Total market view

REVIEW
12/4/2017 Total market view: "TLT YP will be an interesting level to watch next week. If we see more noise from safe havens - ie VIX above DecP, XIV below DecP and TLT above YP, then I'll think SPY top near Q4R3 and consolidation and more weakness in global names. Otherwise, Friday's massive comeback and huge hold of DecPs seems to invite more moves towards highs in the coming week."

Result - VIX calm but TLT above YP and result was mixed. More weakness in global names as expected, a top on SPY Q4R3 as expected, but also a shallow dip and move back up to highs for USA indexes.

SUM
There have been mild drops twice in December so far - on 12/1 and then 12/4 into 12/6. Main indexes came back on Friday to finish near highs. The notable exceptions are global names such as FXI and EEM and in the USA sectors, SMH. I think this is simply a matter of some traders locking in gains after tremendous runs and having a head start to holiday vacations. 

Although there are major resistance levels worth watching - SPY & VTI Q4R3s, QQQ YR3, IWM YR1 and NYA YR2 - the trend gets the benefit of the doubt especially with all USA mains above all pivots. VIX and XIV fully supportive of risk assets, and most other safe havens not threatening risk. 

Given FOMC, futures rollover and option expiration I think some choppy consolidation is the most likely move. 

PIVOTS
USA main indexes - Three yearly levels in play; QQQ testing YR3, IWM YR1 and NYA YR2.

Safe havens - VIX and XIV continue to deliver reliable market clues. 

Sectors of note - SMH hedge recently made up for several small dings on this strategy. 

Global indexes - Ditto on FXI. INDA now taking the year end lead. Of global indexes I track, only ACWI and INDA above all pivots. Recent status changes below DecP - FXI, KWEB, EEM. RSX already weaker and under DecP. SHComp is notably weaker, under Q4P, joining EWZ also under Q4P.

Currency and commodity - OK, I may return to bitcoin coverage soon. In case you think i am totally late to this party, please see "Interesting buy idea" from 2/16/2016 at BTCUSD 406.

OTHER TECHNICALS
The best technicals in a trending environment are to hold above quarterly or long term pivots and/or hold above rising slope moving averages. Anything else that suggests resistance has been mostly an exercise in frustration: pivot resistance levels, overbought readings on RSI, upper Bollinger bands, etc.

This has been a very expansive rally with most major indexes above all pivots for most of the year. Shoring below pivots has not been so easy unless getting into individual stocks which I simply don't have time to do. In fact, of the asset classes I track, the status of "below all pivots" has been quite rare; in 2017, what comes to mind are DXY, oil/XLE, and recently SLV. 

Point: As years change often major themes change, and one of the things I am thinking about for 2018 is a change from a trending environment to a range environment. If this were to play out, many of the strategies that haven't worked in the last 12 months will suddenly look like genius, and the buy and hold crowd may be tested either through a drawdown or by sideways churn. Perhaps more on this topic closer to 2018.

VALUATION AND FUNDAMENTALS
SPX well above 18X forward earnings for several weeks now. Given the Economic Surprise Index I am surprised that TLT is this strong.

SENTIMENT
Standard put-call at 3.5 year lows. This implies more downside risk or at least limited upside.

TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.

September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event

October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low

November dates
11/13 mild (non event?)
11/19-20 risk off (mild pullback low 11/19)
11/22 risk on (markets up esp 11/21)

December dates
12/1 (pullback low)
12/12 (high?)
12/20-22

Safe havens

Sum
Once again VIX and XIV providing very reliable clues for risk. XIV dove off cliff but bungee jumped back to close above all pivots on 12/1, and remained above all pivots this week with near test of DecP. VIX above a monthly pivot on close for 1 day this month 12/4; back under 12/5 and convincing drop from Q4P and back below DecP 12/6.

TLT made a move above its YP but AGG remains weak. Metals trading very weak with SLV under all pivots 11/29 and the easy short trade. 

