Total market view

REVIEW
7/30/2017 Total market view: "4 of 5 USA mains are struggling at Q3 resistance levels (Q3R1s). Only DIA has cleared. This is also occurring with... (see list on link). So although larger trends intact, I thought higher odds of reaction lower in stocks. So far the market has been resilient and first drop on 7/27 was bought. I think the market is inviting sellers so we'll see if they show up. Bottom line - Portfolio reduced exposure last week, opting to raise cash instead of adding IWM shorts or UVXY hedges. VIX reversal bar from historic lows, and XIV seeming to have rejection at YR3 was part of this decision. But trends are intact so willing to buy back again if no rejection at Q3R1s."

Results mixed on the week with DIA higher, SPY fractionally higher, QQQ and IWM lower.

SUM
Last week key points of bearish concern were 4 of 5 USA main indexes struggling with Q3R1s, with only DIA above; along with technical divergence, sentiment concerns and safe haven strength. DIA continued to power up, but the rest - SPY, QQQ and VTI - are still stuck on these levels, and IWM already dropped. Sentiment concerns have eased somewhat, which may lead to a bullish resolution. However, TLT and GLD both above Q3Ps, and VIX & XIV suggesting possibility of risk off. 

I don't know the way the market will go but I am wondering about some nasty counter-trend moves like:
$USD rally on higher rate hike odds, which could sink GLD and cause some pullback in EEM and related FXI, INDA, etc.
VIX up and XIV YR3 slam. 
Tech stocks down again after failing at June high. 

But this is just a bit of speculation as we aren't seeing these moves quite yet, and market could prove these suspicions entirely wrong on Monday with SPY, QQQ and VTI rallying above Q3R1s as the safe havens fade and VIX drops into 9s again. 

Bottom line - Larger trends for stocks intact. But with safe havens strengthening, VIX divergence and XIV bang on YR3 it is time to pay attention to risk management. 

PIVOTS
USA main indexes - SPY, QQQ and NYA Q3R1s all in play. IWM testing key support at 2HP and Q3P.

Safe havens - TLT and GLD above Q3Ps. Stronger situation for stocks if these were below. Also, SPY higher with VIX off the lows and XIV bang on YR3 to me suggest more downside risk for stocks. 

Sectors of note - Despite many smart people recommending XLE as mean reversion, it remains avoid with inability to significantly rally despite USO achieving some long term strength. SMH did not reach quarterly resistance on high, and now testing AugP and D50MA.

Global indexes - Several key indexes on major resistance levels so differences between these and the trading ETF vehicles are construction and currency. 

Currency and commodity - $USD low on 2HS1 near exact may be enough for some near term bounce. This would change the melt up in GLD to breakdown in GDX.

OTHER TECHNICALS
Average true range is an interesting one - corrections tend to happen after range is low. But as a long term study it is problematic (at least on the charting package I am using) because it is point and not percentage based. Still, SPY weekly average true range currently 3.37 is at very low levels, lowest since 9/2014 which was just before a -9.75% drop in SPY.  

VALUATION AND FUNDAMENTALS
10 week moving average of 18X forward earnings dropped a bit last week; could be noise but only 20% of the time since 2016 Q4. Another decline this week would be more significant. Regardless, major professional resistance near 2483.

SENTIMENT
ISEE suddenly out of commission is annoying. Put-call off low levels. Two sources confirming record shorts in VIX futures. 

TIMING
Proprietary work in progress model that I am still maintaining in bare bones form due to calls like this.

August dates - a busy month for timing, alas, probably too busy to be much use.
8/2, bias stock high
8/8
8/11
8/16
8/21
8/25
8/30

I know, +/- 1 is not helpful at all with this many dates. I don't control the model and it just so happens to be busier this month compared to others. With August 2015 recently in memory, a lot of people seem to expect a fast sharp drop. I can tell you that very few were expecting that at the time. Maybe markets will melt up instead, or these dates will be minor swings in a range bound period. 

FAANG

I would be happy to apply The Pivotal Perspective to stocks if time permitted as it works quite well on individual names too. As hours are limited, I have kept to indexes and major asset class ETFs. But let's take a look at FAANG with standard weekly, weekly pivots and daily pivots below.

AMZN and NFLX are pulling back after tagging yearly levels (YR2 and YR3 respecitively). AAPL is testing YR3 from above that is likely decides the next move for tech. 

FB
W: Could cool off after blow-off but very strong long term trend with no divergences. 
W: Holding above 2HR1, bullish - could reach YR3 above near 180.
D: High near Q3R3 but still above Q3R2 and AugP. 
Still strong. 

AAPL
W: Double top with RSI divergence.
W: At YR3, watch 155.74.
D: Holding above YR3, level to watch. 

AMZN
W: First break of W10MA in all year; if lower W20 test likely.
W: YR2 & 2HR2 rejection.
D: Clear YR2 rejection and so far under AugP. Buyers likely at Q3P near 960.

