USA main indexes

Sum
All USA main indexes above all pivots - that's bullish. 2017 leader NDX set also so far holding above levels, with resistance so far turning into support. But we also saw clear selling from levels last week on the other indexes and that has been rare since the election. Most importantly, significant levels were reached on SPY (1HR2 and Q1R2) and these are a bit higher for VTI and DIA. I expect these resistance clusters to be a cap on price in the near term though price could linger up here before a larger drop. 

Levels to watch next week - IWM MarP (bullish to hold, more bearish below), QQQ 1HR2 (ditto), and if back up then SPX set YR1, 1HR2 and Q1R2 all in same area.

Charts
Cash index weekly charts with long term levels only
Daily ETF chart with long term & medium term pivots
Futures current contract pivots only (no S/R) and MAs for clarity of entries (now March 17 H)
Futures "1" continuous contract with the works

SPX / SPY / ESH / ES1
SPX weekly stopped on 1HR2 with YR1 just above. Yup - looks like a decent top doesn't it.
SPY daily clear top and rejection from Q1R2, with 1HR2 and YR1 just above. 
ES H since entry 11/9, all above pivots; above D20 except 1 day and mostly above D10 as well. Amazing run. No clear divergence yet on RSI.
ES 1 tagged the YR1 bang on and also still above D10. Markets could liinger up here very easily.S
SPX set sum - Major resistance cluster of YR1, 1HR2 and Q1R2 essentially reached and so far rejection. But momentum has been so strong that a test of this area more likely than an immediate big drop.

NDX / QQQ / NQH / NQ1
NDX W above its 1HR2 which is bullish, but would look more threatening with a fade back under the level. 
QQQ D shows just 2 days of struggle at its 1HR2 then a jump above. 
NQ H still all above D10 entire way since 1/5! Jeesh!
NQ 1 still looks very strong and can hold that YR1 as support. 
NDX sum - Very strong above its YR1 and above D10 nearly all of 2017. For now level to watch is 1HR2 because back under would make markets in general look more like a fade. 

INDU / DIA / YMH / YM1
INDU not quite to target area.
DIA shows MarR1 tag, with YR1, 2HR2 and Q1R2 just above. 
YMH above 10MA since 2/3
YM1 with a focus on RSI and BBs - RSI high at 85 matches December and I don't think that is coincidence. Also note RSI low at 48 in December, close enough to 50 area pullback zone in uptrend. 
INDU sum - Reached MarR1 with significant cluster just above. 

RUT / IWM / RJH / RJ1
Weekly chart not at resistance, and barely above 2016 high.
IWM still holding MarP, and if that goes then S1 likely. 
RJ H Already a few breaks of D50 this year, and MACD negative but without any damage. D50 nearly flat in slope. 
RJ 1 still above MarP but D20 basically failing to launch. 
RUT sum - the obvious lagger of 2017. Watching MarP and if that goes could be hedging trade candidate. 

NYA / VTI
Above 1HR1 is bullish until it fades. 
NYA D first time any selling from levels since 1/5 top and 12/13 top. But still comfortably above all pivots. RSI divergence more clear on this chart too.
VTI looks quite healthy all above 10MA.
VTI tagged Mar1 with YR1, 1HR2 and Q1R2 above. 
NYA / VTI sum - Reaction from MarR1s but comfortably above all pivots. VTI like SPY and DIA has major resistance cluster just above of YR1, 1HR2 and Q1R2. 

Valuation and fundamentals

10 period moving average of 18x forward earnings since 2/3/2017 has been:

2/3  2374, with SPX at 2297
2/10 2384, with SPX at 2316
2/17 2386, with SPX at 2351
2/24 2388, with SPX at 2367
3/3 2391, with SPX at 2383

High of the week was SPX 2400. Basically the valuation target zone I have been mentioning since last August shifting over to Thomson numbers from WSJ data has been tagged. But valuation is a funny thing. Right now my opinion is that forward earnings high in this bull market will be 18x-19x and not higher. But willing to say that this could be wrong, and it is the psychology of valuation that matters to the market. More on an interesting post here by Barry Ritholz. And while I start each weekend series with a quick look at valuation and fundamentals, it is price action that carries far more weight in my strategies. 

Due to 18x tag, I am downgrading valuation concerns to neutral. For the last year I've been saying mild positive because I thought there were room to go higher (but not too much higher). As long as numbers keep increasing the SPX can go higher while maintaining 18x. The pace of increases to the 18x level seems to be slowing so I may downgrade if the numbers start dropping. 

*

Citigroup Economic Surprise seems to be slowing but still in decently positive territory. 

The two combine for mild positive. 

Total market view

Review
2/19/2017 Total market view: "Levels to watch this week are DIA 1HR1 area, slightly exceeded last week, along with VIX FebP and XIV 1HR2. Thus far any maneuvering out of fully long (or better leveraged long) in 2017 has cost gains, but this won't be the case forever. As strength begets strength and 3 of 5 USA mains above long term levels, we can start eyeing higher targets. This means SPY YR1, QQQ 1HR2 (almost there already) and VTI YR1."