While some stock indexes are near big levels, with most safe havens supportive of risk assets have to say stocks higher is the more likely outcome for next week. That will be even more the case of TLT drops under its YP. HYG being ignored for now - maybe because these cos in debt will have a tax break soon? 

VIX
W: Several tests of 2HP, but last close above was mid August.
D: Crystal clear VIX pivot rejection (& stock buy / short cover) on 12/6. 

9 20 VIX W.png

XIV
W: Potential rejection of 2HR2, but came back.
D: Daily held above all pivots on 12/1, and 12/6 also near test of DecP held. 

9 22 XIV W.png

TLT
Still above YP but highs did not reach the Q4R1 level. 

AGG
2HP low, YP high twice in Dec so far. Bearish for AGG when YP acts as clear resistance.

9 25 AGG D.png

HYG
Below 3 of 4 pivots not really confirming stock move. 

9 26 HYG D.png

GLD
After lots of chop a decent drop under Q4P. Low DecS2 so far.

9 28 GDX D.png

GDX D
The easier short - under Q4P since 10/23; 3rd rejection of 2HP was the charm. YP level to watch. 

9 28 GDX D.png

SLV
The even easier short under all pivots from 11/29.

USA main indexes

Sum
On Monday there was coordinated selling action on nearly all USA main indexes from various resistance levels: SPX/SPY Q4R3, NDX/QQQ YR3, RUT/IWM 2HR3 and Q4R1, NYA YR2 and VTI Q4R3. But the drop ended on Wednesday near SPY DecP (ES DecP near exact low), and from there indexes recovered back to highs. These levels are still worth watching, especially QQQ YR3, IWM YR1 and NYA YR2, but all trends remain up.

SPX / SPY  / ES
SPX W: Comfortably above YR2.
SPY D: Highs on Q4R3 but again mild pullback and back up.
ESZ D: Held DecP on pullback; above all pivots since late August. 
SPX sum: High on Q4R3 so far, but quick dip to DecP area bought and back up to highs. 

NDX / QQQ / NQ
NDX W: 4 of last 5 bars stuck at YR3, but not really dropping.
QQQ D: Only 2 days of real selling from YR3 area; Friday reclaimed above all pivots.
NQZ D: Back above all pivots, slightly.
NDX Sum: YR3 area resistance still worth watching. But notable that decline did not even reach DecS1 before coming back towards highs.

9 8 NQZ D.png

INDU / DIA
INDU W: Comfortably above 2HR3.
DIA D: Held DecP on 12/1 and up from there. Not near resistance. Above 2HR3 and Q4R2 area from late November.
Sum: Above all pivots; last time at or below a monthly pivot was 9/8, amazing run. Not near resistance.

RUT / IWM
RUT W: High on 2HR3, but still above YR1.
IWM D: 3 days back under YR1 but Friday came back. Still area worth watching.
RUT sum: High on YR3 exact, and so far 3 days under YR1 came back to finish above on Friday. Still YR1 level to watch. 

9 11 RUT W.png

NYA & VTI
NYA W: High bang on YR2.
NYA D: YR2 rejection, but maintained above all pivots.
VTI W: Above YR2.
VTI D: Q4R2 selling, but held above all pivots. 
 

9 14 NYA D.png

Total market view

11/26/2017 Total market view: "Most likely path is for the two indexes remaining under resistance to join the others above."

Result - the two indexes referenced, RUT/IWM and VTI, both moved above key resistance levels; IWM cleared YR1 and VTI joined SPX above YR2. Only NDX had trouble last week, falling under YR3.

Sum
USA main indexes continue to power up. As noted above, RUT/IWM cleared YR1 and VTI cleared YR2 last week; SPX/SPY and INDU/DIA already above YR2s. NDX/QQQ is the only main index having any trouble at resistance, falling back under YR3 last week. 

Despite intraday spikes VIX and XIV remain fully risk-on, as the close is what counts.  

Interestingly, this is not the case with global indexes as 7 of 8 that I track are below DecPs. 