NFLX
W: Fading a bit after blow-off but incredibly long term trend. 
W: This makes the move more threatening with YR3 top. 
D: Cluster resistance at the top - YR3, 2HR2 and Q3R3. Still above AugP.

GOOGL
W: Already testing W20MA for 2nd time. 
W: Testing YR2 as support.
D: Under AugP but lots of support at YR3, Q3P and 2HP below.

Safe havens

Sum
VIX remains below all pivots, and XIV above. But both are showing some signs that are typical before a larger move down in stocks. This doesn't always happen but I think right to be watching carefully. First, SPY is just a fraction off 7/26-27 highs, but VIX well off its lows. To emphasize this point, on Friday 8/4 indexes were higher and VIX was as well. This means smart money is paying up for hedges.

XIV is seeing resistance at YR3. This could be a critical turn per this post. Also keep in mind that XIV has been a great tell on many other critical turns (11/4/2016 for starters).

Safe havens TLT and GLD are both above Q3Ps. I think this threatens stocks a bit as well. If these break, stocks especially financials likely to be in rally mode. It could also pay to short GDX. 

VIX
W: Possible reversal from historic lows. Note key stock buy areas on the VIX 2016 YP, 2016 2HP, 2017 1HP, and thus far 2017 2HP. 
D: Still under AugP which has been resistance for 3 straight trading days. 
VIX still under all pivots which means benefit of doubt to stock bulls. Watching AugP. 

XIV
W: Start of reversal or pause before higher to 2HR1? Tough to say. Stall just like this has preceded big drops like July 2014 and August 2015. My view - anything under the YR3 is susceptible to spike lower. 
D: YR3 starting to act as resistance - and noticeably only 1 day of buying above this level (rest of bars red, though closed above). If lower then AugP could be in play very quickly.
XIV sum: Above all pivots but starting to see selling at YR3 area which could mean an important turn. 

TLT
W: Above 2HP, but YP still resistance. Congested.
D: What a fakeout bar on 8/3. But still Friday held D50 and Q3P. 
TLT sum: Strengthening recently as most stocks are sideways. Above Q3P and AugP I think threatens stocks somewhat.

AGG
FWIW the broader AGG is doing fine above all pivots. 

GLD
W: Considering $USD weakness in 2017, GLD has not been so impressive. Several tries above the YP and HPs, but hasn't reached long term resistance yet. Still could but thus far perhaps the start of another drop.
D: Like TLT helding Q3P and rising D50MA, in addition to D20 and D100 nearby. 

GDX
Another fail by GDX. If GLD rallies then better to be in that. If GLD drops further this is a short. 

USA main indexes

Sum
Last week I noted an important change in medium term pivot strength - DIA was only index above Q3R1 and the rest were below. Those with flexibility to rotate did well, with DIA going up each day as other indexes struggled in the past week. Pair trading did even better, as the call for IWM to lead lower also played out.

Indexes look more different than much of the year so far - DIA near 2HR1 area (exact tag on cash index), SPY slightly above Q3R1 (but futures not there yet); then QQQ and VTI are below Q3R1s. IWM has led the way lower as called, already testing a major support area 2HP and Q3P.

Bullish from here would be more indexes clearing Q3R1s. Bearish would be SPY Q3R1 rejection and possible IWM Q3P or 2HP pivot break.

Lastly, I don't mention NYA much but it almost never lets me down as an indicator (for new readers I view this along with VTI as broad indexes). While it has cleared YR1, 2HR1 is not far above. This is an important area to watch at 12034. For now it too is above its Q3R1 slightly. 

SPX / SPY / ESU / ES1
SPX W: Floating up towards 2HR1 at 2503.
SPY D: So far consolidating sideways after run up to new highs; a struggle but no rejection at Q3R1.
ESU D: Below 10MA slightly - otherwise above all pivots and MAs with nicely rising slopes. 
ES1 D: This version looks more bearish with Q3R1 still resistance (ES U also below Q3R1 too).
SPX sum: Sideways consolidation and pause at Q3R1, but no rejection yet. Futures contracts are not as bullish as SPX and SPY. Regardless of Q3R1 status, above all pivots and all daily MAs except 10 is still healthy uptrend.
 

NDX / QQQ / NQU / NQ1
NDX W: Near tag of 2HR1. Glaring RSI divergence. 
QQQ D: After falling under Q3R1 on 7/27, no close above and 2 days of selling from the level.
NQU: Below 10MA, but holding a sharply rising 20MA. Starting to see a bit of resistance at prior highs as well.
NQ1: Q3R1 resistance. 
NDX sum: Since 7/27, Q3R1 has been resistance. 

INDU / DIA
INDU W: Launch above YR1 and reached 2HR1. RSI healthy, no divergence. 
DIA D: Levels slightly different here, with DIA above 2HR1 and nearly and AugR1. 
INDU: Took over as medium term strength leader on 7/28 - the only index to be above Q3R1s as of that date. Momentum has continued. 
 

