Positioning

I may have bitten off more than I can chew with this project, as other work has been quite busy most of the year leaving less time for proper chart analysis across asset classes every day. Positioning is doing OK but could have been far better with quicker rotation into tech, as market commentary identified QQQ as main index leader from mid January. This should have been more reflected in positioning. That said, I did nicely get out of IWM early, gradually reduce and then fully exit out of XLF, rotated into EEM and INDA both before big jumps, and caught the move in KWEB from 4/20+.

Recently I have been just going to SPY to benchmark to index. I have been suspicious of last move from 5/18 lows.

Current
1 QQQ (12/7)
2 EEM (3/13 & 4/3)
2 SPY (4/17)
1 KWEB (4/20) nice idea, better to have more
4 SPY (4/24 & 5/23)

Adjustments
6/5: 2 IWM short hedges
6/6: None
6/7: None
6/8: covered IWM shorts for small loss
6/9: None

Back to above, 100 long with SPY concentration. Could have rotated into XLF with move above Q2P, but short term charts very overbought.

Dow yearly levels

The market is testing the YR1 on INDU ie Dow Industrials. While I always pay attention to yearly levels on main indexes, there is a case to be made that the Dow is the most important. Why? So many historical turns have happened bang on Dow yearly levels. 

Weekly charts below. Red means resistance, green support, orange are pivots.

2005-09
2005 - Low of year on YS1
2006 - Low of year on YP, major May high on YR1, major higher low near tag YP again
2007 - Low of year on YP, major lower high on YR2
2008 - High of year on YP
2009 - Low of year - that's right, the low! - on YS1
 

2010-2014
I added the 1HP and 2HP for these (pivots only, not support or resistance levels for clarity)
2010 - Low of year on 1HP
2011 - High of year on YR2, low of year near tag of YS1
2012 - Major first half highs on YR1, low of year near tag of YP
2013 - Key pullback lows on YR1 and YR2 holding as support
2014 - Low of year on YP, major second half low on 2HP

2015+
2015 - Major first half low on YP; low of year on YS1
2016 - Low of year on YS1, major higher low on YP, key high on YR1
2017 - YR1 high?

Safe havens

Sum
VIX remains below all pivots and XIV above. So basic trends of risk meters still supportive of risk assets. However, last week VIX lifted from its Q2S1 and XIV dropped from 1HR3 / Q2R1 combo, increasing the chance of a significant turn.

Students of the market and VIX in particular will be keen to see the VXN chart below. 

Bonds are also testing key levels. Last week's low on TNX bang on the YP is so far the low of the year. This coincides with TLT near tag of its YP / 1HP, and AGG back testing its same combination as well. D200MAs are also in play. Generally I think safe havens trading well is bearish for stocks, but I will not rule out a stock drop on rising rates ie TLT lower. That said, financials may benefit in that environment. 

Lastly, GLD is also somewhat mixed by remaining above all pivots, yet having a double top on Q2R1. 

Basically - trends remain supportive for risk assets, but watching carefully next week. GLD remains in better shape that TLT for a safe haven trade, though GDX is not helping on the long side. 

VIX
Q2S1 holding as support, but fast pop to JunP and Q2P combo was rejected. Edge still to larger trend which is supportive for risk.

XIV
Another high on 1HR3 / Q2R1 combo.

VXN
When time permitted I checked these frequently, but haven't in a while. As far as I am concerned this nailed the long exit / short trade, with VXH above Q2P and JunP from 6/6.
 

TLT
Thus far rejection of YP / D200MA area (near test for this ETF).

TNX
Holding YP exact on the low of the year so far. 

AGG
Back to its YP / 1HP as well

GLD
So far double top on Q2R1, but still above all pivots. 

GDX
Has not helped on the long side. Still below 1HP and fading back under Q2P as well. 

USA main indexes

As with last week, shorter version with 1 chart per index. 

Sum
2017 leader QQQ slammed last week, but still above YR2 and JunP. The broader COMPQ had its high bang on YR2 and I think this makes last week's move a bit more threatening. 