DIA continued to rally above 1HR1. QQQ reached 1HR2 and so far this is the top. 

Sum
Amazing rally in February - straight up despite RSIs overbought on every timeframe on most USA main indexes. Usually, multiple indexes will reach major resistance for a significant high. As of last week, QQQ had zoomed above YR1 and reached 1HR2; none of the other indexes are at resistance. 

Momentum is so strong that any first pullback likely bought. And yet, TLT has not dropped further this year and GLD is above all pivots. In a sense these are questioning the rally. So far VIX and XIV have supported stocks, as VIX clearly rejected from FebP several times this month. Even VIX above a monthly pivot would not be such a big deal in the scheme of things, as my official "trouble alert" comes when VIX closes above a QP, and SPY closed below a QP. 

So, bullish scenario from here is VIX remaining below all pivots as tech continues to lead and other indexes make it to major resistance for a top. A more bearish scenario is QQQ rejection of 1HR2 as VIX jumps above its FebP. 

Bottom line
Stocks have been incredibly strong, and with VIX below all pivots it has been best to hold risk assets. With market leader QQQ at major resistance there is a level worth watching, but probably best to err on the side of holding longs until multiple indexes are at resistance, divergence is clear and both VIX & XIV along with other safe havens are showing signs of trouble.

Pivots
USA main indexes - Watching QQQ 1HR2 this week. 

Sectors of note - XLE below 3 of 4 pivots for the second time this month as of 2/16. 

Safe havens - GLD strong above all pivots, soon testing D200MA. Reaction to this may be a tell for stocks. VIX also better to stay under its FebP until MarchPs take over. 

Global indexes - Hard to say "Trump rally" when Brazil, EEM, etc are flying in 2017. 

Currencies and commodities - DXY low of the year bang on YP on 2/2. Back above all pivots, but upside seems like struggle. Oil mostly sideways this year so far, but maintaining above all pivots on CL1 continuous contract. 

Other technicals
Strength begets strength in USA stock indexes with RSIs overbought in every timeframe. This is not as uncommon as one might think in strong bull markets. 

Sentiment
Extremes of December not yet matched in 2017. 

Valuation and fundamentals
SPX within 1% of longstanding 18x forward earnings target. Price may continue to increase based on increasing earnings, but ultimately I think the markets will make a significant top with SPX in 18x-19x range. 

Timing  (Proprietary experimental work in progress model)
Feb dates published 1/28
2/6 - Non event
2/10 - Non event
2/21 - Looked like a top, then markets back up on 2/24.
2/24-26 (call it 2/27 as 2/26 is Sunday) - TBD

March dates

3/3
3/20
3/24

Positioning

After returning to 100% long early February, only 1 adjustment and that was selling RSX with a drop below its monthly pivot on 2/17.

2 DIA (first positions near election, with a shuffle week of 1/30)
3 XLF, 1 QQQ (pre and post election)
2 SPY (1/3)
1 SMH (1/18)

9 longs or 90% long, no shorts. 

Although gradually rotating out of IWM has been correct, a couple reductions have cost this quarter as I have paid up to get back to higher exposure. In addition, while I was comfortable being maximum long in 2016 Q4 with safe havens confirming this position (TLT below all pivots, GLD below 3/4 pivots, both as of 11/10-11/2016), I have kept stock index exposure to a maximum of 100% after GLD reclaimed its YP for the second time on 2/1. Speaking of GLD, I did clearly recommend it here on 2/1 although did not include it in trading exposure system. 

While it makes sense to not include currencies and commodities in an overall exposure system - since I am treating GLD more as a safe haven think it would be valid to include it going forward. 

No adjustments in the past week. As tech looks toppy it might be worth taking gains on SMH or hedge via IWM.

*

Positioning limits
15 or 150% long, -50% shorts or hedges, 200% max total exposure. 

Currency / commodity positions are not included in this system. 

Safe havens

Sum
TLT stabilizing and GLD already above all pivots, but crucially VIX has clearly stayed under all pivots and that is bullish for stocks. 

TLT
Stopped going down but hasn't gained much either. Still, interesting that rates are not really confirming move in stock indexes in 2017 thus far.
TLT has now stabilized long enough to turn the 10, 20 and 50MAs to upward sloping and jumped above these levels. Still, heading into falling 100 and below Q1P. 
TLT sum - Bounce in play is interesting in that TLT has stabilized while stocks have zoomed higher. Hm. 

GLD
Completely different story here - clear lift from 1HP, above both long term pivots. 
Also above Q1P and FebP. Heading into test of D200. 

GDX
Odd with GLD popping that GDX is not following through. 

VIX
Up from lows of the decade but crucially, staying below all pivots. 

