Your Custom Text Here
Last week's blog post: "New lows have been rising since since late July all the way to 8/21. The cross of new lows exceeding new highs was about 8/15-16. The market is not "in the clear" until new highs exceed new lows. Should that happen, point in bulls favor."
And that is how it played out on 8/31, with 10MA of new highs jumping to 63 with new lows falling to 49. Note these other crosses since 2016 have been excellent places to return to bullish mode - 3/1/2016 and 11/10/2017.
Sum
VIX below critical 2HP / Q3P combo 12.28 from 8/22 on. Though 8/29 seemed threatening overnight and near the open, VIX fell most of NYSE session hours and back under the level from 11:00 am EDT on. If pro SPX traders were not worried about NKorea WWIII, then neither should you.
XIV mostly mirrored the move, yet is fractionally under its SepP - so this means XIV is not fully confirming VIX under all pivots yet.
Meanwhile, TLT and GLD above all pivots. It still seems odd to me to have market at highs and safe havens so strong. Watching GLD YR1 / Q3R1 combo and GDX 2HR1 for reaction.
HYG has been giving good signals and I'm starting to include it in safe haven rotation, with a possible occasional glance at LQD as well. With higher dividend ETFs it is important to remember that these charts are not total return, but they still seem to respect the technicals here. HYG currently above all pivots, bullish for risk assets.
VIX
W: Not hard to imagine another visit into single digits.
D: VIX D below 2HP / Q3P combo on daily close from 8/22+. 8/29 seemed to be going the other way but dropped all day for session; back under critical levels about 11:00 EDT.
D: Green light below all pivots from 8/31 on. Bullish for risk with VIX below 12.28-46 which includes 2HP, Q3P and SepP.
XIV
W: High on YR3, pullback low near YR2.
D: Hard to see but SepP 83.87 so far resistance. So a bit of divergence between VIX and XIV here.
TLT
W: Still above YP.
D: Still above all pivots.
D: Above all pivots - below 10MA and 400MA (400 not used as much but consider proximity to monthly 20MA).
TLT sum: Still above all pivots and next move from YP will be interesting tell for market.
AGG
Above all pivots but Q3R1 on highs and rejection from there.
HYG
Pretty decent signals with 7/26-8/1 top and then similarly 8/18-22 low area. Currently above all pivots.
GLD
W: When everyone else was finally getting excited about GLD, The Pivotal Perspective is watching YR1 carefully to decide whether to lock in gains.
GLD: Testing YR1 with no rejection so far; Q3R1 just above. Could also hold above rising MAs and/or SepP near 123.
GDX
Testing 1HR1 area.
Sum
Regardless of any opinion about how NKorea would play out, all USA indexes made convincing holds of various pivot areas last week, and by 9/1 all 5 above all pivots (first time since 8/2).
It is important to understand what was on the low to help recognize these days where the market is literally ringing a bell for a definitive turn. Weekly level major pivot only (ie, pivots, no support / resistance, and no monthly levels) and moving average charts included below for clarity of long term trend. On recent lows:
SPY weekly 20MA held, then recovered AugP 8/30 along with D20 and D50MAs.
QQQ weekly 10MA and 20MA cluster held, then all above AugP on daily close from 8/22 on; 8/29-30 recovered D20 and D50MA.
DIA weekly 10MA held; AugP and D50MA 8/29 bang on last week's lows.
IWM weekly 50MA and 2HS1 on lows; recovered 2HP & Q3P 8/30.
VTI weekly 20MA and near tag of Q3P; recovered AugP 8/30-31.
From here, SPY and VTI Q3R1s are in play but even if mild pullback then SepPs likely support on first test. With all USA indexes above all pivots, one really has to be bullish and expect higher targets. I will change this view if we see resistance rejections and SepP breaks.
SPX / SPY / ESU / ES1
SPX W: From near lows of summer range to highs, but without tagging long term levels.
SPY W: Major pivots only (Y, Hs, Qs, no monthly) chart plus MAs; MACD+ from 11/2016, above rising 20MA entire ride.
SPY D: Back above all pivots as of 8/30.
ESU D: Back above all pivots and MAs on 8/30 close, as MACD flipped +. D100MA near enough on both llows.
ES1 D: At Q3R1.