RUT / IWM
W: 2HR1 stopped the move, and now nearly testing 2HP - important long term support!
D: 2HP and Q3P nearly same level and highlighted by orange arrow. 
RUT: Led down as called. Now testing significant support area 2HP and Q3P. Below AugP from the second trading day of the month. 

NYA & VTI
NYA W: Near tag of 2HR1. Made it above YR1 for 3 weeks, but less than enthusiastic on this last leg up.
NYA D: Holding Q3R1 as support so far, in addition to the YR1 below that. 
VTI D: Struggling at Q3R1 since 7/27.

Valuation and fundamentals

I use a 10 period moving average to smooth out the week to week noise in the SPX 18X forward P/E, and this week it took a notable drop. Since 2016 Q4, this hasn't happened too often, less than 20% of the time. The important thing for positioning is that downward revisions to forward earnings should mean more resistance at this level, currently 2483.

It has been very clear from the image below that a big fund has been trimming each time SPX has reached up to 18X forward earnings. There hasn't been one weekly close above, with several tests and reactions lower. 

It is clear from the moves of 2017 that the Citigroup Economic Surprise Index had more pronounced effect on currency moves and bonds than stocks - but this could be a late cycle aberration. When at a small hedge fund I tracked the versions for China, Japan, Emerging markets, and Europe and they did very well in anticipating relative leaders most of the time. 

So, improvement from very low level may help stabilize $USD for a while. 

Global indexes

Some long term levels to consider. 

Yes I like the China, India and EEM trade and TPP rotated into this in March with a substantial percentage of portfolio since then, often 40%. This has benefitted from Trump shenanigans and institutional recognition that EEMs should have far higher market cap compared to global GDP and GDP growth. But if markets were to have a pause, it is at places like this.

That said, all these weekly charts have RSI strength with higher highs than May. This increases the chance of mild drop and/or eventual comeback. 

EEM W
YR2 area and 2HR1 testing, pullback likely. 

INDA W
So far soaring above, bullish. Easier to hold above the YR2 as support. 

Hang Seng Index W
Bang on YR2 here. 

NIFTY W
YR2 and 2HR1 tag - so far not above.

SENSEX
Same move - YR2 and 2HR1 tag. 

MSCI Emerging Market Index Futures Cont Contract
YR2 and 2HR1 combo too.

DXY, GLD and GDX

August and September tend to be the weaker months for stocks. August 2015 also seems recently in memory, and while January 2016 drop was about the same, the August decline was sharper, with most damage from highs occurring in just 5 trading days. 

But with everyone anticipating seasonal weakness, I don't think this year will be as severe. This may or may not be correct, and at some point stocks will have another drop of 5% or more, but my guess is that August and September are more stable for stocks. A correction could be in time, not price, with a choppy range bound period. 

But $DXY is falling off a cliff and GLD is perking up, and so in addition to oil which is suddenly showing long term strength for the first time in months, I am wondering about a $DXY melt down and GLD melt up as the next near term best move. Let's look at all 3 charts. DXY first.

DXY Q
First support not until 91 area with 38% Fib, 20MA and 100MA.

DXY M
38% fib from higher anchor is nearly 92. Rising 50MA is currently 91.55 and will be higher as August opens. If that goes, however, 88 area with monthly 200MA and 50% beckons. RSI sliding below 50 also points to more chance of reaching 30 area. 

DXY W
Red lines at various weekly close and price lows of past 2 years. Rising W200MA currently 92.13 seems like it will test. 

DXY W pivots (long term)
Possible support at 2HS1 92.79, and if that goes then 90 is next long term support.
 

DXY D
Daily chart with pivots and MAs. Arrows show bounce attempts or lack thereof. Blue shows 5 day bounce to JunP. That was the best! Otherwise red arrows show where support crumbled without any attempt at bounce at all! 

Bottom line - DXY while weekly and daily RSIs are fully oversold, this is in meltdown mode. Currency trends tend to persist more than stocks and with every Trump antic selling seems to increase. Watching 2HS1 and weekly 200MA but the way it is moving $DXY could semi-crash through 2015-16 lows. This would set the stage for major melt up in GLD!

GLD Q
Falling 20MA resistance for 3 of last 5 bars, but note last bar weak selling and currently lifting from rising 10MA. If that 20MA clears there is a lot of room to upside.

GLD M
Congestion for the last several months between falling M50 and rising M20 seems to be resolving to upside.
 

GLD W
From below all weekly MAs just 3 weeks ago to above all. 6th time since 2016 trying to clear weekly 200MA, and 4th time this year. It could fail again but chances are just as good we see upper weekly BB or higher. 

GLD W
2HR1 to YR1 target 124-126 is not unreasonable! YP and 2HP just had liftoff so why not? 