USA main indexes

Sum
SPY, DIA, VTI all recently cleared resistance clusters without any trouble and have maintained gains. QQQ soared through its YR1 to 1HR2. This is very healthy action. Only IWM is acting weaker and likely to lead markets lower when (if) they stop going up. Level to watch this week is QQQ 1HR2; I think a pause there more likely than blast though, but we'll see what happens. 

Charts
Cash index weekly charts with long term levels only
Daily ETF chart with long term & medium term pivots
Futures current contract pivots only (no S/R) and MAs for clarity of entries (now March 17 H)
Futures "1" continuous contract with the works

SPX / SPY / ESH / ES1
SPX weekly launched from 1HR1 and looks headed for YR1 / 1HR2 combo, only 33-40 points away.
SPY no damage even from FebR3 yet.
ESH above all pivots from 11/9 on; above 20MA entire way except 12/30, and most of the way above 10MA as well. 
ES1 includes Bollinger bands and though we are seeing highs inside the band (classic divergence) after several power up moves outside the band since 11/9, RSI *higher* should mean divergence there too for a major top.
SPX set sum - amazing trend continues. YR2 / 1HR2 looks very doable. 
 

NDX / QQQ / NQH / NQ1
NDX looks more like a top here at 1HR2. 
QQQ also testing level.
Futures above all pivots and 10MA every day since 1/4 is a stunning run.
NDX set sum - Testing 1HR2. Tech has been 2017 leader which is bullish for the market. First to reach YR1 and clear, but now at the next long term resistance level. Pause here certainly possible. 

INDU / DIA / YMH / YM1
INDU lifting above 1HR1, bullish. 
DIA above 1HR1 / Q1R1 cluster without any trouble. 
RSI is just a tad lower than December high but not glaring. 
INDU set sum - above 1HR1 / Q1R1 without trouble and so far maintaining gains. Doing fine. 

RUT / IWM / RJH / RJ1
Not joining the fun this year; just above Dec highs. 
Recent high on FebR2 and noticeable RSI divergence.
RUT sum - 2017 lagger, not even close to a quarterly resistance, barely above 2016 highs and glaring RSI divergence makes this index likely to lead lower when market finally stops going up. 

NYA / VTI
NYA & VTI also recently above Q1R1 without any trouble. NYA showing a bit more RSI divergence but otherwise these look fine too. It would take noticeable deterioration in both IWM and VTI to have a real breadth concern in the market. 

SPX nearing longstanding valuation target

8/6/2016, SPX 2182. "I think we can see 18x-20x forward earnings in this latter stage, but not has high as the late 1990s when new technology was so completely changing everything."

8/20/2016, SPX 2183: "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."

12/3/2016, SPX 2191: "Ultimately I'd like to see euphoria highs near 18x forward earnings in 2017-18."

12/10/2016: "I don't understand the curve fitting of the model but Thomson Reuters P/E went *lower* last week. I think the solution here is a moving average so I am just going with a 10 period MA. This will cut out this noise and have smoother valuation areas to watch as support or resistance."

12/17/2016, SPX 2258: "There you have it, a continually updating target range for SPX at 18x - 20x forward earnings. I don't think the market is going higher than that. Based on 12/16 close, this means SPX about 4-15% upside from here, although it is possible that the 10MA will continue to climb and this shift the target range higher as well. 

12/24/2016, SPX 2263: "This site has consistently maintained that I expect to see 18x-20x forward earnings for a real bull market euphoria high. Currently, 18x 10MA is 2350 and 20x 10MA is 2612. These may continue to increase, but for now this is my target range which is an admittedly wide +3.9% to +15.4% upside from current levels on SPX."

1/7/2017, SPX 2276: "The 10MA of 18x-20x valuation target are up to 2360-2622, or 3.6% to 15.2% upside from current price levels. These will continue to change as earnings and the 10 week moving average also change.

1/14/2017, SPX 2274: "I'm beginning to have doubts about anything higher than 19x. Smart money will gladly leave the remaining 5% on the table to protect themselves against a -20% drop. If I change the target range to 19x, then this means current 2514, 10MA 2503, % upside to 10MA = 10%."

2/4/2017, SPX 2297: "Using 10MAs to smooth the data: 18x target 2374, 19x target 2506, Or 3.3% - 9.1% upside."

2/18/2017, SPX 2351: "Every week I have pointed out target of 18x forward earnings; the current value is 2440 and 10MA is 2386. I think 19x is a cap, because I don't think smart $ will wait for 20x forward earnings to sell. This is currently 2576 and 10MA is 2518. Thus, 10MA target range of 18x-19x forward earnings of 2386 to 2518 is 1.5% - 7.1% from current SPX levels." 

Valuation and fundamentals

Information from Thomson Reuters over the last few weeks is exactly why I have switched over to a smoothed 10 moving average emphasis.