But SPY and VTI are still holding above their YR1s, and IWM has gotten in gear. 

DIA is now testing its YR1. There have been many historical turns on Dow long term pivots. We could see one here. 

SPY
Trouble at JunR1 but still holding above Q2R1 and more importantly above YR1 as support. So, resistance at JunR1, support zone JunP to Q2R1. If higher, JunR1 in play.

QQQ
Smash but still above YR2 and JunP. It would look much more bearish to be if those levels break and then start to look like resistance. In the bigger picture, Tech has run up so much that it would take a substantial drop to threaten any long term weakness, ie 1HP or soon to be in play 2HP. 

COMPQ
Broader Composite had high bang on YR2. 

DIA
Testing YR1!

IWM
Quick pop above Q2R1 to JunR2. 

VTI
Still holding YR1 as support. 

Valuation and fundamentals

The 10 week average of earnings estimates continues to climb, jumping from 135.40 to 135.89 according to numbers implied by Thomson Reuters. This lifts the 10 week average of the 18x earnings to 2446. SPX has been pushing 18x earnings for months now, but with earnings estimates increasing price as been able to increase without getting truly more expensive. Fully valued with upwards slope is still a decent positive for the market. 18x valuation in blue and SPX in orange below. Still considering this a 3 on scale of -5 to +5.

*

But Citigroup Economic Surprise still looks terrible. Calling this -3.

Combined score 0. Rallies should face headwinds until economic data begins to improve.

Bonds

Huge decision for bonds and the larger market here.

TLT near test of YP & 1HP, and D20MA test
TYX YP / 1HP exact hit and D200MA test
TNX YP / 1HP exact hit and D200MA test

On futures charts, the rollover charts have much different levels due to lookback period which is not really the full calendar year of 2016. This is why I use the continuous contract charts for long term levels. ZB is a bit further away from YP test, but ZN looks more like TLT, ie testing YP and D200MA.

Pivot only charts with MAs below. To keep rising rate / reflation story alive, these levels on the yield charts should hold (and TLT should reject). A break (or clear for TLT) would imply the recent economic data weighing on market, and would increase the chance of a more significant pullback for stocks. 

Total market view

REVIEW
5/29/2017 Total market view: "I have been skeptical of the recent bounce but put caution on hold when indexes cleared pivots last week and VIX & XIV confirmed. Either the market will push to next levels higher - SPY Q2R1, QQQ Q2R2, DIA YR1 - or fade. We'll see what happens. ... Back to 100% long but at some point (and I believe sooner rather than later) a defensive adjust will pay."

Result
Markets continued higher with SPY above Q2R1, QQQ above Q2R2, and looks like DIA will be soon testing YR1 area. 

SUM
All 5 USA main indexes are above all pivots, with VIX below all pivots (and not showing any caution signs) and XIV above all pivots. This basic configuration is very bullish for risk assets. In addition, 3 of 5 USA mains just cleared significant levels - QQQ jumped above Q2R2, and even more important, SPY cleared YR1 and VTI traded above YR1 for one day. Tops begin with rejections - not clearing - of levels. As long as these maintain, markets are doing fine. 

Next to watch will be DIA set YR1 area, which is a cluster of YR1, 1HR2 and Q2R1, in addition to IWM Q2R1 and NYA Q2R1. 

Other safe havens are of some concern. TLT is making a move, and AGG (key benchmark bond index) is above all pivots, joining GLD above all pivots as well. Until trouble shows in VIX and XIV however, and we see resistance level rejections on the indexes, I'll maintain full positioning. But safe haven strength is a reason to not be leveraged and still be a bit more skeptical of the recent move. 

Another thought - at some point in June we may see professional re-balancing move. This would imply tech slowdown and and possible bid in energy, the weakest S&P sector this year. Not sure where IWM & XLF fall in this picture however. 