GLD D
Above all pivots and likely to open above the AugP. Already above 61% Fib. MACD cross 7/18 did not correspond with pivot or MA buy, but above Q3P on 7/21. But here late and RSI getting up there but I am thinking stage set here for melt up above the prior highs. Also note huge buying from D400 thick brown ie monthly 20MA (and yet monthly 20MA still looks like resistance on that timeframe). 7/11 20% portfolio long nice pick if i do say so, but if this is going higher and suddenly GLD above all pivots with USA mains below AugPs (could happen). there is room to increase. 

GDX
Has been weaker than GLD technically for much of the year, with 3 breaks of YP although no downside follow through. GLD had just 1 break. Also, GLD well above D200MA 3 separate times and GDX barely above and even still touching on Friday 7/28. GDX has not met condition of above all pivots & MAs for much of this year - however, any higher and it will do it!

Total market view

REVIEW
7/23/2017 Total market view: "A lot has changed from my confidently bullish assessment of last week. First, all USA main indexes have reached medium term resistance (ie, Q3 or July pivot resistance levels). Safe havens have strengthened. Sentiment readings are considerably more bullish. Thus, some reaction lower for stocks is a much greater possibility."

Results
Aside from DIA, other USA main indexes tried to go higher and then dropped, ending about even for the week.

SUM
4 of 5 USA mains are struggling at Q3 resistance levels (Q3R1s). Only DIA has cleared. This is also occurring with:

* Sentiment extremes recently reached, as 10 day put-call average is very near lowest levels of 2017; ISEE has had several very high spike readings in recent weeks, and even cautious AAII recently showed the 2nd highest bull-bear spread of 2017.
* RSI at or near overbought conditions on weekly / daily charts, several showing divergence.
* USA main indexes at or near the top of weekly Bollinger bands.
* Risk measures VIX and XIV still with the trend, but at notable extremes.
* Other safe havens strengthening somewhat.

So although larger trends intact, I thought higher odds of reaction lower in stocks. So far the market has been resilient and first drop on 7/27 was bought. I think the market is inviting sellers so we'll see if they show up.  

Bottom line - Portfolio reduced exposure last week, opting to raise cash instead of adding IWM shorts or UVXY hedges. VIX reversal bar from historic lows, and XIV seeming to have rejection at YR3 was part of this decision. But trends are intact so willing to buy back again if no rejection at Q3R1s.

Positioning
I will continue to mention good setups when time permits, but this week likely last dedicated post and daily tracking of each entry and exit will cease. 

PIVOTS
USA main indexes - 4 of 5 USA mains struggling at Q3R1s. Rejection hasn't happened yet, but my judgment call is that is the more likely next move. Also, new August pivots in play from 8/1.

Safe havens - VIX still below all pivots, so I can't be too bearish. On the other hand, potential rejection of XIV YR3 could very well be *the turn* in VIX/XIV for the year. 

Sectors of note - USO somehow rallied above 2HP, but XLE a lot more work to reclaim long term pivots.

Global indexes - Benchmark ACWI also stalling at Q3R1. Other leaders FXI, EEM and INDA have pushed to higher levels, but watching 2HR1 / Q3R2 for FXI, YR2 / 2HR1 / Q3R2 for EEM and same levels for INDA. PS, Hang Seng and Nifty both approaching YR2s too, could be worth watching as well.

Currency and commodity - Oil perking up with CL1 contract making definitive hold of YP, and USO June low bang on YS1 with several nice divergences on higher timeframes. The real story of global index outperformance and GLD strength is of course the plunging $USD. The Pivotal Perspective said $DXY looking "screaming bearish" on 5/17/2017 and I even thought that was 1-2 days late. Since then -4.25% in 6 weeks. $DXY near multi-year lows but accelerating lower into these levels. Pivot support has mostly not bounced at all, or had brief bounce for 5 days in June that quickly resumed lower. Main point: 2HS1 next long term target at 92.79 but given the above and higher timeframes probably lower. 

OTHER TECHNICALS
Katie Stockton in this Bloomberg video pointed to an SPX symmetry target of 2640, but I'm not sure why she missed the larger pattern that topped at 2468 (exceeded slightly but still close enough to watch. 

That said, we agree - larger trends are up. It would take all USA main indexes to have a weekly close below 2HPs to even somewhat threaten the long term picture. These are SPX 2374, NDX 5476, INDU 20855, RUT 1394 (most likely to break first), and NYA 11564.

Otherwise, weekly and daily RSIs and Bollinger bands worth studying on the USA main indexes here, with several indexes showing divergence on daily or weekly charts or both.

VALUATION AND FUNDAMENTALS
Someone keeps selling 18x forward earnings.

SENTIMENT
Not quite as stretched as the prior post from last week, but daily put-call still at lowest levels of the year.

TIMING
Proprietary work in progress model that I am still maintaining in bare bones form due to calls like this.