TLT YP will be an interesting level to watch next week. If we see more noise from safe havens - ie VIX above DecP, XIV below DecP and TLT above YP, then I'll think SPY top near Q4R3 and consolidation and more weakness in global names. Otherwise, Friday's massive comeback and huge hold of DecPs seems to invite more moves towards highs in the coming week. 

PS - Just when I was about to give up the occasional short hedge and stick to safe haven longs, daily comment on 11/27 suggested re-hedging SMH and a hedge on FXI (both favorite longs from 8/21 area low). These two recs put some prior small dings in the rear view mirror as SMH fell -4% 2 days later, and FXI weak as well. 

PIVOTS
USA main indexes - QQQ YR3 level to watch, then SPY Q4R2.

Safe havens - TLT testing YP.

Global indexes - 7 of 8 suddenly below monthly pivots, the most widespread global weakness in quite some time.

OTHER TECHNICALS
New highs / new lows resolving in bullish fashion. One wonders when Bollinger bands will act as resistance

VALUATION & FUNDAMENTALS
Maintaining above 18X forward earnings.

SENTIMENT
Put-call now at relative low extreme. 

TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.

September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event

October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low

November dates
11/13 mild (non event?)
11/19-20 risk off (mild pullback low 11/19)
11/22 risk on (markets up esp 11/21)

December dates
12/1 (pullback low)
12/12
12/20-22

Sentiment

Standard put-call continuing to be decent sentiment indicator. In mid November with put-call at relative high level SPX tested and held NovP and rocketed from there. Now however, put-call at lowest point in nearly 18 months. 

Global indexes

I don't post about these every week but watch and often have positions.

From the perspective of tax cut this is not that hard to understand but suddenly nearly all of the 8 I track are below DecPs. In fact, all but broad index ACWI. EWZ the weakest of the lot, under Q4P for the 3rd time. 

ACWI (like NYA broad index)

2 50 ACWI D.png

SHComp
Holding Q4P, below DecP.

2 51 SHComp.png

FXI
Below DecP.

2 52 FXI D.png

EEM
Below DecP.

2 53 EEM D.png

KWEB
Below DecP, nearing Q4P.

INDA
Below DecP.

2 55 INDA.png

RSX
Below DecP, holding Q4P so far.

EWZ
Break under OctP at slanted arrow; then NovP resistance on bounce; below Q4P 2n3rd break, slightly below DecP as well. 

2 57 EWZ D.png

Safe havens

Sum
VIX and XIV both made huge moves on Friday and somehow reversed to finish back under all pivots / above all pivots respectively. 

Bonds are showing a bit more trouble, with TLT testing YP - again! - making anything higher back above all pivots. HYG also weaker, under 2HP.

While GLD testing Q4P and DecP, GDX and SLV weak.

VIX DecP, XIV DecP and TLT YP interesting levels to watch for next week but as of now risk on continues. 

VIX
W: Could have lifted above 2HP but didn't.
D: Somehow fell back to finish below all pivots! High near DecR1.

XIV
W: Holding 2HR2 as support.
D: Also held DecP.

2 32 XIV W.png
2 33 XIV D.png

TLT
D: Above 2HP, Q4P and DecP; testing YP.

AGG
YP still resistance, and below DecP as well. 

2 37 AGG D.png

HYG
Below 2HP, Q4P and DecP.

2 38 HYG D.png

GLD
Testing Q4P and DecP. 
 

GDX
2HP clear resistance, and under DecP as well.

2 40 GDX D.png

SLV
Under all pivots.

USA main indexes

Sum
The market continues to power up above resistance levels without any difficulties. Two weeks ago, SPX cleared YR2. Last week, IWM cleared YR1 and VTI also joined SPX above YR2. Only NDX having some trouble at YR3.

Additionally, all 5 USA main indexes tested and held DecPs on Friday in impressive fashion with a massive intraday comeback. While I thinks some buying climax and consolidation likely after tax cut, and NDX offering an interesting hedge against YR3, all trends are up.