Bottom line
Despite plunging economic data, full valuation and strength in safe havens, markets are still doing totally fine. I have been skeptical of the bounce from 5/19 but bulls proving me wrong with easy clear of QQQ Q2R2 and SPY Q2R1, along with SPY big jump above YR1. But there have been many historical turns on Dow levels and cluster of YR1 / 1HR2 / Q2R1 combo is next to watch. See USA main section below for the actual numbers.

Positioning
Back to 100% long on 5/22-23 with SPY concentration, and I held off adding shorts back on 5/30-31. This turned out to be the right move. No change since 5/23 so previous positioning post still valid. 

From the bigger view, it has been a huge mistake to not rotate more into QQQ as main index leader as I have actually been using that terminology ("2017 main index leader") from mid January. 

PIVOTS
USA main indexes - SPY set above YR1 is big picture bullish. Now watching INDU & DIA YR1 / 1HR2 / Q2R1 cluster.
INDU levels: YR1 21349, 1HR2 21428, Q2R1 21328.
DIA levels: YR1 213.43, 1HR2 214.30, Q2R1 213.05.

Safe havens - VIX and XIV doing fine, but GLD and AGG above all pivots does not imply indexes continuing to soar and ignore overbought conditions. TLT soon testing YP also interesting level to watch.

Sectors of note - Despite broad strength, XLF well below Q2P and just fractionally above JunP. XLE 3rd break of YP was the definitive one, below all pivots as of 5/24. This is also showing how a long term investor can use pivots to overweight & underweight, with XLE below 1HP on a weekly close as of 2/13 week and clearly below YP as of 5/22 week. SMH continuing along with tech as the power trade of 2017.

Global stocks - Looks like profit taking on KWEB YR2 area. INDA and EEM at highs, FXI higher on recent move. Oil taking toll on RSX and EWZ. SHComp 2 breaks of YP and 2 comebacks thus far. 

Currency & commodity - $DXY moving as expected after "screaming bearish" call on 5/17. USO below all pivots - if we do see pro re-balancing move, then at least it will be able to get above JunP. 

OTHER TECHNICALS
RSI on SPY
Quarterly chart - 79.3 with no divergence, very healthy as RSI overbought on Q charts is what happens in bull markets.
Monthly chart - 74.6, also looking good.
Weekly chart - 71.7, jumped above to overbought for only the second time since 2014 (first was weeks after election).
Daily chart - 70.3.

I just don't see how this is sustainable - all charts in overbought territory means more likely move is sideways or down. 

Also, SPY daily chart close outside its Bollinger band and weekly chart pushing the band. Only two weekly bars this year tagging the band and one of them was last week. 

VALUATION AND FUNDAMENTALS
Mixed bag here - I think this implies more sideways than continuing to trend up. 

SENTIMENT
2 of 4 indexes at extremes as of last week, but even that not enough to prevent stocks from rallying. 

TIMING
(Proprietary work in progress model)

May dates published in 4/30 Total market view:
5/3-4 - stock index minor pullback low on 5/3
5/19 (stronger) - stock low 5/18 (-1)

June dates (published in 5/29 Total market view)
6/9
6/15-16
6/21-26

In addition, a larger timing cycle points to momentum slowing in risk assets from 6/5 into July.

Safe havens

Abbreviated posting this week. 

Sum
VIX healthy and confirming risk on. I will be more concerned with reversal bar and/or divergence, meaning higher highs in indexes without lower lows in VIX. XIV slight divergence per recent lower highs, but above all pivots as of 5/19. 

But TLT above D200, AGG above all pivots and GLD above all pivots! That is rather odd to have 2 key safe havens above all pivots at the same time as USA main indexes also above all pivots. But until VIX & XIV confrims trouble, better to stay fully invested. 

VIX
At lows, no divergence compared to indexes; typically bullish for risk. 

XIV
Minor divergence only, slightly lower high compared to 5/16.

TLT
Jump above D200MA and near test of YP & 1HP!

AGG
Already above YP & 1HP, so above all pivots, above D200, testing D400 (ie near monthly 20 MA). 

GLD
Well above all pivots and MAs, looking good. 

GDX
Not attractive as a long option. 