SPX sum: Low on AugS1 and D100MA held for a second time, and from there fast move back above all pivots and MAs. Q3R1 in play. Above that will target 2HR1 2500, not far away.
NDX / QQQ / NQU / NQ1
NDX W: Between levels.
QQQ W: Held 10MA and 20MA tag, with key low of Q3 bang on Q3P.
QQQ D: AugP 2 breaks, but held on daily close from 8/22 on.
NQ D: Above all pvits and MAs early 8/30.
NQ 1: About same.
NDX sum: Held test of weekly 10MA and 20MA; 2 minor breaks of AugP and definitive hold from 8/22 on.
INDU / DIA
INDU W: Back to 2HR1.
DIA W: Simple pullback to rising 10MA.
DIA D: Rising D50 and AugP convincing hold on 8/29.
RUT / IWM
RUT W: High on 2HR1, low on 2HS1 both near exact. Recovered 2HP.
IWM W: Rising W50MA on the low as well.
IWM D: Pivot cluster on lows, back above all pivots as of 9/1.
NYA & VTI
NYA W: Back above YR1.
NYA W: Hold of rising 20MA and near tag of Q3P.
NYA D: Above YR1 is bullish, with SepP not far below as support as well.
VTI W: YR1 held as support from 8/22 on.
VTI W: Rising 20MA and near tag of Q3P on the lows.
VTI D: At Q3R1.
18X forward earnings represented by its 10 week moving average has been near the top on several weeks. After declining in value in weeks prior, last week showed a healthy rebound as price advanced. Current level 2486.
Citigroup Economic Surprise Index improving, but still a long stretch in negative territory.
FWIW FAANG equal weight forward PE from 52.3 to 54.3 last week.
REVIEW
8/13/2017 Total market view: "Simply stated, I think is it is the time to err on side of waiting for dust to settle and let indexes drop further, rather than jumping right back into risk after such a minor drop."
No Total market view 8/19-20 weekend. The Pivotal Perspective has been cautious from 7/23. While SPX has not yet dropped as much as the mildly preferred -5-6%, VIX has spiked twice, IWM -7%, and safe havens GLD and TLT near 2017 highs in the ensuing month. Shifting defensive has been the right thing to do.
8/21/2017 Daily comment: "SPY tested and held AugS1 today, though the bounce for session seemed weak. But factor in moving averages, Bollinger bands and RSI, one has to conclude a 'maybe' low. For SPY, this was the nearest test of D100MA since the election; also, a close back inside the Bollinger band after 2 closes outside; as RSI near lows for 2017. In addition, this is happening as sentiment via standard put-call near highs for the year and CNN Fear & Greed Index at major lows."
And indexes indeed bounced with the 8/21 low holding so far.
SUM
Main question from here is whether the 8/21 low and -2.95% decline for SPX was 'it.' There are indications of at least maybe: weekly charts of USA main indexes have had typical pullback to rising moving averages, sentiment picture has changed sufficiently, and VIX at 15+ has been the two other primary buying opportunities this year. In addition, global indexes especially China, are very strong.
However - TLT has rallied above its YP to be above all pivots. This was not in the Wall Street script for 2017 and points to risk of another drop for stocks. Also, AugP for SPY has acted as resistance for 3 days in a row. While SPY may be able to clear this next week, a monthly pivot acting as resistance has occurred in declines like August 2015 and December 2015.
Following a Pivotal Momentum strategy, one would be concentrated in global indexes (especially China). See this post from 8/21. One would also have DIA and SMH/QQQ, and of course, GLD and TLT, and possibly a recent add on GDX per this post. I haven't been mentioning EWZ much this year (got lots of attention in 2016) as EEM, FXI and INDA leading, but it did hold a nicely rising D20MA and above all pivots on 8/10 as USA breaking down.
Bottom line - Until SPY and VTI clear the monthly pivot, and VIX drops below its monthly pivot, stocks are not yet in the clear. While it paid to be buying back some positions on 8/21, it is not yet full green light for 100% risk and certainly not the place for leverage yet.
PIVOTS
USA main indexes - DIA and QQQ above all pivots. SPY and VTI below AugP. IWM weak yet bouncing from 2HS1 / Q3S1 area.
Safe havens - VIX below crisis level of 12.23, but still above AugP. TLT pushed above its YP, and GLD holding above Q3R1.