SPX / SPY / ES
SPX W: Powerful move from August lows. Minor shuffles around YR2 then it turned into support 2 bars ago. Buying climax likely to lead to some consolidation.
SPY D: High on NovR3; so far DecP holding as support.
ESZ : 11/15 low bang on NovP looking more and more important; Still above 10MA and DecP.
SPX sum: Powerful uptrend continues with major lift above YR2 area after NovP held on the pullback low. DecP tested and holding so far. Next resistance above is Q4R2 near 11/30 highs.

2 12 ES D.png

NDX / QQQ / NQ
NDX W: Fade back under YR3!
QQQ D: Daily action on YR3.
NQZ D: Still above all pivots though.
NDX Sum: Possible key high forming on YR3. Important level to watch.

INDU / DIA / YM
INDU W: Amazing move.
DIA D: Keeps powering above levels without any trouble.
YM: Last tests of monthly pivots 12/1 and before that 9/11. 

2 18 YM.png

RUT / IWM
RUT W: Above YR1 but testing 2HR3.
IWM D: Amazing comeback.
RUT Sum: Could have broken under YR1 on Friday but came back. Near Q4R1 but the yearly level hold is more important, along with maintaining above all pivots.

2 19 RUT W.png

NYA & VTI
NYA W: Near YR2 with 2HR3 just above.
NYA D: Massive rally from DecP.
VTI W: Joined SPX above YR2.
VTI D: Friday test of both DecP and YR2, fantastic hold. 

Total market view

Abbreviated Thanksgiving version - one post only, no charts.

REVIEW
11/18/2017 Total market view: "If no decline Monday or Tuesday I'll start thinking a low volume rally above more possible Wednesday and Friday." 

Result - Indexes continued higher for the week with most highs on Friday.

SUM
Over the last few weeks, most USA main indexes have cleared major resistance:

SPX/SPY launched above YR2 (last week)
NDX/QQQ lifted above YR3 (also last week)
INDU/DIA cleared YR2 with no trouble (mid Oct)
NYA fell back under 2HR1 and NovP for several trading days, then recovered (last week)

At this point main indexes below resistance are:
RUT/IWM still under YR1
VTI testing YR1

Most likely path is for the two indexes remaining under resistance to join the others above. That said some reaction after holiday buying could easily happen.

Bottom line - Trends are up and most recent hedging ideas have cost a bit (SPY short, SMH short, 1 GLD long chopped) though keep in mind that UVXY gained somewhat, IWM & EWZ shorts worked, and EEM nearly break-even. However, I find it odd that indexes are so strong with both TLT and GLD above all pivots. Rather than reduce exposure on indexes or try the short hedges it seems to make sense to simply add to these safe havens.

PIVOTS
USA main indexes - QQQ lifting above YR3 is bullish. IWM testing YR1 and VTI testing YR2.

Safe havens - New all time low on VIX 11/24 seems valid as price reported from CBOE. Interesting that it was near NovS1 and 2HS1 tag; reaching long term support is very rare for VIX. Other safe havens TLT and GLD are a bit stronger than stock indexes would suggest.

Global indexes - Other than EWZ, all global indexes that I track above all pivots.

Currency - $DXY back under all pivots as of 11/22 will help global indexes and metals.

OTHER TECHNICALS
Minimal index damage compared to what new high & new low chart seemed to suggest.

VALUATION
Thomson Reuters forward P/E dropped under 18 after spending the last 5 weeks above. The 10 week moving average of 18X is still well under price.

SENTIMENT
Standard put-call turned out interesting tell over the past few weeks, at relative highs (not lows), indicating disbelief of rally and expectation of drop.

TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.

September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event

October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low

November dates
11/13 mild (non event?)
11/19-20 risk off (mild pullback low 11/19)
11/22 risk on (markets up esp 11/21)

December dates
12/1
12/12
12/20-22
 

 

Total market view

11/12/2017 Total market view: "There are a few cracks for the main indexes. VIX above a monthly pivot is fairly rare this year, and XIV fell back under a long term resistance level. Indexes themselves are in varying states according to The Pivotal Perspective: Dow between levels, NDX testing YR3, SPX still holding YR2, and RUT already dropping from YR1. 