USA main indexes

Abbreviated posting this week. Instead of including all variations of the indexes I track, just posting 1 per index.

Sum
USA main indexes bullish last week, with QQQ continuing power move and jumping above Q2R1. Even more significant, SPY definitely clearing YR1 and VTI moving above YR1 as well. DIA testing major cluster ahead, and IWM near test of Q2R1. 

SPY D
Bullish with the jump above YR1. Also above Q2R1, and near JunR1. 

QQQ D
This just does not stop, with launch above Q2R2. First reference to "2017 Main index leader" was in January. Better move rotating all SPY & IWM positions to QQQ from there. 

DIA D
Major cluster approaching, YR1, 1HR2 and Q2R1. Now testing JunR1.

IWM D
Bounced from MayS1, jumped above Q2P and JunP, near test of Q2R1. 

VTI
Above YR1, bullish to maintain. 

Valuation and fundamentals

Abbreviated posting this week.

10 period MA of 18x forward earnings jumped to 2437, with the first weekly close above. While the market is still basically at 18x, it is bullish with this kind of slope. 

But Citigroup Economic Surprise Index looks terrible. Most stocks may be ignoring this right now, but bonds aren't. 

Valuation +3, Fundamentals -3, total score 0. This would imply a trading top is immanent. 

Total market view

REVIEW
5/21/2017 Total market view: "Color me a cautious and somewhat disbelieving bull. I think markets are due for more of a pause than 1 day bear wonder and -2.2% down from SPX highs; but if I have to pick between VIX and opinion, VIX is usually the better choice. Bottom line - Portfolio is a bit underweight markets with 2 short hedges and 2 shorts. I will be quick to cover these with any additional strength next week (ie, SPY continuing above MayP, QQQ above YR2, VIX continuing below Q2P, IWM above Q2P, XLF above MayP)."

Result
Markets did indeed come right back, so covered hedges and shorts back to 100% long. Still, many reasons to expect limited upside.

SUM
2017 USA main index leader QQQ has been on a tear, and last week closed above YR2. This is bullish because as long as that level maintains, threat of significant turn is reduced. SPX also cleared YR1 for two days, so the same conclusion: bulls in charge. 

However, DIA and NYA/VTI both at March highs, and IWM bringing up the rear with much lower high and still below MayP.

Conclusion: Indexes are mostly bullish, but mixed in recent strength. 

Safe havens VIX and XIV are supporting risk assets, but TLT, AGG and GLD showing some caution. Edge to bulls, but somewhat mixed here too.

Valuation and fundamentals are similar - SPX pushing the 10 period moving average of 18x forward earnings estimates which took a nice jump last week. But fundamentals per Citigroup Economic Surprise Index are not supporting this move at all.

Of the four sentiment meters I track, 2 are showing bullish extremes. This can often limit upside and increase the risk of a drop, especially if a third joins in.

Bottom line
I have been skeptical of the recent bounce but put caution on hold when indexes cleared pivots last week and VIX & XIV confirmed. Either the market will push to next levels higher - SPY Q2R1, QQQ Q2R2, DIA YR1 - or fade. We'll see what happens.

Positioning
Back to 100% long but at some point (and I believe sooner rather than later) a defensive adjust will pay. 

PIVOTS
USA main indexes - QQQ above YR2, SPY above YR1, both very bullish as long as those levels maintain. 

Safe havens - VIX and XIV saying all clear. AGG at interesting cluster. 

Sectors of note - SMH semiconductors still powering up too.

Global indexes - Above all pivots are ACWI, FXI, KWEB, EEM, INDA. RSX, EWZ and SHComp weaker.

Currency & commodity - DXY 2nd break of YP on 5/15 the definitive move, and fast drop through Q2S1 to MayS2. Expecting lower.

OTHER TECHNICALS
Tech is on an epic run. NDX is set to close outside its monthly Bollinger band for 5 months in a row! The last time this happened was 1999, and that had a down bar shakeout in the middle of that move. While I am not saying a top of that magnitude is imminent, at some point the index will fall back inside the band, and I think this is becoming the more likely move over the next few months. 