Raw numbers SPX earnings implied by P/E and price
2/3/17: 132.04
2/10/17: 134.81
2/17/17: 135.59
2/24/17: 133.22

Earnings cut that much over the last week?

Meanwhile the 10MA smoothed data is:

2/3/17: 131.90
2/10/17: 132.48
2/17/17: 132.58
2/24/17: 132.72

Market is acting like the latter, not the former. 

So, 18x 10MA is 2389, and 19x is 2521. This is .9% to 6.5% from current levels. Valuations may soon turn into more of a headwind depending on what you think of 18x forward earnings. 

*

Citigroup Economic Surprise Index still looks quite healthy. 

 

 

Total market view

Review
2/12 Total market view sum: "...SPY and VTI are running into long term resistance at 1HR1s, and QQQ is not far from YR1 These are key levels to watch. In addition RSI approaching overbought or fully overbought on several charts across timeframes increase the chances of a pause or a drop." Also, "Any sign of weakness on Monday means possible to reduce long exposure via a hedge on SPY. Run through the top checklist (current answer: maybe) and the more items tick off the more likely the market is at a decent trading top."

Results
Market simply blasted through the levels last week. Without any sign of rejection, no need for hedging trade.

Sum
Amazing rally continues, yet for the first time the often reliable VIX and XIV are showing signs of some top. Even if that happens, though, 3 of 5 USA main indexes have blasted above resistance, so any drop will be on to significant pivot level support. Add in rising moving averages on every timeframe and first drop will likely be bought. 

Bottom line
Levels to watch this week are DIA 1HR1 area, slightly exceeded last week, along with VIX FebP and XIV 1HR2. Thus far any maneuvering out of fully long (or better leveraged long) in 2017 has cost gains, but this won't be the case forever. As strength begets strength and 3 of 5 USA mains above long term levels, we can start eyeing higher targets. This means SPY YR1, QQQ 1HR2 (almost there already) and VTI YR1. 

Positioning
Dropped down to 90% long only due to RSX weakness, but think late to add or rotate. 

Pivots
USA main indexes - Very healthy, with 3 of 5 main indexes clearing resistance. Only IWM not joining party which means it could play catch up or more likely lead lower on a pullback.

Sectors of note - Ideally XLF reaches at least a quarterly level for a decent top. SMH daily RSI not like other indexes but continues to power up. 

Safe havens - VIX and XIV starting to show some signs of caution, but so far VIX remains below all pivots. 

Global indexes - Global benchmark ACWI is lagging SPY from 11/9, but matching SPY nearly exact for 2017. EEM, FXI and EWZ all rallied above levels. RSX disappointed, SHComp not as strong, and INDA had one day above its Q1R1 then dropped back under so less impressive than the first three. 

Currency and commodity - DXY held its YP exact on the 2/2 low, but move up from there has been with struggle. Held Q1P last week. EURUSD looks ready to resume lower, below all pivots for the second time in Feb. 

Other technicals
Strength begets strength. RSIs above 70 are the sign of strong bull markets, and a lot less rare than the TLT line up that was part of my top call last July. 

Some indexes that look a bit more ready to drop per weekly charts: IWM, EFA (?), XIV, EEM, FXI, EWZ, SHComp.

Valuation and fundamentals
Moderate positive for the market. SPX getting closer to 18x-19x forward earnings target zone that I have maintained for months (more recently shifted to 10 period moving average to smooth out some of the chop). 

Sentiment
Surprisingly not that euphoric in 2017 considering the move. Extremes reached in December worked off by indexes going sideways with a very mild drop into year end. Put-call getting lower, and NAAIM has been on the high side for a while. Another pop in either AAII or ISE could be closer to a sentiment extreme.

Timing  (Proprietary experimental work in progress model)
Feb dates published 1/28
2/6 - Non event
2/10 - Non event
2/21
2/24-26

Positioning

Heading into week:

2 DIA (first positions near election, with a shuffle week of 1/30)
3 XLF, 1 QQQ (pre and post election)
2 SPY (1/3)
1 SMH (1/18)
1 RSX (1/23)

Adjustments
2/17: - 1 RSX

9 or 90% long, no shorts or hedges. 

*

Even though "should have" is usually not effective mindset for trading/investing, taking off leverage after GLD lifted above its YP again in February has cost some gains. Better to not be max long when a safe haven is showing strength, but given TLT, VIX and XIV could have kept some leverage on.

Also, I have been surprised by tech and global index strength - these have been the best gains of 2017. Although I did rotate out of IWM, decision to buy 2 SPY instead of 2 QQQ has cost, and not adding EEM, EWZ on buy signals (already pretty long at that point) also cost gains. With XLF outperformance portfolio is roughly in line with SPY, although 2016 Q4 recommendations generated huge outperformance by focusing on IWM, DIA and especially XLF longs. Simply matching SPY is not the goal here - i'm shooting higher, while avoiding assets that are in long term downtrends. 