It is a week to be agile, because anything lower on SPX would invite a quick trip down to NovP at minimum. But if 2576-82 continues to hold and VIX drops back under NovP then might as well be more long. 

If we put on our max pain hats we might think that 1) emerging market currency volatility will continue (because FXI, EEM, INDA have done so well this year), thus causing further pressure in most of these top performing names; 2) NDX will top out at or near YR3, and 3) the generally disappointing RUT and maybe XLF will rally off the recent lows."

Review - yes I am quoting 3 paragraphs verbatim because you know sometimes I am pretty good at this stuff.
SPX did drop to NovP and then rallied
Global markets bigger drop (but also impressive rally)
NDX topped on YR3 near exact
IWM rallied off lows; XLF did too but not enough to be impressive yet

SUM
SPX/SPY and NDX/QQQ have stalled under YR2 and YR3 respectively. SPX has been hanging around this area for the last 4 weeks, and NDX the last two weekly bars. Weekly charts on both have the look of 'weak advance' and as this is happening below resistance the market is inviting sellers.

In addition, the other usual elements of deeper pullback - highs tested with lower high on most main indexes, RSI divergence on daily chart, breadth deterioration already in play, safe haven strength still a factor with VIX still above its NovP.

Granted given the strength of the bounce from SPY NovP test last week it is hard to be too confident is a big drop heading into a holiday week. Also, XIV has done well as a tell and it fell below its NovP for only 1 day and recovered above all pivots. If no decline Monday or Tuesday I'll start thinking a low volume rally above more possible Wednesday and Friday. 

Bottom line - This isn't a matter of shorting, it is to lock in gains from my earlier buys in August and pound the table buys in late September. Granted I have been in and out of a few different hedging ideas the last four weeks. Some have cost a little (SPY short hedges) others have gained (IWM, EWZ, UVXY). 

PIVOTS
USA main indexes - SPX/SPY and NDX/QQQ both testing yearly resistance with similar structure does not happen so often. Market has been in a sideways range but don't be lulled to sleep. 

Sectors of note - SMH on top of buy list 8/21 looks like time to lock in gains. 

Safe havens - VIX still above NovP but XIV above all pivots 'mostly long' for risk assets. GLD and SLV perking up and yes I do have a bit there but lack of GDX and highs already on NovR1s are some concern. 

Global indexes - SHComp 2HR2, Q4R1 rejection and below NovP. I don't trade this too much but like to watch. Otherwise FXI and EEM like USA indexes starting to see selling from highs.

Currency - Recent DXY highs 10/27 - 11/7 all on YS1 which acted as resistance. Back down to test Q4P. If in metal longs better to see DXY break Q4P and thus fall under all pivots. 

OTHER TECHNICALS
New highs new lows along with MCO still seeming to be pointing to more than a -1.4% tick to tick drop on SPY.

VALUATION AND FUNDAMENTALS
SPX maintaining above 18X forward earnings on a real time and moving average basis the last several weeks. I continue to think this is solely due to corporate tax cut plan by Congress. Any noise about that not passing this year should reflect in SPX valuation.

SENTIMENT
Some extremes last week worked off by drop mid-week.

TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.

September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event

October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low

November dates
11/13 mild (non event?)
11/19-20 risk off
11/22 risk on

 

 

Semi-conductors

I've frequently mentioned SMH / SOXX as a favorite sector trade this year. In fact SMH was on the top of pivotal strength check on 8/21 and since then have rallied an amazing 20%+!

Here is SPY in bars from 8/21 and the others that I mentioned from that post. I know it is hard to sort out lines but several of the indexes mentioned did outperform SPY for several weeks after that low, with the outperformance ending about 2 months later. I mentioned EWZ weakness early, and it could have even been a hedge against other global longs. SHComp is also below SPY performance now, and though I like to monitor I typically don't trade it too much. EEM has kept above even with SPY. Others are above, but again SMH the huge winner.