VALUATION & FUNDAMENTALS
Citigroup Economic Surprise not supporting the rally, though increased earnings helps market gain without becoming more expensive. 

SENTIMENT
IEEE spike reading on Friday, and NAAIM at bullish extremes. Also, I interpret Dr Shiller's recent video as capitulation.

TIMING
(Proprietary work in progress model)

May dates published in 4/30 Total market view:
5/3-4 - stock index minor pullback low on 5/3
5/19 (stronger) - stock low 5/18 (-1)

June dates
6/9
6/15-16
6/21-26

Positioning

Came into week 60 net long with 2 shorts and 2 hedges.

1 QQQ (12/7), 1 unit hedged on 5/17
2 INDA (3/3 & 3/28)
2 EEM (3/13 & 4/3)
2 SPY (4/17)
1 KWEB (4/20)
2 SPY (4/24), 1 unit hedged 5/9
-1 IWM short (5/17 open)
-1 XLF short (5/17 open)

Adjustments
5/22: covered QQQ and SPY hedges
5/23: +1 IWM, +1 XLF short covers; rotated out of INDA into SPY (sigh, not a good move)
5/24: none
5/25: none
5/26: none

Defensive moves cost slightly as market basically had a false break - given SPX YR1 and NDX YR2 rejection, monthly pivot breaks, along with VIX & XIV confirmation there would be bit more trouble before recovery.

Another false break in INDA - steadiness of the bid is remarkable. Typically after a run of above all pivots for 4 months a break reaches at least an S1 level. 

Current
1 QQQ (12/7 - would love to have added more on that!)
2 EEM (3/13 & 4/3)
2 SPY (4/17)
1 KWEB (4/20) nice idea, better to have more
4 SPY (4/24 & 5/23)

10 longs for 100% net with SPY concentration. More tech would be better. 

Safe havens

Sum
VIX and XIV confirmed all clear for stocks 5/19-22. We can talk about a double bottom in VIX or potential divergence in XIV, but basic configuration of VIX below all pivots and XIV above all pivots is bullish for risk assets. 

Other safe havens are showing more signs of caution - TLT above Q2P throughout, and above MayP as well. AGG interesting area to watch with YP, 1HP and D200MA all clustered. GLD decent hold of 1HP & Q2P 5/9-11 lows and back testing MayP. If higher then back above all pivots, and with June pivots in play in a couple of days likely at that status as well.

Summary is that despite TLT, AGG and GLD strength, VIX and XIV are saying all clear for stocks. With DXY weakness, GLD could be an interesting hedge idea if stocks fade or go up to higher resistance levels. 

VIX
Two weekly rejections of 1HP.
Daily chart possible double bottom on Q2S1 - if lower then we might see into 8s for 1HS1.

XIV
Weekly chart 1HR3 top, but holding YR2 as support bullish.
Daily chart back above all pivots and above YR2 on 5/19.

TLT
Weekly chart between levels and still well under YP and 1HP.
Daily chart above Q2P all quarter; also now above MayP.
If higher still running into sharply falling D200MA.

AGG
At YP, 1HP and D200MA all about the same level. Interesting tell for markets. 

GLD
Weekly chart lifting from 1HP support.
Daily chart back to MayP, and will likely open above JunP.
2nd time above the still falling D200MA.

GDX
Still under 1HP, Q2P and falling D200 makes this not so attractive on the long side.

USA main indexes

Sum
2017 leader Tech continues amazing run, clearing YR2 and 1HR3 which is big picture very bullish as long as these levels maintain threat of significant turn is reduced. Similarly, SPX set cleared YR1 for 2 trading days last week - bullish with the same logic, threat of major turn reduced if the index can maintain above these levels. INDU, NYA & VTI are at March highs. IWM bringing up the rear, still below MayP and likely leading down if markets lower next week.

Bullish scenario from here is IWM clearing MayP, DIA, NYA & VTI clearing March tops, and leaders going for next levels up which are QQQ Q2R2 and SPY Q2R1. Bearish scenario would be IWM breaking Q2P and SPX set back under YR1 for a pesky fake-out move. 