Positioning limits
15 or 150% long, -50% shorts or hedges, 200% max total exposure. 

Currency / commodity positions are not included in this system. 

 

Other technicals - RSI

We are hearing a lot of chatter about RSI and rightfully so - the move underway is remarkable. But how rare? Let's look at charts. 

I'm going to keep to SPX and NDX, though a full study would use the Dow and go back further in time. 

Sum
In both Q and M charts, above 70 is a sign of strength. This is exactly what happens in bull runs. It is not that terribly uncommon. What you don't want to see is:

1) A move that stops at 70 cold and turns lower. A few of many examples: SPX 2007 Q chart, SPX 1994 M, NDX 2011 M. 
2) A move than returns back under 70 after a long stretch above. Some of these can come back (1998), but negative examples are SPX Q chart in 2000 and both SPX and NDX M charts in 2015.
3) A parabolic move that has RSI values above 85 with price outside the Bollinger bands - risk at this point for a fast drop is significant. Obviously referring to the generational NDX 2000 top here. SPX M chart also reached 85 in 1997 and was outside the band, then spent about 4 months going sideways before another launch. 

Where indexes are now (values not final until quarterly and monthly closes):
SPX Q 77.4, strong and can go higher. Currently not showing divergence.
NDX Q 80.7, strong and near area of 2015 high at 81.4.

SPX M 71.6, better to close above 70 and stay outside of BB than to drop back under and fall back near 70 for the close. 
NDX M 71.5, ditto. 

As it turns out, weekly and daily chart RSIs are also above 70 here. It would take a better data provider to run the stats on the line up of Q, M, W and D charts with RSIs all above 70. I just don't have that right now. It would be on the lower side of total percentile events, but everything depends on environment selection. If you measured all trading quarters, months, weeks and days from 1980 then you might come up with something that appears statistically significant. But if you kept to bull markets when indexes are above all moving averages with rising slopes, then this is what happens a decent amount of the time. Mostly, no. Often enough, yes. An exit signal? No, not the incidence itself. A sell short signal? Definitely not. 

SPX Q
RSI currently 77.4 looks strong as it is above the 2015 peak of 75.8. Quarter is only halfway through, and this value won't be 'on the books' until close. But look at 1980s and 1990s; quarterly chart RSI above 70 is what happens in real bull markets and one cannot say it is uncommon. While we are at it, just look at the 10MA and it has held on Q close since 2011 Q4. 

The danger in SPX Q RSI was falling back under 70 after a long stretch of above. This happened in 2000 Q4 which also coincided with a close under its 10MA, the first since 1990. This didn't nail the top but did keep you long term invested for an amazing stretch. Realize the difference at the 2007 top - SPX was overbought for only 2 quarters and then clearly rejected in 2007 Q4, falling to 66. 2008 Q1 closed under its 10MA and from there trend was down until its 100MA a year later. 

NDX Q
We're not in the 1990s yet with quarterly chart RSI at 80.7 compared to 96 then but hey, NDX Q RSI totally overbought from July 2013 on. Bullish, and yet not too bullish. When NDX reached the heights of the 2000 top it did have a faster drop, going from outside the BB to under 10MA in 3 quarters. RSI was a still healthy 76.9 in 2000 Q3, then fell to 57 in Q4. That was quite a walloping for the latecomers, basically 1999 Q4 to 2000 Q1. 

SPX M, 2000+
Looking at this chart you might be more concerned, as only a handful of monthly bars are above 70. Even so, above 70 is better than stopping cold at 70 and turning lower. 

SPX M 1980-2000
But 1983-1987 had frequent moves into overbought territory. 10/1987 did come out of the blue from RSI perspective. SPX monthly chart entirely overbought from 5/1995 to 8/1998. The next phase up in 1999 and 2000 the chart showed very clear divergence, with RSI highs getting lower and lower over more than a year before the big rollover down. 

NDX M 2000+
NDX monthly chart RSI above 70 less common from 2000 on, but not unheard of per the 8/2013 - 7/2015 run. 

NDX M 1995+
Showing the chart this way to keep consistent with SPX periods. This did bounce around having moves from above 70 to below several times 1997-1998. From there purely overbought with RSI highs at 88, with a huge wick on the monthly chart before the walloping. 

Safe havens

Sum
VIX and XIV have been totally right on markets (again). VIX has closed below all pivots from 11/9 on. XIV nailed the stock index low on 11/3-4, holding its YP near exact and then jumping above all pivits from 11/8 on. XIV in particular has been on a tear since then, gaining over 100% from those lows and 49% this year. Hilarious - wasn't Wall Street consensus more volatility? Instead we are seeing historical extremes in low volatility! Yet both are showing a bit of caution last week, not confirming the recent stock index move. VIX is testing its FebP, and XIV faded back under a long term resistance level. VIX above its FebP and XIV rejection of 1HR1 will likely coincide with some shakeout in indexes. 