18 40 SMH comp.png

SMH M
Starting to fall back inside BB.

18 41 SMH M.png

SMH W
BB divergence high. 

18 42 SMH W.png

This has been a great catch but with NDX / QQQ on YR3 I'm thinking time to lock in gains. 

Safe havens

Sum
VIX correctly anticipating stock weakness, but given the close above 2HP on 11/15, even the smart money surprised by the magnitude of bounce on 11/16. To be fair VIX did drop back under 2HP and Q4P that day, but often VIX will make a clear move before stocks (just like on VIX lows & stock highs such as 11/7-10). 

Currently VIX above only NovP, and while 2HP and Q4P more important market is not fully in the clear until VIX is below all pivots. XIV is more confident, so current configuration is mostly long risk.

TLT back to YP again; any higher and TLT will be above all pivots. 

Pop in GLD and SLV above all pivots; GDX not making the same move. 

VIX
D: Still above NovP, but RSI 70 on the high was hit hard with a drop back under 2HP and Q4P the next day. So far looks like many other good buys this year like 8/22, 5/19, 4/24, etc, with one exception - VIX still above NovP. 

XIV
Only 1 day below NovP though UVXY buy near 11/8-9 did work as a hedge. Back above all pivots as of 11/16, albeit fractionally, then definitely on 11/17.

18 21 XIV D.png

TLT
Again back to YP. Any higher and TLT will be above all pivots. 

AGG
Held 2HP on low, but still under YP, Q4P and NovP.

18 23 AGG D.png

HYG
Strong bounce from 2HS1 and Q4S2 area lows, but still below 2HP.

GLD
2nd move above Q4P; already testing NovR1. A lot of people including me were initially expecting metals down with rates up for Q4, so this is a surprise for the market. A couple weeks ago noted that though below Q4P metals were just not dropping as they should. 

18 25 GLD.png

GDX
Still under 2HP, NovP and Q4P. This chart implies GLD may fade soon; more bullish for metals if miners are participating in pivotal momentum like August.  

SLV
Above all pivots 2nd time this month, but at the same time clear resistance on NovR1. 

18 27 SLV D.png

USA main indexes

Sum
All but IWM and NYA remain above all pivots, with SPY and VTI testing and quite successfully holding NovPs on the pullback low. But indexes have stalled in two major resistance areas - SPX YR2 / 2HR2 / Q4R2 for about 4 weeks, and NDX YR3 for the last 2 weeks. To me the configuration opens door for sellers next week, but given the strength of bounce from SPY NovP it is hard to be fully confident in any drop. 

SPX / SPY / ES
SPX W: No selling from YR2; second bar of last 4 to have small advance and close under 2HR2.
SPY W: I will be surprised if we don't see a drop next week.
SPY D: Daily version view shows drop to NovP, and bounce back to resistance.
ES D: NovP exact on pullback low.
SPX set sum: Held above all pivots with a strong rebound after test of NovP (exact on futs and cash, near tag on ETF). Still in YR2 / 2HR2 / Q4R2 resistance area for the last 4 weeks. 

18 6 ES D.png

NDX / QQQ
NDX W: 2 small bars below YR3 - door open for sellers.
QQQ D: YR3 near exact on high.

18 7 NDX W.png

DIA
Between levels.

IWM D
Low on NovS2 and 2HR1 combo, strong bounce back to NovP.

18 10 IWM D.png

NYA
NYA low on NovS1, bounce back to NovP>

VTI
Also low on NovP, back to 2HR2 resistance. 