Sectors of note - I've seen professionals recommend XLE for months now, expecting mean reversion. First, according to The Pivotal Perspective, it would have been significant underweight / avoid from February 2017; if trying to re-establish positions, only sufficient technical setups were: 3/27-28 (2 week bounce followed), 5/4-5, 7/7-8 and 8/18-21. XLF holding up well considering the bond move, but under AugP since 8/17.
Global indexes - ACWI, EEM, FXI, SHComp, KWEB, INDA, RSX and EWZ (in other words, all that i track!) - all above all pivots!
Currency and commodity - DXY plunged through 2HS1 support on 8/25. The last trading day above a monthly pivot was 4/11. Oil seems like it is trying to perk up but still rather stuck.
OTHER TECHNICALS
USA main index weekly charts
SPY pullback to weekly 20MA
QQQ pullback to weekly 10MA and now near 20MA
DIA pullback to weekly 10MA
IWM pullback to weekly 50MA and lower weekly BB
VTI pullback to weekly 20MA
These are all rising and so bounce was the more likely move. However, bounce looks rather tepid so far and I would not be surprised to see another downdraft.
Analysis of new highs new lows.
VALUATION AND FUNDAMENTALS
18X forward earnings (or more accurately, the 10 week moving average of 18x) worked very well as a level to reduce risk.
SENTIMENT
After reaching bullish extremes near the end of July, sentiment meters have taken a sharp move the other way. Put-call at high levels, and Equity put-call at highs for the year. Indexes may still move lower, but with sentiment already stretched the short squeezes will make shorting difficult from here. IWM short would have worked as a hedge, and otherwise safe haven longs were easier $.
TIMING
Proprietary work in progress model that I am still maintaining in bare bones form due to calls like this.
August dates first posted 7/23/2017
8/2 - not much event
8/8 - key stock high
8/11 - low
8/16 - high
8/21 - key low
8/25 - high?
8/30
For those who are reading this far, August timing turning our rather amazing don't you think? What are the statistics in 4 turn dates in a row? If markets drop on Monday, 8/25 will be the 5th.
This is a non algorithmic, proprietary, judgment based timing system.
September dates
9/4-5
9/13
9/22
9/26
This is an old school breadth indicator that I have toyed around with from time to time but not made part of my routine - until now.
10 day average of new highs in blue; new lows in red.
I reviewed data as far back as I could go - here are some guiding principles:
1. In a bull market environment, buy the time new lows cross over new highs, most damage is done. In other words, shifting bearish at these crosses is too late.
2. When new highs again exceed new lows, this is often the right time to go back to "confirmed bullish" on the rally. Let's say market has stabilized after a pullback; if new highs are exceeding new lows, no hesitation in being fully bullish.
3. When new highs gradually decline as new lows gradually increase, there can be more damage on the next drop. This happened in 2015 before the summer drop, and late 2015 before the January 2016 plunge, etc.
4. Many divergences on new highs before a real top; divergence in new lows is a helpful bottom signal. For example, 2/12/2016 significantly less new lows than 1/21 area.
Current assessment:
New lows have been rising since since late July all the way to 8/21. The cross of new lows exceeding new highs was about 8/15-16. The market is not "in the clear" until new highs exceed new lows. Should that happen, point in bulls favor.
Sum
VIX spiked twice in August, had highs near Q3R1 and dropped back under key 2HP / Q3P level of 12.23 twice. Currently out of danger zone but above AugP. It has paid to be defensive with VIX above 12.23. Similarly, XIV had big drop from YR3 area - as called. It held 2HP near lows and back above Q3P, but well off highs.
VIX and XIV are not signaling too much trouble for stocks, but not giving full green lights yet.
Other safe havens are speaking more loudly. TLT above all pivots this week, joining AGG above all pivots for all of August. GLD above all pivots from 7/26. Also starting to officially watch HYG, which is likely to signal trouble in rising rate environment and/or economic weakness.
VIX
W: Spike to above 2HR1, then 1 bar on that level, next drop below 2HP and out of crisis.
D: Orange arrow at 2HP / Q3P combo. Still above AugP.
D: 2nd spike up was really a divergence high test considering Bollinger bands. Below falling D200, above rising D50.
Sum: VIX back out of crisis - 2HP / Q3P both at 12.23 - the last 4 trading days. Still above AugP.