July dates (published 7/2/2017 Total market view)
7/3
7/21
Last week added 7/26

7/3 DIA high
7/21 gave 7/20 high (-1)
7/26 gave 7/27 low (+1)

August dates - a busy month for timing, alas, probably too busy to be much use.
8/2, bias stock high
8/8
8/11
8/16
8/21
8/25
8/30

I know, +/- 1 is not helpful at all with this many dates. I don't control the model and it just so happens to be busier this month compared to others. With August 2015 recently in memory, a lot of people seem to expect a fast sharp drop. I can tell you that very few were expecting that at the time. Maybe markets will melt up instead, or these dates will be minor swings in a range bound period. 
 

Positioning

Came into week with 10 longs and 2 GLD safe havens for 120% total exposure and 80% net long exposure.

2 SPY (4/17)
2 XLF (6/28)
2 INDA (7/5)
1 QQQ, 1 SMH (7/7)
2 EEM (7/10)
2 GLD (7/11)

Adjustments
7/24: - 2 SPY short hedges
7/26: -2 XLF, out; +2 SPY to cover hedges; +2 QQQ to maintain positioning
7/27: -1 SMH, -1 EEM, -2 QQQ

Leaving
2 SPY (4/17)
2 INDA (6/28)
1 QQQ (7/7)
1 EEM (7/10)
2 GLD (7/11)

This may be too light. I opted to raise cash instead of hedges given all the caution signals as outlined in the last Total market view. I could have kept more longs and added IWM shorts and/or UVXY hedges. Might be looking to add something on Monday. 

This will likely be the last positioning post. I tried this as experiment the last several months to show more clearly how trading with Pivotal Strength can benefit one's account. For example, some big calls on positions or highlights on sectors in 2016:

EWZ mentioned as buy February 2016, and mentioned often afterwards
SOXX encouraged March 2016 and mentioned frequently afterwards
XLF encouraged in 2016 Q4 before the election jump
IWM mentioned as main index leader post-election

All these produced huge outperformance over simply buy and hold on SPY. In addition, I am fierce about reducing exposure in downtrends and although some shuffle costs a bit at times, and looks completely unnecessary in a year like 2017 - which has the second lowest SPX drawdown since 1928! - I am experienced to know that at some point, probably rather sooner than later, protection will be quite worthwhile. 

I also wanted to show some of the methods employed achieving world beating 110% returns at a small hedge fund that was running ~100M AUM. In fact, at that fund the gains were due to even more leverage and concentration that what I typically have done here. Those returns involved huge gains in certain individual stocks, hedging portfolio via futures, and benefitting from a massive currency trade. 

But this does take extra time to review all these charts and when that time is lacking, I feel that portfolio could be better. This happened in 2017 Q1 when I didn't rotate into tech or global stocks soon enough. It is likely that time available for this project will reduce in the near future. 

Also, lastly, positioning totally depends on:
your position as investor or trader
tax status of account
flexibility of account (ie margin or willingness to use leverage)
costs - as this is an active strategy, it assumes commissions are small fraction of capital

As such, I will return to certain setups that I will continue to try to mention, but execution part and day to day listing will likely not continue. 

*

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.

Symmetry

This isn't qualitative enough for today's crowd but consider these charts:

SPX W
5/2015 H to 8/2015 L
Projected from 11/2015 H
Gave 1850 as a target - somewhat exceeded by price, but held on weekly close. 

Now I am doing the same thing from the 2/2016 L to 8/2016H, projected from the 11/2016L. This gave 2468 as a target - slightly exceeded by 2 weeks but still potentially in play. 

Oil

Oil has made a surprise move to upside. I actually bought in this past week as I spotted something interesting technically, but didn't write about it in advance as a setup so didn't feel fair to include in the Portfolio tracking project.  

CL1 W
Jumped above both long term pivots. There have been 2 other false starts this year so who knows. But right now I'd say this is looking good. 

USO
Monthly chart RSI divergence and lower BB tag!

USO W
Above weekly 20MA for the first time in months. 50MA next up, and has flattened out which gives this more chance to clear. 

USO W
Low on YS1 which is where portfolio suggested buy for mean reversion, but could after first rally. Above 2HP, so this means some long term strength the first time since 4/10 which quickly failed. If higher then the YP will be critical. 

USO D
Plan to hold above the 2HP at 10.05.

Safe havens

Sum
VIX below all pivots, and XIV above. In particular VIX could have jumped higher last week but didn't. So these are still supportive of risk assets. However, XIV 3 day overshoot of YR3 and rejection is not to be dismissed.

We could have just seen the major turn in XIV for the year. If you think this is too much a stretch then please review the charts towards the end of this review and see if you are convinced that seemingly unstoppable trends can and do end on yearly levels. 

Next move critical for XIV. Any weak up that is still under YR3 could invite a big drop. 

GLD above all pivots and GDX also almost there as well. But some of this is $USD weakness. TLT saved a breakdown, but still under 3 of 4 pivots. Conversely, AGG actually looking quite good and nearly above all pivots.