Total market view

REVIEW
11/4/2017 Total market view: "While it is possible to have trading turns on quarterly levels - SPY, QQQ and NYA all at Q4Rs right now - in my view clearing long term resistance as SPX did last week is the larger positive because now this can act as support. ... HYG has anticipated several stock drops in the past, so currently below its Q4P is some warning for stocks. That said I'll stay fully on the bull side with SPX above 2582. If one wants to reduce risk, IWM is a hedge candidate. Also, if we see more DXY strength and global weakness, i may hedge current FXI and INDA longs with an EEM short."

Result was most stock indexes closed lower for the week, but SPX still held YR2 / 2HR2 levels 2576-2582 as support. 

SUM
There are a few cracks for the main indexes. VIX above a monthly pivot is fairly rare this year, and XIV fell back under a long term resistance level. Indexes themselves are in varying states according to The Pivotal Perspective: Dow between levels, NDX testing YR3, SPX still holding YR2, and RUT already dropping from YR1. 

It is a week to be agile, because anything lower on SPX would invite a quick trip down to NovP at minimum. But if 2576-82 continues to hold and VIX drops back under NovP then might as well be more long. 

If we put on our max pain hats we might think that 1) emerging market currency volatility will continue (because FXI, EEM, INDA have done so well this year), thus causing further pressure in most of these top performing names; 2) NDX will top out at or near YR3, and 3) the generally disappointing RUT and maybe XLF will rally off the recent lows. 

Bottom line - I think upside is limited, but I don't rule out a fling up towards highs before another drop. Watch NDX YR3 to lock in gains. Also keeping an eye on XIV under 2HR2, which is both an indicator and a possible trade trigger on UVXY. Global names are looking a bit shaky excepting portfolio winner FXI; EWZ mentioned previously as weaker has been working as a hedge, or one could simply reduce exposure. 

PIVOTS
USA main indexes - Indexes varying more than most of this year. 

Safe havens - Though bonds and metals weaker, volatility increasing. Volatility has been the better tell on risk assets for many months. 

OTHER TECHNICALS
Please see my twitter on new highs / new lows and McClellan Oscillator. 

VALUATION AND FUNDAMENTALS
Again over 18X forward earnings which is, in my view, only due to promise of corporate tax cut. 

SENTIMENT
Currently quite mixed. Equity-only put call just off lows, but general put-call (includes indexes) near relative highs for the year. 

TIMING
As it turned out, 7 dates provided for August. 2 were the high and low of the month. 2 were the second high and second low of the month. 2 were milder turns. 1 was non event.

September dates
9/4-5 - 9/4 mild pullback low
9/13 - QQQ high and TLT low
9/22 (+/-1) - stock index high 9/20 (miss)
9/26 - stock pullback low 9/25 (-1)
9/29 - non event

October dates (listed from 10/1)
10/6-9 - 10/9 mild pullback low
10/19 - pullback low
10/23-26 - 10/25 pullback low

November dates
11/13 mild
11/19-20 risk off
11/22 risk on

 

 

 

Safe havens

VIX and XIV are making noises - VIX above NovP for the second time this month, and XIV fell back under 2HR2 with weekly and daily RSIs near overbought. These add to concerns for risk next week.

Trouble in bond land last week with sharp drops in all classes: TLT AGG LQD and HYG. This hit metals as well. 

VIX
W: After new weekly close low last week, decent rebound that still stayed under 2HP.
D: Above NovP for the 2nd time this month. The move on 10/23-24 did correctly anticipate more stock weakness. 
D: Above D200MA s well; still under 2HP and Q4P. 
VIX sum: Spike to 2HP rejected to close under all pivots, but finished the week above NovP. Some warning here. 

XIV
W: Struggling at 2HR2 with RSI overbought. 
D: Still above all pivots but so far highs somewhat like Jul-Aug above one level and not quite on another. Liking idea of UVXY below the 2HR2. 
XIV: Also some warning with move above 2HR2 for 4 days and rejection. Still above NovP though. 

TLT
W: Another YP rejection! 3rd this year. 
D: Recent bounce quickly gone - under YP, Q4P and NovP. 

AGG
2nd D200MA break and back to 2HP. Any lower and below all pivots. 