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 June 17 M)
Futures "1" continuous contract with Bollinger bands

SPX / SPY / ESM / ES1
SPX first close above YR1 2407 - maintaining above that is bullish.
SPY same idea, 240.90.
ESM showing entry chart with pivots only - MayP recovery & D50MA gave profitable buy chance, with MACD following through to positive 2 days later.
ES1 chart at the top daily BB, RSI not yet overbought. Next target area up is 1HR2 and Q2R1 combo.
SPX set sum - clearing YR1 is bullish and if maintains opens door to next level up, Q2R1 at 2427. That said the more important levels are the long term YR1 / 1HR2 combo at 2407 and 2400 respectively.

NDX / QQQ / NQM / NQ1
NDX W chart very bullish to be above YR2 & 1HR3.
QQQ nearing Q2R2, but more important is the YR2 clear.
NQM chart on pivot & MACD buy from 4/20
NQ1 chart some divergence on RSI currently.
NDX sum - very bullish to be above YR2. Next level Q2R2.
 

INDU / DIA / YMM / YM1
INDU W bullish to hold 1HR1 as support - looks to be going for YR1 / 1HR2 combo.
DIA back above all pivots on 5/22. 
YM also back above all pivots 5/19, and above all MAs 5/22.
But current 2x top to continuous (and current) futures, as well as ETF & cash.
INDU set sum - above all pivots and MAs, but 2x top potentially in play. If higher then YR1 area next major level to watch.
 

RUT / IWM / RJM / RJ1
Weekly chart between levels.
IWM much lower high, and though back above Q2P bounce capped by May thus far.
RJM chart does not have look of lift-off above any pivot on recent bounce, and MACD still negative.
RJ1 showing resistance at falling D20 and MayP combo.
RUT sum - Lagging but everyone knows it. Still likely to lead lower if markets down next week.

NYA & VTI
Both back above all pivots on 5/19. Both at double tops; if higher then VTI nearing YR1.

Valuation and fundamentals

Earnings estimates picked up nicely last week, turning slope from flat-ish trend since March to decently positive.

The 10 period moving average of forward earnings estimates.

This level multiplied times 18 gives us implied 18x P/E, smoothed by a 10 period moving average. 

And here is that same level with SPX price in orange. 

So this is the third time near this valuation, though the first two tries were at 2400 and this time a bit above. Rising slope means the market can gain without getting truly more expensive. I still think this level is worth watching for professional reactions. Still, due to rising slope, on a scale of -5 to 5 I am upgrading this to 2.

*

But economic data is a real drag here. Scoring this -3 since below last low. 

Combined score still negative. This increases the chance of a fade back into recent range for SPX.

Shiller vs Shiller

Nobel prize winning Yale professor pontificates...

February 24, 2017

SPX 2367, CAPE 28.66

Interviewer: "Should the portion of someone's portfolio that was equities be reduced?"
Shiller: "Yes, reducing your holding of stocks, even for a long term, especially for a long term investor.... we know that when [the CAPE ration] is this high, the [stock market] doesn't do that great."

May 24, 2017

SPX 2404, CAPE 29.39

"Think back to the 1990s, it went up from 30 to 45, that's a 50% further increase. I'm just saying, that could happen again. ... We have some kind of inspiration, maybe, from the White House, a businessman president. If factors go right and there are tax cuts for corporations, it's not that hard to understand" that [the CAPE ratio could go up 50%] (implying the market would also go up 50%). 

The Pivotal Perspective - this is an utter bullish capitulation from a Yale economist, professor and Nobel prize winner for studies in stock market valuations. We are closer to a top than most people think.

File this under: Apple target 1000 (at 700), 5 months and only 12% from major top and -44% decline, and TNX target of 1.0% at 1.38% on the day of the low! 