VIX
W: Could have jumped more, but didn't. Not quite a full reversal bar. 
D: Still under all pivots. 
D: D20, D50, D100 all falling slope and looking more like resistance. Latest moves did not tag either BB.

XIV
W: 2HR1 and YR3 pause. Next move critical!
D: Very important cluster 2HR1 97.84, YR3 95.41, and Q3R1 93.24.

TLT
2HP and D200 save. Still under 3 of 4 pivots though. 

AGG
YP has tried to rally a few times. Any higher and AGG above all pivots.

GLD
Above all pivots! Yes, some of this is DXY weakness. 

GDX
Has lagged GLD technically all year, but could be on verge of reclaiming decent uptrend status, above all pivots and MAs.

USA main indexes

Sum
Larger uptrend intact with all indexes above all pivots, and daily charts above all rising slope MAs except the 10MA. However, 4 of 5 USA mains having trouble at Q3R1s - only DIA has cleared. In addition, RSI divergence on some weekly and daily charts. The market has invited sellers. IWM the weak link likely to lead lower. A clear of Q3R1s would alleviate concerns. 

SPX /  SPY / ESU / ES1
SPX W: Candlestick fans would like to see a top here. If higher then 2HR1 in play.
SPY D: Struggling at the Q3R1, especially on Friday.
ES U: But still above all pivots and MAs.
ES 1: Similar to SPY.
SPX sum - Uptrend intact, but Q3R1 resistance and RSI in toppy area. 
 

NDX / QQQ / NQU / NQ1
NDX W: Glaring RSI divergence.
QQQ D: Also back under Q3R1.
NQU: Still above all pivots and MAs; prior key important to watch as well.
NQ1: Q3R1 resistance.
NDX W: Larger uptrend, but glaring RSI divergence. Watching Q3R1 and prior June high area (price & close levels).

INDU / DIA
INDU W: Doing well above the YR1.
DIA: Only one to clear Q3R1.
INDU sum: DIA new medium term pivotal leader, above the Q3R1.

RUT / IWM
RUT W: Another tag on 2HR1.
IWM D: Q3R1 rejection. 
IWM D: Also watching prior area (both price and close highs).
RUT sum: Continues to be weak link of USA main indexes. 

NYA & VTI
NYA W: Above the YR1 but struggling to really lift off; 2HR1 not far.
NYA D: By Friday, also trouble at Q3R1.
VTI W: Note RSI.
VTI D: Clear selling from Q3R1.

Valuation and fundamentals

This past week SPX again bumped up against forward 18X P/E, or more accurately, the 10 week moving average of 18X P/E, and turned lower. These are weekly close figures so even though this past week look like it was a little shy, consider the value was 2480 last week and 2485 this week; and the SPX high was 2484. Someone big is selling up here, although the reactions have been quite mild thus far, this could change.

Also, as long as the slope is decently positive (rising 5 points a week is great!) then I think there won't be serious selling pressure even if this level continues to act as resistance. When the slope rolls over though, watch out for a more serious drop. 

Citigroup Economic Surprise Index is turning up from very low level but still. 

VIX & XIV

Regular readers know that I factor VIX & XIV into every equity positioning decision. Market observers know that VIX and XIV are historically stretched. Where is the turn?

Let's take a detailed look. 

VIX Q
Already crumbling below the quarterly close low (thin red line) of 11.26, VIX seems intent on testing the all time price low of 8.60 reached in 2006 Q4.

VIX M
Monthly low close of 10.41 was in May 2017; before that 10.42 in January 2007. Also seems like VIX could tag the lower monthly BB for a turn, currently 8.03!

VIX W
And here is the weekly version with low close just the prior bar at 9.36. Other than RSI at typical low area, nothing glaring here other than above last week's close. 

VIX D
JulS1 only a few days left, but at 8.64.

VI Q
Would have to move above 11.25 for better buy.

VXV (3M)
Might be reversing on JulS1 HERE, with lots os support not far below.

VVIX
The VIX of VIX is bang on JulS1 as well, and just a little higher would look like decent reversal. 

XIV Q
Unfortunately not enough price history, bu tRSI 78.9 getting up there. Also, BB value 80 is significant % below current levels. 

XIV M
7th bar outside the montly BB! RSI 81 is impressive, but let's face it, sometimes RSI goes higher. 

XIV W
RSI positive divergence and outside weekly BB. Cannot say glaring top yet.
 

XIV D
And here are pivots. Testing YR3, so far above for 2 trading days. 

OK - full analysis of other technicals does not give huge edge to a turn. But XIV is on YR3. I leave you with a few other charts for consideration.

GDX W
Major high on 2016 YR3.

Shanghai Comp W
Major high near 2015 YR3 - 2 bars of overshoot then wham.

GLD W
2011 top on 1HR3, with near tag of YR3. 

SPY W
2007 top on YR2 exact, along with 2HR1.

QQQ W
2000 top 1HR2 exact, near tag YR2.