XIV
W: High on YR3, recent lows near YR2.
D: Back above 2HP and Q3P; some resistance at AugS1.
TLT
W: Above all pivots!
D: YP turning into support!
D: Rising 10, 20, 50 and 100 MAs; above a falling D200, flatish 400.
AGG
D: Interesting tip-off, above all pivots from 8/1 on.
HYG
Highs on Q3R1, then fast drop through Q3P and 2HP. Higher low 8/21 part of tell for stock bounce.
HYG 2H chart with SPY in blue
HYG dropping in August several days before SPY followed.
GLD
W: 2 small up bars invite selling.
D: Holding above Q3R1.
D: Above rising 10 and 20MA. Red line shows 2017 close high and Apr price high resistance.
GLD: Stalling near Q3R1 / gold price 1300 area and just not pushing through to real new highs yet.
GDX
3rd time above 2HP has been charm.
SLV (new)
Holding above YP for last 8 trading days, though D200 and 2HP / Q3P still resistance.
Sum
Current leaders DIA and QQQ above all pivots. But SPY and VTI below AugPs with clear resistance on those levels the last few days. IWM led down as expected and recently bounced from the 2HS1 / Q3S1 combo.
Levels to watch this week are QQQ AugP, SPY & VTI AugPs. It is certainly possible that SPY rallies and joins DIA and QQQ above all pivots. That said, several declines in early stages have involved a monthly pivot starting to act as resistance. This happened with SPY in April 2017 and September/October 2016; and in more threatening examples, December 2015 and August 2015.
SPX / SPY / ESU / ES1
SPX W: Near tag of 2HR1 at highs; still above YR1 support and if lower then 2HP could be in play.
SPY D: AugP resistance 3 days in a row.
ES U: AugP, falling D20 and flat D50 resistance. MACD not returning to positive on the bounce.
ES 1: About same.
SPX sum: Consolidating gains after big run. Recent low on AugS1 and D100MA exact, bounce, but now AugP and D20 & D50 resistance. AugP acting as resistance can be part of a larger decline, like April 2017.
NDX / QQQ / NQU / NQ1
NDX W: Near to 2HR1 at highs; above YR2.
QQQ D: Still above AugP; 2 slight breaks this month.
NQU: Falling D20 resistance.
NQ1: About same:
NDX sum: Consolidating gains after amazing run up. Still above AugP and D50MA.
INDU / DIA
W: High slightly above 2HR1 but now below.
D: Q3R2 near tag, and 2HR1 selling. Still above AugP.
RUT / IWM
W: Isn't that nifty - high on 2HR1, low on 2HS1
D: Q3S1 also involved in low.
D: D200MA break, but rising could recover.
NYA & VTI
NYA W: 2HR1 high, and now below YR1. Key level to watch>
NYA D: YR1 in red arrow, and AugP also there.
VTI W: YR1 not acting as definitively as early 2016 YS1 low or second half 2016 YR1 high.
VTI D: AugP resistance.
10 week moving average of 18x forward earnings (blue line below) was essentially the high area, that capped SPX price (orange) on several tests.
New idea - forward P/E for equal weight FAANG. Currently 52 and that is off the highs.
Citigroup Economic Surprise Index may not seem to be heavily influencing stocks, but it is certainly impacting bonds and currencies.
Standard put-call jumped from notable low at the end of July to relative high area, exceeded by only a couple of weeks this year.
Equity only put-call even more glaring - at highs for 2017, only exceeded in last 12 months by election anxiety.
AAII weekly survey out - bears at 38.2% 5th highest for the year, and bull-bear spread also at 5th lowest reading of 2017.
TPP gave a rec to buy GLD on 7/11 just after the YP hold, and I haven't seen any reason to sell yet. Here I'd like to point out that GDX has spent the last 5 trading days above its 2HP (ie above all pivots) which has been fairly rare this year.
In addition, SLV (not something I always track) has recently lifted back above its YP and held yesterday. SLV is a bit weaker, still under 2HP and Q3P and a falling D200MA, but may join the others above all pivots. SLV looks interesting here, and although I don't like to fight a falling D200MA, there have been several days of selling from this level and no downward motion. This could squeeze higher.
With DJT threatening shut-down, bonds are the less likely safe haven. Aside from sectors like utilities, institutions concerned about stock valuations can buy volatility, metals or raise cash should their funds allow that.