Total market view

REVIEW
5/14/2017 Total market view: "...there are other technical signals that often precede weakness such as weekly RSI divergence on USA mains excepting QQQ, weak advance decline volume difference, and daily 50MAs rolling over to flat or slightly negative slope on DIA and IWM. Bottom line - I've mentioned that markets are a toss up two weeks ago, and last week decided that chances of powering up were slim so reduced portfolio from 120% long to 70% long on 5/9, and back up to 80% on 5/11. Part of this decision was the poor choice of vehicles on 4/20 & 4/24.... Trends are up, but indexes at resistance and so far there has been mild selling on all USA mains except tech. I still think markets are a toss up. We'll see what happens."

Result
NDX exceeded YR2 by 2 days then fell back under the level. SPX came within 2 points of YR1 2407 and dropped significantly the next day. However, several signs of strength returned on Friday 5/21.

Sum
Market has had some drop from NDX YR2 and SPX YR1 as I have indicated possible the last several weeks. Now the big question is whether this is just a pause in uptrend or a turn as significant as 2015 Q3 lows or 2016 Q1 lows, which were both double bottoms on long support support levels on SPX.

Valuation and fundamentals have both not helped the market since late April. Based on these, no chance that indexes return to a trend up move. However, indexes could remain in a sideways range without going significantly higher or lower for a considerable period. 

NDX / QQQ is in the middle of epic run with closes outside monthly Bollinger bands. While only one of these in the past has been a major top, often there will be a pause to fall back inside the band - this is soon becoming the more likely move. More on this point here. 

At the same time, I cannot be too bearish with 3 of 5 USA mains above all pivots, VIX below all pivots and XIV back above all pivots. Color me a cautious and somewhat disbelieving bull. I think markets are due for more of a pause than 1 day bear wonder and -2.2% down from SPX highs; but if I have to pick between VIX and opinion, VIX is usually the better choice. 

Bottom line
Portfolio is a bit underweight markets with 2 short hedges and 2 shorts. I will be quick to cover these with any additional strength next week (ie, SPY continuing above MayP, QQQ above YR2, VIX continuing below Q2P, IWM above Q2P, XLF above MayP).

Positioning
Detail here. Reduced from leveraged long to underweight 5/9. Due to market strength covered a couple of hedges, then quickly added these back on 5/17 open in addition to 2 shorts. Thus far, defensive moves have not paid but will not cost much more to hold. 

PIVOTS
USA main indexes - Leader NDX testing YR2 5684 again; SPX recovered MayP 2370; INDU testing MayP 20796; RUT below Q2P 1378.

Safe havens - VIX below all pivots, XIV above all pivots is bullish configuration for risk assets. But strength in TLT, AGG and GLD some caution.

Sectors of note - XLF below Q2P all quarter. SMH again USA sector leader in 2017, another huge run from 4/20 low.

Global indexes - DXY weakness supports global indexes. KWEB, INDA, EEM, ACWI above all pivots. RSX weaker, EWZ smashed, SCH also weaker below all pivots. 

Currency and commodity - The low in oil was CL1 YP. DXY bearish with YP and D200MA rejection.

OTHER TECHNICALS
Warnings about average true range and weekly divergence did play out with a range expansion drop last week. I don't think NDX power up move can continue much longer. 

In addition, Elliott wave model says upside limited in weekly W4, and pullback "should be" more than -2%.

VALUATION AND FUNDAMENTALS
Based on valuation via SPX forward P/E and Fundamentals via Citigroup Economic Suprise Index, I have been saying market should not blast through NDX YR2 & SPX YR1 for about a month. Check the tag on the dedicated post and you'll see.

SENTIMENT
Not a lot of bullish sentiment on recent highs, only 1 of 4 readings at lower end sentiment on lows. 

TIMING
(Proprietary work in progress model)

May dates published in 4/30 Total market view:
5/3-4 - so far stock index minor pullback low on 5/3
5/19 (stronger) - possible stock low 5/18 (-1)

5/9 was actually there in system but I missed it on 4/30 post so will not count it.

Positioning

Came into week 80% long via 2 longs and 2 short hedges.