Total market view

REVIEW
7/16/2017 Total market view: "USA indexes are healthy uptrends, above all pivots and moving averages; and should go higher before we see a decent trading top. For additional context: daily RSIs on main indexes are not yet overbought, safe havens are weak, and emerging markets are ripping. Further, most sentiment readings are nowhere near a bullish extreme - in fact, the opposite! With many participants expecting a correction in Q3, the market may just continue to leave people in the dust. Bottom line - Typically, key highs like 3/1/2017 are made with multiple USA indexes on pivot resistance levels, with other technicals showing divergence, safe haven strength, and crowded bullish sentiment. None of that is happening yet. Markets should go higher."

Result
Aside from DIA, most indexes higher last week.

SUM
A lot has changed from my confidently bullish assessment of last week. First, all USA main indexes have reached medium term resistance (ie, Q3 or July pivot resistance levels). Safe havens have strengthened. Sentiment readings are considerably more bullish. Thus, some reaction lower for stocks is a much greater possibility. 

Scenarios from here:
Further melt up above Q3R1s to next resistance levels higher (still decently possible)
Sideways or weak selling, then higher
Mild pullback, high test, then lower
Down for 3-5% dip

Probably in this kind of trend, the straight down move is not as likely. Often highs test before indexes drop for real. For example, March highs had a near test on 3/15 before the larger drop. Extremely high momentum trades like QQQ in 2017 may not unfold in this manner; however, that isn't the case with SPY at this point. 

So that leaves us with the first three possibilities. If #1, then easy, hold all longs and sell GLD on weakness. If #2 then it is a matter of quick hedge then out; if #3 again we want to be hedged but not overly aggressive on bear side in this kind of market. Given larger trends, I think a hedge rather than raising cash is the right move, although more trouble indicated by VIX or XIV could change that view. 

Bottom line - Ready to reduce or hedge unless Q3R1s clear early in the coming week. I was expecting to be cutting XLF late last week with TLT strong, but then noticed XLF holding firm as other indexes were down more so held on. QQQ and SMH have been 2017 market favorites, though any trouble at prior highs could be prelude to another drop. Lastly INDA bang on YR2 but just a pause so far. 

Positioning
10 longs (100%) and 2 safe havens (20%) for 120% total exposure, 80% net long exposure. GLD was nifty trade to be gaining on a safe haven while fully long indexes have also gone higher. Much easier than shorting. 

PIVOTS
USA mains - SPY, QQQ and VTI all on Q3R1s. 

Safe havens - VIX and XIV still confident, but XIV YR3 level to watch. Other safe havens TLT and GLD above Q3Ps! I don't think we should be seeing that kind of safe haven strength in pure bullish scenario for stocks. 

Sectors of note - A lot of smart people keep trying to buy oil and XLE, and it keeps on going down. I live in San Francisco and with all these Teslas around it isn't hard to view oil as a soon to be obsolete commodity. Avoid. 

Global indexes - ACWI at Q3R1; FXI at 2HR1; EEM 2HR1 near tag; INDA at YR2; KWEB Q3R1; SHComp recently held 2HP and Q3P, only at JulR1; RSX and EWZ at July levels only. Point - global indexes all on key levels too.

Currency and commodity - DXY plunged through YS1 without any attempt at bounce. Larger timeframe charts look terrible. 

OTHER TECHNICALS
SPY weekly reaching RSI 70+ and tagging the upper Bollinger band does not happen that often. Here's a quick visual rundown from 1995. 

VALUATION AND FUNDAMENTALS
Nicely rising earnings supports the larger trend. 

SENTIMENT
Now that daily put-call measures are near the lowest of the year, the market is much more likely to drop. 

TIMING
Proprietary work in progress model that I am still maintaining in bare bones form due to calls like this.

July dates (published 7/2/2017 Total market view)
7/3
7/21

Bias was for 7/3 to be a high and 7/21 another high. 7/3 was a minor trading high for DIA. As of last week: "If my idea correct 7/21 will be another high, ideally higher than 7/3."

7/20 close enough. Another score for this model!

Adding 7/26 as possible turn date

August dates - a busy month for timing, alas, probably too busy to be much use.
8/2, bias stock high
8/8
8/11
8/16
8/21
8/25
8/30

I know, +/- 1 is not helpful at all with this many dates. I don't control the model and it just so happens to be busier this month compared to others. With August 2015 recently in memory, a lot of people seem to expect a fast sharp drop. I can tell you that very few were expecting that at the time. Maybe markets will melt up instead, or these dates will be minor swings in a range bound period. 
 

Technical sell?

The case for some pullback as the next move has a few elements. One criterion is technicals on weekly SPY:

RSI 70+ and
Upper BB tag

Arrows on charts below are about where these both occurred; if a cluster of consecutive weeks met conditions, there is still one arrow so this is more visual than quantitative. Just reaching upper band or RSI 70+ alone did not count; both had to happen at the same time.