GLD, GDX and SLV below.
For the asset classes I track (ie major stock indexes, safe havens, global ETFs), here's the current update above vehicles above all pivots:
Risk
SMH
FXI
EEM
KWEB
SHComp
RSX
EWZ
Safe havens
GLD
GDX
TLT
AGG
To translate, all USA main indexes have fallen below AugPs, but look at the global indexes holding firm. The story is of course China strength and $DXY / $USD weakness. It is interesting that the global indexes have stayed so strong as 2 key safe havens, GLD and TLT, have moved above all pivots.
Often the best rotations are what holds up best in pullback - for example, KWEB far above AugP the two days that QQQ broke. Other times the best buys are a sudden change of pivot status, especially with moving averages and some MACD or RSI point on your side.
With this in mind - it seems that either safe havens drop and more USA main indexes join the list of risk assets above all pivots, or global indexes fade as safe havens maintain strength.
Third week in a row that the 10 week moving average of 18X forward P/E has declined. Market is responding appropriately.
Citigroup Economic Surprise Index continues to turn up from very low levels; still very negative. This has roughly corresponded with $DXY halting a decline, but that seems about all.
REVIEW
8/6/2017 Total market view: "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."
Indeed. Whether risk management meant trimming longs, hedging with inverse ETFs, puts, or playing the volatility trade that was urgently recommended a week ago (+44% so far), risk management was the theme of the week.
SUM
Indexes cracked last week as safe havens continued up, and most important to The Pivotal Perspective, volatility exploded. But is this another index mini-dip / false break / one day bear wonder like 4/13/2017 or 5/17/2017, each days that looked to be risk-off yet turned out buying opportunities instead?
I don't think so - risk-off seems real this time. For one thing, safe havens are speaking loudly. VIX is above 2HP now; on 4/13 2HP held as resistance; and the same situation on 5/17. TLT had no long term strength then; it does now. Further, several main indexes had bearish action on long term levels: SPY near tag of 2HR1 and down; DIA 2HR1 rejection; IWM 2HP break; NYA 2HR1 rejection and YR1 break. Even more, this is occurring as global leaders China (HSI, FXI, KWEB) and India (Nifty, Sensex, INDA), EEM, and MSCI EMI index all had bearish action on significant levels, mostly yearly resistance levels. Some of these levels were called out here on 8/2 Global index post, and here is a review of what has happened since then. Simply stated, I think is it is the time to err on side of waiting for dust to settle and let indexes drop further, rather than jumping right back into risk after such a minor drop.
While markets can snap back from political worries, I think the problems here are more intractable and likely to continue. Regardless of this opinion, the majority of charts - which is by far the more important consideration - point to serious trouble. According to VIX, stocks are not really a buy here. Even if VIX fell back under the Q3R1, it would still be well above the 2HP! If SPY matched VIX technically (this doesn't always happen but still), then SPY should be at 237 (SPX 2374). I would rather buy stocks if VIX tested its YP at 19.02.
If bearish view is incorrect, we'll see more indexes recover AugPs (SPY to start), VIX collapse, XIV huge rebound back above Q3P, and TLT YP rejection.
Also, review of "speculation" last week, "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." DXY no action and GLD higher, but the rest was bang on.
Bottom line - Last week's Total market view pointed to risk management with a focus on volatility. This was exactly the right approach and worked extremely well. I'm still cautious on risk and am expecting more than a -2% drop for SPX/SPY before this phase is over. TLT above the YP, should that occur, would be also bearish for stocks.
PS - Vacation this week 8/16-20. I may return in time for a few posts on 8/20.
PIVOTS
USA main indexes - DIA and QQQ still above all pivots. SPY, VTI/NYA below AugPs. IWM below AugP, Q3P and 2HP! (IWM led down as called.) IWM so weak means breadth has significantly weakened for USA indexes.
Safe havens - GLD above all pivots and above Q3R1 is one of the strongest asset classes I track. TLT if higher would join above all pivots, and bearish for risk.
Sectors of note - Always interesting to see what sectors holds up best in a decline. So far SMH like QQQ had 1 day break of AugP and recovery.
Global indexes - KWEB, FXI and oil influenced RSX and EWZ remain above all pivots. ACWI, EEM, INDA and SHComp below AugPs.