1 QQQ (12/7)
2 INDA (3/3 & 3/28)
2 EEM (3/13 & 4/3)
2 SPY (4/17)
1 KWEB (4/20)
2 SPY (4/24)

4/20 and 4/24 buys right idea but too bad not more tech, as IWM and SPY disspointing in comparison. Check previous posts via tag for analysis and other blog posts on best moves from 4/20 low. 

-2 SPY 5/9
-1 QQQ 5/9
+1 SPY 5/11

Adjustments
5/14: +1 QQQ short hedge cover
5/16: none
5/17 open: -1 QQQ short hedge, -1 SPY short hedge, 1 IWM short, 1 XLF short
5/18: none
5/19: +1 SPY short hedge cover

Currently
1 QQQ (12/7), 1 unit hedged on 5/17
2 INDA (3/3 & 3/28)
2 EEM (3/13 & 4/3)
2 SPY (4/17)
1 KWEB (4/20)
2 SPY (4/24), 1 unit hedged 5/9
-1 IWM short (5/17 open)
-1 XLF short (5/17 open)

10 longs, 4 shorts/hedges = 60% long.

Positioning information
1 position represents 10% of capital.
Limits: 15 or 150% long, -50% shorts, hedges or safe havens, 200% max total exposure.
Currency & commodity positions are not included in this system.

NDX

File this under Other technicals.

NDX is in the middle of an amazing run outside the monthly Bollinger band. Using this index alone, there are only a few times to see 3+ consecutive closes outside these bands. By my count here are past incidences. 

1995 March to 1995 August - 6 months outside the band. Of course this was the start of a massive move in tech, but before this run resumed the index did pause for sideways for about 5 months. 

1998 Nov to 1999 Jan had three huge jumps, and 3 consecutive closes outside the band. Feb 1999 dropped back inside, but was a pullback low in the middle of screaming up. 

The index started to jump outside the band again in late 1999. Nov, Dec, Jan 2000 down but still looks to be close outside, then two more bars outside for 5 total. Everyone knows the rest of the story. 

The only other times to have these kinds of power moves were late 2013 in the QE power up and now, the huge streak as NDX 100 has finally cleared its 2000 top. 

On the plus side, only 1 of the past incidences was a major top. However, some pullback as the market drops back inside the bands is quite a possibility. How far that goes is impossible to know in advance - anything above a rising 10MA keeps trend strongly up.

Safe havens

Sum
VIX and XIV giving benefit of doubt to stock bulls with VIX rejection of 1HP and subsequent drop back under all pivots on Friday. XIV huge drop from 1HR3, but also back above all pivots and YR2 on Friday reaches same conclusion.

Other safe havens - TLT, AGG and GLD - are not as clearly bullish for stocks. In fact, AGG back above all pivots and testing D200MA. GLD near D200MA as well. TLT above MayP with 2nd lift from Q2P this quarter. 

Bottom line - benefit of doubt to bulls per VIX and XIV, but not highest confidence and it would not take much to turn the other way. Simply stated VIX needs to stay under Q2P and XIV above YR2 for safe havens to confirm risk on. 

VIX
Cannot really argue with the drop from 1HP.
Daily chart fell back under Q2P as well. Below this gives benefit of doubt to stock bulls. 

XIV
1HR3 rejection, but recovered YR2 on weekly close.
Perfect technical top on 5/16 with doji bar at long and medium term resistance with RSI at 70 but not above. 
Above YR2 gives benefit of doubt to stock bulls. 

TLT
Weekly chart still below YP and 1HP.
But daily above Q2P and MayP, MACD on a buy (5th cross this year) and starting to have upward sloping MAs (10, 50, 100) to help out. 

AGG
Back above YP (so above all pivots!) and testing D200MA!

GLD
Another hold of long term support - 3rd this year. 
Above YP, 1HP and Q2P, still below MayP. Rising MAs on daily chart are 10, 50, 100; falling 20 and 200. Mixed trend. 

GDX
Continues to disappoint on the long side (this site hasn't recommended any official GDX positions). Despite GLD strength, GDX below 3 of 4 pivots and below a falling D200MA.