GLD above all pivots is doing better than TLT, which cannot get going up though it has stopped dropping. 

TLT
Weekly chart stopped dropping.
Daily chart shows two moves above monthly pivots only to be about sideways.
D50MA has leveled out but still under all pivots. Recent bounce attempt still under FebP.
TLT sum - weak. Above FebP for the second time and above 10MA, 20MA and 50MA would look a bit better. Still with Q1 halfway through, seems likely to remain under Q1P. 

GLD
Second weekly bar clearly above all pivots.
Daily chart shows 1HP turning into support, bullish.
GLD - doing better than TLT, above all pivots.
 

GDX
Also above all pivots but seems to be struggling at D200MA, with a few times to clear and most recently rejection. 

VIX
Red line on weekly chart shows lows of this decade, but no reason why it cannot drop lower into single digits. 
VIX daily chart shows a big jump on 2/15, so not confirming the recent stock move. However, clearly staying below all pivots still bullish for stocks. VIX has closed under all pivots since 11/9. 
VIX buy signals came come quickly with fast shoots up when risk suddenly shows its face to markets. Like stocks, the VIX buys (ie stock caution signals) work better with rising MAs. Currently 10MA flatish slightly up, 20MA flatish slightly down, 50MA down, 100MA down, 200MA down. See late October 2016 for rising 50MA and jump above a quarterly pivot. Until that happens, stock index bulls get benefit of doubt. 

XIV
Weekly chart close under 1HR2 with wick looks more threatening. Note the low in 2016. Also, RSI 78 is highest in this ETF's history but VIX related RSIs don't work like stocks. 
Daily chart shows 1 day above 1HR2 then 3 days under it. Level to watch this week. 
Held YP on 11/3-4 a fantastic tell for markets. Closed above all pivots from 11/8 on. Above rising 20MA except 12/30 and all above rising 10MA since 1/3. Chart does not even convey the percentage gain here, up 111% from 11/3 close low to 2/14 high, and up 49% in 2017. 

VI 1
Continuous VIX contract jumps at the rollover to the current month. Testing FebP but so far below all pivots. 

USA main indexes

Sum
2017 market leader QQQ powered up above YR1 without even a day of pause. SPY and VTI powered up above 1HR1 / Q1R1 clusters as well. Price action is massively bullish. DIA is testing its resistance cluster, and IWM is being left out of the party. While this means breadth is weakening somewhat, NYA/VTI strength helps mitigate. Strength begets strength as a pause likely precedes a drop and the market hasn't even paused yet. DIA resistance cluster is main level to watch this week. 

Charts
Cash index weekly charts with long term levels only
Daily ETF chart with long term & medium term pivots
Futures current contract pivots only (no S/R) and MAs for clarity of entries (now March 17 H)
Futures "1" continuous contract with the works

SPX / SPY / ESH / ES1
SPX leaped above its 1HR1 and looks on the way to YR1.
SPY just no red at all at the resistance cluster and very easy to hold through.
ESH shows amazing trend however you want to look at it - above all pivots from 11/9, MACD positive from 11/9 and not one dip into negative (blue line), above rising 20MA every trading day since election except 12/30. RSI is even higher last week than election win and with divergence more likely at tops that high values, this is very positive. 
ES1 which includes Bollinger bands also a classic example of strength - several power up bars outside the daily BB, especially last week. Last tough of lower BB was 11/9. 
SPX sum - amazing trend above all pivots and rising MAs, and no damage at resistance cluster. We are likely to see a stall before a drop and that hasn't happened yet. Even so, it will be dropping to support which will likely be bought. 

NDX / QQQ / NQH / NQ1
NDX powered through YR1, and looks like it will test 1HR2.
QQQ shows daily view of powering through the YR1, and massive launch above the level the very next day. Soon at 1HR2.
NQH all above rising 10MA since 1/4 and RSI 80+!
NQ1 lifting above YR1 and still powering outside of BB. 
NDX sum - Massively bullish to power through YR1s without even a day of pause. 

INDU / DIA / YMH / YM1
INDU slightly above its YR1 but near enough to be watching closely next week.
DIA at resistance cluster of 1HR1, Q1R1 and FebR3  - so far still looking strong.
YMH dipped below 10 and 20 a couple of times but all above rising 50.
YM1 also at resistance.
INDU sum - Testing resistance cluster of 1HR1 and Q1R1. 

RUT / IWM / RJH / RJ1
Left out of the party this year. Weekly chart far from long term resistance and RSI not overbought. 
Daily chart above FebR1 but barely above 2016 highs.
RJH chart broke D50 a few times and MACD negative.
RJ1 chart not powering up outside daily BBs like the others.
RUT sum - 2016 Q4 leader turned to 2017 Q1 lagger. Crucially, this means breadth is weakening somewhat. Still, RUT above all pivots and rising MAs so cannot really be bearish. 