11 37 AGG D.png

LQD
Trouble in investment grade corporates as well. 

HYG
2nd break of Q4P from 11/1 and down from there. All the way to 2HS1 and RSI deeply oversold might be enough for some bounce. 

GLD
W: Small advance and under 10 & 20MA. Ready to drop.
W: Also rejected from Q4P.
D: Here's daily version of poke above and fail. 
GLD: Looks ready to go significantly lower. 

11 41 GLD W.png
11 42 GLD D.png

GDX
2HP rejection, 3rd time this quarter. 

11 43 GDX D.png

SLV
2HP rejection, but not breaking down. 

11 44 SLV D.png

USA main indexes

Sum
Unfortunately not one easy message this week. Indexes are in fairly varying states:

INDU / DIA between levels, not at resistance and well above support.
SPX / SPY testing YR2 / 2HR2 combo 2576-82, with SPX holding this area as support a couple times last week. Bullish to be holding level, but anything lower would look like yearly level rejection and open the door to NovP at minimum.
NDX / QQQ is high was very near YR3 6377. Time to lock in some gains.
RUT / IWM already down from YR1 and agile traders have made money on this move as a hedge as suggested last week. Whether this is enough for a decent bounce or goes lower I don't know.
NYA & VTI are also giving mixed messages. NYA has more global names which have had a bout of short term weakness the last few days, and Friday NYA closed below its NovP for the first time since 9/5. 

SPX / SPY / ES
SPX W: Benign pause so far. That multi week RSI low in August band on W20MA and AugS1 standing out as one of a few key pullback lows of the year. 
SPX W: Holding above resistance cluster 2576-82 so far. 
SPY D: But not the case on SPY, with YR2 2HR2 area looking like resistance. 
ES Z: So strong hasn't touched a monthly pivot since 9/8. 
ES 1: High on Q4R1, but above YR2. 
SPX sum: Remaining above 2576-82 gives bulls benefit of doubt despite look of SPY and Q4R1 rejection. Anything lower than 2576 opens door to deeper pullback but NovP at 2559 will be next key support. 

11 2 SPX D.png
11 1 SPY D.png
11 7 ESZ D.png

NDX / QQQ
NDX W: Small up bar a bit toppy though 10/16 bar also looked that way to mee as well. 
NDX W: YR3 near tag. Time to be locking in gains. 
QQQ D: YR3 near tag. Well above all pivots from late Sept but I will be surprised if powers through YR3 before a bigger drop. 
NQ Z: For now all above rising 10MA from 10/27, with rising 20MA and NovP also below to act as support. 
NDX sum: Near YR3 tag. I think more likely to see drop from this level instead of power move through it (though Dow surprised me in this regard from YR2 a few weeks ago).

11 12 NQZ D.png

INDU / DIA
W: Reversal / pause. 
W: Between long term levels with power move up through YR2 a few weeks ago.
D: Between levels.
INDU sum: Still doing fine and not at pivot resistance. NovP and Q4R2 combo are support.

11 13 INDU W.png

RUT / IWM
RUT W: Selling with RSI near OB in contrast to other indexes. Testing W10MA and slight break. 
RUT W: YR1 high.
IWM D: IWM near YR1 tag and down; just held NovS2 and 2HR1 area. Might be enough for low but if lower then Q4P key support. 

11 16 RUT W.png

NYA & VTI
NYA W: Holding above 2HR2.
NYA D: NovP slight break!
VTI W: Under 2HR2.
VTI D: But still holding NovP.
These are a bit conflicted with opposite messages from each weekly and daily chart. The larger context is volatility in global names which is pulling NYA down the last few days.

Valuation and fundamentals

Another week above 18X forward earnings on real time and moving average basis. In my view this move has been the market pricing in tax reform. Any more delays or rumblings of no deal should send price back to 18X or below. That said Repubs are most likely to pass a bad deal just to save face rather than no deal.

DXY has stalled despite even more jump in Citi Economic Surprise Index. This should be assisting bond yields to move higher.