Currency and commodity - I probably should start covering bitcoin here, though unlike some more famous strategists who just recently added this to their analysis, I started in February 2016 with BTCUSD at 420 and only discontinued due to time pressures. DXY has been below all pivots since 5/15, and just a couple days later I issued "screaming bearish" call on 5/17. DXY remains below all pivots, though selling pressure seems to be abating.
OTHER TECHNICALS
I have been watching RSI divergence on weekly charts carefully and mentioned it several times in the USA main index section. Last week I mentioned another more obscure indicator, average true range, and said it was multi year low on both weekly and daily SPY chart. Thus far situation similar - fear stokes a sell-off that was ready to happen.
VALUATION AND FUNDAMENTALS
Pro selling at 18x forward earnings for SPX. I have been pointing to this area as resistance all year (and then some), and said last week that due to negative slope of the moving average valuation level, that 2483 more likely to act as resistance.
SENTIMENT
Sentiment extremes reached near end of July and beginning August were part of shifting to defensive mode. Put-call has jumped but otherwise not near bearish extreme.
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 - turning out key stock high!
8/11 - TBD
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.
Sum
I look at VIX and XIV every day because i find technical analysis on these to complement indexes quite well. In recent weeks, the setup on XIV as a short was so compelling I pounded table on recommending that for a trade. Needless to say it has been a phenomenal week at The Pivotal Perspective.
In addition, safe havens have done their job. Whether you chose to have positions or not, they have worked very well as providing important reads on the market. For example, GLD and AGG held key support (YP and 2HP respectively) early in Q3. They then continued to strengthen. GLD surprised to upside, reclaimed status of above all pivots on 7/27 and remained above all pivots on the pullback. TLT joined in 7/28-8/1 with holds of 2HP and near tag of D200 and D100 MAs. Also, TLT held Q3P on 8/8. All these contributed to my reasoning that indexes were vulnerable, that IWM could have a significant drop, and even leading global indexes would pause at YR2 levels. This is not hindsight reasoning. Simply review the summary comments of Safe havens over the past 4 weeks or so.
7/22: "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)."
7/29: "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."
8/5: "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."
OK, moving on. VIX and XIV are very extended - this move has been too much. If VIX and XIV are correct, stocks should be lower. I think caution is correct approach. Additionally, watching TLT because anything higher above the YP would very very bullish for TLT, and bearish for risk assets. GLD is near high area for the year but acting well.
VIX
W: So far looks like normal VIX spike that happens from time to time. It would be a better speculative buy at the YP. Right now above 2HR1 means caution. It would take a massive collapse to be back under 2HP & Q3P 12.28.
D: Above Q3R1 as well, same level as 2HR1.
D: 8/8 gave the buy signal, 8/9 looked bearish (for VIX), then 8/10 skyrocket. Key point to remember - reversal that is still outside the daily BB is suspect.
XIV
W: From YR3 to YR2 in one week. RSI already near 50.
D: On YR2 and 2HP combo.
D: Sitting on 2HP, but 2 days outside BB. In other markets that are moving down sharply, it usually pays to wait for divergence lows inside the BB, or at least a recovery inside the BB itself, before attempting any longs.
TLT
W: Above 2HP for the last 4 bars and knocking on YP.
D: Q3P and AugP hold was key tell.
AGG
AGG part of the market tells, as it could have broken down early in Q3 but instead held 2HP, then quickly lifted back above all pivots. After that, Q3P held several times with clear buying. Above all pivots from 8/1.
GLD
W: Seems like it should reach 2HR1.
D: Above Q3R1 so far, testing AugR1.
D: Everyone knows GLD has been up here 2x before with RSI overbought and had made key tops. So far sign of strength above Q3R1 and powering up outside the BB.
GLD sum: Buy rec on 7/11 working nicely.
GDX
Above all pivots for 2 days. The thick brown line is D400MA, roughly like monthly 20MA.
Sum
First the positives: DIA above all pivots and all MAs except 10MA. QQQ broke AugP for 1 day and recovered. Also, only IWM is below Q3P. All the others (SPY QQQ DIA NYA/VTI) above Q3Ps, 2HP and of course YPs.