NYA / VTI
Both powered up above 1HR1 Q1R1 cluster, bullish. 

Valuation and fundamentals

The 10 period moving average of SPX forward 12 months earnings as implied by Thomson Reuters is a bit higher than last week, from 132.48 to 132.58. So this makes the 10MA of the P/E 17.23, which is just a bit under the current value of 17.34. 

Every week I have pointed out target of 18x forward earnings; the current value is 2440 and 10MA is 2386. I think 19x is a cap, because I don't think smart $ will wait for 20x forward earnings to sell. This is currently 2576 and 10MA is 2518.

Thus, 10MA target range of 18x-19x forward earnings of 2386 to 2518 is 1.5% - 7.1% from current SPX levels. 

Last week I mentioned that 17.5x might have been part of resistance market was facing, but didn't pose any problems. 

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Citigroup Economic Surprise Index as reporting by Yardeni looks great, looking to be the highest since early 2014. 

These are both a moderate positive for markets. 

Total market view

Review
2/5 Total market view: "Bottom line - Range bound or start of melt up, not sure here. There is no reason why VIX can't sink down into the 9s and indexes go for major resistance (and by this I mean Q1, 1HP levels, not just monthly). If market fades then IWM will likely be the first below a monthly pivot."

Result - IWM did drop below its FebP for two days but larger move was SPY and VTI up to 1HR1 / Q1R1 resistance areas. 

Sum
Trump honeymoon now about 3 months has been an incredible move. But the rumor, sell the news as they say, and the tax plan and further deregulation still in rumor stages with news yet to come. So there is a case to go yet higher. But SPY and VTI are running into long term resistance at 1HR1s, and QQQ is not far from YR1 These are key levels to watch. In addition RSI approaching overbought or fully overbought on several charts across timeframes increase the chances of a pause or a drop. 

Bottom line
Any sign of weakness on Monday means possible to reduce long exposure via a hedge on SPY. Run through the top checklist (current answer: maybe) and the more items tick off the more likely the market is at a decent trading top. 

Positioning
Reductions in Q4 2016 made money (IWM hedge was a gain as was FXI short). But 2017 reductions have cost a bit. That said, 2 indexes on long term resistance means ready to hedge to lower exposure from current 100% long. 

Pivots
USA main indexes - SPY on 1HR1  Q1R1 combo and VTI on same. IWM on FebR1. 

Sectors of note - XLF on FebR1. XLE below 1HP for several days but bounced back from FebS1.

Safe havens - GLD above all pivots showing some caution, but TLT weaker and just barely above its monthly (below the others). VIX and XIV continue to be correct on markets as they held levels (pivot resistance for VIX and support for XIV) when some USA main indexes were weaker on 2/1-2.

Global indexes - EEM, FXI, INDA and EWZ all at highs despite USD bounce. Impressive!

Currency and commodity - DXY held its YP exact on the low on 2.2 and since then has also recovered 1HP and Q1P. Near testing FebP.

Other technicals
RSIs approaching overbought on several indexes across timeframes - this tends to increase the chance of a top. But as we saw last December if market ignores overbought readings then it is very strong, so the important thing is to watch the reaction.

Valuation and fundamentals
While watching 17.5 forward earnings at 2318, I am still pulling for 18x-19x as a better bull market euphoria high. These levels are currently 2384-2517 or 3.0% - 8.7% higher than now. Fundamentals continue to support risk assets. 

Sentiment
Extremes reached in December 2016, but not yet in 2017.

Timing  (Proprietary experimental work in progress model)
Feb dates published 1/28
2/6 - Non event?
2/10 - Stock index high?
2/21
2/24-26

Positioning

Heading into week 100% long via:

2 DIA (first positions near election, with a shuffle last week)
3 XLF, 1 QQQ (pre and post election)
2 SPY (1/3)
1 SMH (1/18)
1 RSX (1/23)

10 longs or 100%.

Adjustments last week: None.

Probably too much XLF, and if RSX continues weak below its FebP that is candidate for reduction. Also, SPY can be hedged at the 1HR1 Q1R1 combo. 

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Positioning limits
15 or 150% long, -50% shorts or hedges, 200% max total exposure. 

Currency / commodity positions are not included in this system. 

TPP top checklist

With 2 USA main indexes on significant resistance, it is time to revisit the top checklist.

Sum - maybe, but even if so the first drop after highs is usually not the threatening one. Even before that, SPY and VTI are at levels without any sign of rejection yet. We'll see what happens. 

1) Multiple USA mains on pivot resistance, then rejection?
SPY and VTI on significant resistance for part a, but no rejections yet.

2) VIX and XIV confirmation?
Both fine so far. VIX above a monthly pivot would be the first sign of serious trouble.

3) Other technicals like RSI overbought and/or divergence, or higher timeframe issues?
RSI overbought or approaching overbought on daily charts, weekly and monthly charts for SPY, DIA, QQQ and VTI. So other technicals show more chance of top.