The most important tops in 2000, 2007, 2011 and 2015 all occurred with RSI well under 70 - divergence being the critical issue. Still, a trend has to slow before reversing and the possibility of a pullback worth hedging is what we are assessing here. 

Starting with recent years, the first thing to notice in the chart below is that the weekly RSI was under 70 from 7/2014 all the way to Q1 2017. Just reaching 70 is not of itself negative; stronger markets will reach overbought several times. It is the reaction to the level and potential divergence that matters.

Still, even in a power up period like 2013 (QE!), the combination of upper BB tag and RSI 70+ is where the pullbacks began. In some cases, the market pushed the band for several weeks before dropping. Often any push outside the band was followed by a divergence high inside the band. 

2013-current

2008-13
3 of 4 incidences at major trading highs, but a different environment then compared to now.

2003-07
Aside from 2003, the real recovery after recession, RSI had trouble when it reached overbought; a real tell for what was to come. 2006 and 2007 saw pullbacks after RSI 70 and weekly BB tag, though in two of three cases market continued higher to make a divergence high before the drop. 

1995-2000
This is probably the most relevant chart considering current market. Obviously I am not bothering with 2000-02.

In 1995, the entire year pushed the upper Bollinger band and RSI overbought! After that, SPY RSI reached 70+ many times and pushed the upper weekly band even more times. Often divergence in both proceeded the pullbacks, though the nicely rising moving average lines snapped back so many times before the market rolled over. 

The point here is that a strong market can ignore the weekly band and RSI 70+, and we could certainly experience that here. If higher, then watching for divergence; if lower a real correction would take SPY to weekly 20MA, which has not tagged since 11/2016. 

Positioning

Came into week:

2 SPY (4/17)
2 XLF (6/28)
2 INDA (7/5)
1 QQQ, 1 SMH (7/7)
2 EEM (7/10)
2 GLD (7/11)

10 longs or 100%, 2 safe haven hedges for 80% net. 

Adjustments
Watching carefully, but none last week.

*

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.

Sentiment

I tend to mention sentiment when it is doing something interesting. In the last few weeks, there was one massive ISEE spike high, but at the time, other readings were subdued. As of the end of last week they have finally been convinced of the bull side.

This increases the chance of a decline as the next move. 

Put-call W
On the lower side, especially when viewed from 2015+. 2013 abnormal QE year.

Put-call D
Near lowest levels of past 1.5 years. 
4/25/2016 - near trading top of 4/20.
7/20/2016 - SPY higher but not by much for several weeks then correction into November.
12/15/2016 - Trading top for dip into year end.
2/27/2016 - Decent trading top 3/1. 
6/8/2016 - Top for NDX, -5% followed.
And now. 
 

ISEE
3 recent spike high readings, the highest one was the 3rd highest this decade. 10 day moving average at highs for the year. 

AAII
While levels not extreme for the decade, for 2017, 7/20 readings were:
2nd lowest in bears
3rd highest in bull-bear spread

NAAIM
Elevated 5/24 and 6/28, but faded a bit since then. No extremes here.
 

Safe havens

Sum
VIX and XIV tend to be right on the market, and these are pointing to bullish resolution for stocks. But watching XIV YR3 for possible turn. Despite the bullish implications of VIX and XIV, TLT and especially GLD seem to be speaking loudly - both above Q3Ps. 

If both TLT and GLD rally above all pivots (both are not far from this condition) it may be correct to reduce stock positions no matter what VIX & XIV do (against my usual view to put more weight on VIX and XIV for stock positioning). 

Portfolio has had 20% in GLD from 7/11 and done nicely with this. Easy to hold if Q3P maintains as support. 

VIX
VIX still getting crushed. VIX lower (!) despite stocks higher. If VIX is right indexes are right back to highs on Monday. Could happen.

XIV
W: Nearing YR3! How new from YS1 low early 2016 and YP hold Nov 2016 that this year would have such a run. No selling from YR2, YR2 had a drop, then turned into support twice. 
D: Straight up from 7/7 on. Above Q3R1, nearing YR3. RSI overbought. 
Sum: Thus far, warnings of crowded VIX shorts have not materialized. This keeps printing money. But if any level can stop a move, it is yearly resistance.

TLT
W: Held 2HP, back to testing YP.
D: Almost but not quite above the JulP. Rising D50 won over falling D20. 
TLT sum: So far resolving recent congestion area to upside. Interesting and odd that TLT rising along with XIV from 7/7. 

AGG
Above all pivots from 7/19+; above all MAs except D400.

GLD
W: Hold of YP and then bullish launch above 2HP.
D: Buy on 7/11 doing well, but let's face facts, GLD has faded several times this year so exit could be tough decision.
D: 3rd time this year trying to rally from D200MA (or 4th depending on how you count).

GDX
Despite the strength in GLD, GDX still cannot get it going. Below YP, still below D200MA.