 (9th of all values)
7/13 (11th)
8/3 (19th)
8/10 (22nd)
7/20 (23rd)
That is a fat cluster of very exposed managers. Some of this may have been forced in buying, but still. Obviously this contradics the BAML survey as reported by Fat Pitch for higher levels of cash. 

AAII Investors
Savvy bunch, frequently right but also will show some capitulation on turns. This batch has refused to get too bullish on the way up (though i'm not sure if that is correct, given the market.) Still, the highest readings of 2016 have been 3/10 & 3/24, then 7/14, 7/21 and 8/18. 

Using data from 2005 on, bullish sentiment remains middle of the pack and restricting data from 2012 doesn't change much either. Similar results with % bears, bull - bear spread and 8 week bull average. Only when restricting data to 2015 on do we see bullish sentiment at a relative high. I'm not sure how valid this is; from 2015 market was stuck, and now it has broken out up. 

E-wave

A revisit with some discussion of ideal targets and patterns vs failure targets and patterns. 

Basic 5 waves up here on SPX monthly according to the ideal pattern:

W1 up - strong, impulsive, itself a zig-zag
W2 down - normal
W3 up that subdivided into 5 waves of its own - classic longest and strongest wave
W4 down - zig-zag, also normal if W2 was not.
W5 up - in process from February 2016 low

There are all kinds of nifty relationships here which I will simply list and not chart:

W3 top was 161% of 2007 high to 2009 low (to the point actually)
W2 = W4 within a few points
W4 zig-zag portions also equalled each other

Ideal price high of W5 is 61-100% of W1 shown on this chart:

So that's 2241-2510 but let's make it easier and say 2250-2500. I highly doubt we will see blowoff 161% target. But we could see a failure zone 38-50% 2075-2160. Hm. That's done, even exceeded slightly. More on that in a bit.

We can also do the same exercise in time. Currently we are not even 38% of W1, which would be 12/2016. The ideal time zone of 61-100% of W1 is 6/2017 to 4/2018, or again for ease, 2017 Q2 to 2018 Q2. Why would such a powerful rally have such a fizzle at the end? I guess that is possible, but this is one reason to stay bullish for a while yet. 

I am expecting the 5th wave in the monthly to be comprised of 5 waves on the weekly. So far we have seen this. My ideal version is below. 

So ideally we are in W3 on the weekly, which should be the longest and strongest wave. This will also divide and show most clearly on the daily chart. 

The entire move from 2/11 low to 6/8 high, then to 6/27 low fulfilled the ideal complete pattern, meaning an ABC down following the 5 waves up. Then a new pattern began. This is not a hindsight call - the 6/30 post said: "If all this is correct then we are about to get the last best move of the bull market over the next year or two." (You can also read that post for details of the ideal complete pattern on the daily chart.)

According to all this, we "should" see higher, and this is just the first portion of a larger W3 on the weekly that will sub-divide. 

It is possible that we just saw 5 waves up on the daily like this:

But is also possible that we are still in W3, and that we'll go on like this:

As I've said before with all this stuff, if all this boggles your mind just keep it simple with the pivots alone. But let's keep that in perspective. SPX went from below YS1 to YR1; Tech set from below YS1 to 2HR1; INDU from YS1 to YR1 within 59 points; RUT from YS2 to near YR1. That's a lot. Ideally all these targets will complete, but perhaps it will take some more time for that to happen. 

OK, what about the failure idea? If I do the same basic pattern on Dow monthly, then W5 is at 50% of W1 here, and due to the low structure, we have already seen 38% in time and will be at 50% 12/2016. A major high within 100 points and .3% of a YR1 - it has happened before and could happen again!