4) High tested with at least one lower high? 
No.

5) Safe havens showing concern?
GLD yes, TLT no.

6) Breadth or volume divergence? 
Yes on daily, but not on weekly. 

7) Sentiment extremes reached? 
Yes in December, but not in 2017. 

8) Valuation concerns? Fundamentals weaker?
SPX at current 10 weekly moving average of 17.5x foward earnings. Maybe somewhat in this regard. Fundamentals still strong though.

9) Timing?
2/10 was one of the dates in February.

Safe havens

Sum
VIX & XIV correct on markets, with VIX staying below all pivots on close from 11/9 on. XIV soaring this year so far, with no damage at YR1 and the level quickly turning into support. 

TLT tried to rally above FebP but gave back gains in 2 days. Only GLD showing some caution above all pivots. 

TLT
Weekly chart in the middle of long term levels all 2017 thus far. 
Daily chart rallied above FebP only to give back gains in 2 days. 
 

GLD
Weekly chart decently above long term pivots for the first time since October 2016. 
Daily commentary mentioned good looking buy set-up on 2/1.
 

GDX
Held the YP and Q1P support zone from 1/5/17 on.

VIX
Weekly chart has red bars all year!
Daily chart below all pivots all of 2017.

XIV
Weekly chart soared above YR1 and might test 1HR2.
Daily chart showed lack of selling pressure at YR1 and then the level holding as support. Q1R2 also acted as support. 
RSI on daily chart above 70 from 1/5 on!
 

USA main indexes

Sum
USA mains continue amazing uptrend that started near the election - reaching 3 months. 2 of 5 USA main indexes testing significant resistance clusters: SPY on 1HR1 & Q1R1 231-32, and VTI also testing Q1R1 with 1HR1 just a bit above 119-120. If higher then QQQ will be running into YR1. Also, last year out-performer IWM not having as much fun this year, and reached monthly resistance the first time in 2017 thus far.

Sum: So 3 of 5 USA mains testing resistance levels, with 2 of 5 on significant clusters including long term resistance. If higher then QQQ will reach YR1s. Daily RSIs approaching overbought increase chance of a trading top either at SPY 1HR1 or QQQ YR1 above. 

Charts
Cash index weekly charts with long term levels only
Daily ETF chart with long term & medium term pivots
Futures current contract pivots only (no S/R) and MAs for clarity of entries (now March 17 H)
Futures "1" continuous contract with the works

SPX / SPY / ESH / ES1
SPX testing 1HR1!
SPY also on Q1R1 with RSI at 69.7.
ESH with pivots only shows incredible uptrend, above all pivots since 11/8 close and above D20 the entire way except for 1 day 12/30. 
ES1 resistance levels are higher than SPX / SPY due to election night spike. 

NDX / QQQ / NQH / NQ1
NDX looks to be going for YR1 at 5274.
QQQ at FebR1 and just above that YR1 at 128.38.
NQH fantastic run in 2017, closing above the 10MA the entire way from 1/4 on!
NQ1 also near resistance, with Q1R2 testing and YR1 above that. 

INDU / DIA / YMH / YM1
INDU has further to reach long term resistance.
DIA at FebR2 with Q1R1 and 1HR1 above in 205s.
YM closing above all pivots from 11/7 on except for 2 days, 2/1-2. 
YM1 about the same, with long term resistance bit further away due to influence of election night spike. 
 

RUT / IWM / RJH / RJ1
RUT testing 2016 highs.
IWM first tag of monthly resistance this year, with other levels far above.
RJH shows 3 breaks of D50 in 2017, but cannot complain too much with no follow through and back at highs. 
 

NYA / VTI
NYA above all pviots since 11/11 excepting 2/1-2. On FebR1, with 1HR1 & Q1R1 a bit above. 
VTI testing Q1R1 with 1HR1 just above.

Valuation and fundamentals

The 10 week moving average of SPX forward earnings estimate according to Thomson Reuters continues to climb, reaching into the 132s for the first time since I adopted this method to smooth out of some of the noise. Thus the 10MA of P/E is stable despite the price jump in the index, which is bullish. 

I have been pointing to 18x as a nice sounding area for bull market euphoria high since starting this site, and observing how this level has moved over time. The 10MA of 18x is now 2384 with 19x at 2517. This target zone represents about 3.0% - 8.7% upside from Friday's close of 2316.

In the meantime I will watch 17.5x forward earnings to see if there is any reaction. The 10MA of 17.5 forward earnings now 2318.

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Citigroup Economic Surprise Index staying in positive territory for the longest span since 2014. Bullish.

Sum: while watching 17.5 forward earnings at 2318, I am still pulling for 18x-19x as a better bull market euphoria high. These levels are currently 2384-2517 or 3.0% - 8.7% higher than now. Fundamentals continue to support risk assets.