Ugh. Since the major bullish holds and recoveries of pivots from 9/30-10/5, I have been largely bullish on the market (true, check it out here). There was a some concern on 10/13 but QQQ level held to keep the rally intact. Then on 11/9 I recommended to hold USA winners and reduce long exposure by hedges on weaker global indexes, which worked. The November pivots on SPY, QQQ and IWM all held simultaneously on 11/16 and that was the perfect place to lift the hedges.
But now I am raising some caution flags again because there was enough bearish action today on 12/2. Instead of doing a separate blog post I'll just outline my concerns with a number of charts and suggest levels to watch from here.
SPY, after launching from Q4R1 yesterday, turned right around and broke. This is somewhat like 9/28-30 in reverse (which means potentially bearish, maybe significantly so). However, right now it is still above all pivots and bulls get the benefit of the doubt. Watch the DecP (small orange dots) at 207.51 and below that is the 2HP (larger orange dots) at 205.83. I think the 2HP is the key level here because a break would be the 2nd time after the August drop, and this time after a high test of sorts on 12/1-2 to the 11/3-4Hs.
BUT (this means big but), ES and SPX are holding the level with Q4R1s at 2077 and 2079 respectively. If that breaks, then the DecPs at 2062 and 2072 respectively are the dividing line. Like the Q4R1s, these look to be a bit lower than the SPY version.
The reasons I have for concern are: QQQ exact tag of Q4R1 and clear rejection, DIA Q4R1 exact tag and clear rejection, and NYA (key institutional index) failing to rally above its YP on 12/1 which would have really helped to confirm the bull case (alas). From the way I count, this means 3 of 5 main USA indexes had bearish pivot action today, and that can be enough to start a drop that matters. This will be much worse if the king benchmark SPX also confirms, so watch the support area outlined above very carefully from here.
Supplemental indicators are leaning bearish but overall really still a mixed bag. TLT held its YP weeks ago, and even slightly reclaimed its Q4P today. I consider this bearish for stocks. XIV not helping by rejecting its Q4P, but still holding DecP which is worth watching from here. However, VIX is still under all pivots so the sell-off isn't really confirmed yet. I recommend watching all these levels on Thursday, along with the ES and SPX levels mentioned above.
At this point, due to structure, if everything looked bearish then I'd reduce USA winners AND add shorts again via FXI, EEM, PIN, and possibly RSX, some EWZ too if it stays under all pivots. This is contrast to the 11/9 idea which was holding all USA longs, and simply adding some hedges. Of course there are other ways; through VIX, puts, futures, 3x inverse ETFs, etc, all depending on what you are managing.
That said if ES and SPX hold their support, and SPY reclaims the Q4R1 then hedge or short idea is off and rally continues. Also, it is worth nothing that QQQ (ie NQ / NDX) has saved the market at every point this year, including the August low, end September low, 10/13-14 drop and also on the 11/13-14 pullback. So if QQQ holds its DecP, other indexes can come back too.