But - significant negatives. DIA, IWM and NYA had long term level bearish action. DIA top on 2HR1 and rejection, IWM 2HP break, and NYA 2HR1 and YR1 rejection. SPY had near tag of 2HR1 and rejection, and currently below AugP.
My interpretation of this is the move we just saw is not a 1 day bear wonder or false break. This opinion could change, but this means I am not expecting an immediate bullish resolution.
More bullish action would be SPY recovering AugP with look of support, and VTI bouncing from YR1 in decent reversal.
SPX / SPY / ESU / ES1
SPX W: Near tag of 2HR1 and down. Support at YR1, 2HP. RSI buy attempts likely in 50-60 zone.
SPY D: Q3R1 rejection and below AugP. Next support AugS1, YR1, Q3P. Or, recovery of AugP would look more bullish.
ESU: Break of D50MA.
ES1: 2 days outside the daily BB.
SPX sum: Below AugP means should go lower.
NDX / QQQ / NQU / NQ1
NDX W: Failing at prior high and RSI divergence. That said just looks like consolidation at this point.
QQQ D: Only 1 day below AugP.
NQU D: Also back above D50MA.
NQ1 D: 1 day outside lower BB.
NDX sum: 1 day break of AugP and recovery, also back above D50MA. This looks more like one day bear wonder.
INDU / DIA
INDU W: Possible critical high on 2HR1.
DIA: High on Q3R2 / AugR1 combo, then 1 day rejection of 2HR1.
DIA: Still above all pivots, and all MAs except D20.
DIA: 2HR1 rejection is bearish, but still above all pviots and all daily MAs except 10.
RUT / IWM
RUT W: Break of 2HP! 2HS1 support not far.
IWM D: RSI oversold and near Q3S1, but below 2HP and Q3P, and of course AugP. Red line at 2016 close. Total return includes dividends and this is price, but still an important level for the market.
RUT sum: This is long term underweight based on break of 2HP. This index has been weaker all year, and you ca
NYA & VTI
NYA W: Looks like critical high on 2HR1, and break of YR1 confirms selling. 2HP support.
NYA D: That near tag of 2HR1 and break of Q3R1 started the move. Massive rejection of YR1 on 8/10. Still under AugS1.
VTI W: Testing YR1 as support.
VTI D: Q3R1 rejection and so far holding YR1 but not much bounce.
NYA move adds to argument that market just made important top. VTI would join in that if YR1 breaks with look of rejection.
Professional smart money has sold SPX at 18x forward earnings. I have been pointing to this valuation level for many months. As long as it was rising in slope, I argued that the market may still face resistance yet continue to go higher as the level went up as well. Last week was a drop in the moving average of forward earnings - not totally rare, but according to last week's notes, "more resistance at this level, currently 2483."
It would be interesting to see buyers either at 17.5X currently 2413 of better 17X 2344.
Citigroup Economic Surprise Index is up from low levels. DXY has stopped going down but that is about it.
Arrows show bearish looking bars on SPY weekly chart that turned out to be buying opportunities. This is not an insignificant number.
And yet, an equally impressive number of bars that either are reversals or follow weak up bars do turn out to be trading tops.
I'll try to figure it out.
Since last real deal correction in early 2016, there have been 3 notable dips, depending how you count.
June 2016 Brexit drop, -6.1% high tick to low tick
Summer into election jitters, -5.0%
March 2017 dip off highs, -3.3%
A 5-6% correction targets 2340-65. 3.5% would be about 2405.
Assuming drop is for real and will match March at least, then the minimum target is SPX Q3P at 2402. If that breaks, there AugS1 in play for a few more weeks is 2377 and Q4S1 would be ideal at 2347, a totally normal pullback in line with moves historically common and matching previous drops in this rally cycle as well.
Another way to visualize is to projecting by points like this. Results are nearly similar, giving a range of 2365-2380 or milder drop of 2410.
In case you haven't gotten the point I am very keenly watching VIX and XIV for a trade and in fact already partially positioned in a rare UVXY position.
XIV is sitting on YR3 at 95.23. This could be the turn of the year.
The VIX short trade is hugely crowded.
As it turns out the July close on XIV was 94.37. This means there is a hugely significant zone between 95.23-37 that combines YR3 and the monthly close high. Anything below this is very vulnerable.
Interactive brokers hiked margins for VIX futures and this could be the spark for a XIV selloff on Monday. I'm ready to add.